Corn

Corn market trading has been volatile as September futures have traded in a 64 cent range from top to bottom today as the market soared higher on the release of the monthly USDA data but then closed lower.  In today’s report, old crop corn ending stocks were raised 52 million bushels from last month at 903 million bushels as imports increased 2 million bushels and exports were reduced 50 million bushels. The average trade guess for ending stocks was 840 million bushels. The stocks to use ratio rose from at 6.7% to 7.2%.  The season average price is increased 5 cents on both ends from last month and is projected to range from $6.10 to $6.30 a bushel. Global old crop corn stocks slightly increased 7 million bushels from last month to 5.093 billion bushels. USDA made an unprecedented drop in new crop corn yield of 20 bushels per acre to 146 bushels per acre. Yields are usually not adjusted until the survey based yields come out in the August report but declining crop condition ratings prompted the move. An yield adjustment to 154.1 was expected as a few previous years have had adjustments. Acreage of 96.4 million planted and 88.9 million were based on the June 30 Acreage Report. It is expected by some analysts that additional acres will be abandoned due to the drought and dry conditions. While production was slashed 1.820 billion bushels, demand was also cut 1.055 billion bushels resulting in ending stocks of 1.183 billion bushels compared to 1.881 billion bushels in June and the average trade guess of 1.280 billion bushels. All categories of usage are reduced as lower supplies and higher prices are expected to cut demand. The new crop season average price as compared to last month is up $1.20 on the bottom side and $1.40 on the top side in a range from $5.40 to $6.40 a bushel. The stocks to use ratio is projected at 9.3% compared to 13.7%.  Global stocks are projected at 5.279 billion bushels, 852 million bushels lower than last month. September corn closed down 14 ½ cents at $7.04 a bushel on what has been considered was an overbought condition. Technical analysis has a strong buy bias with support at $6.49 and resistance at $7.76. In weekly comments, I am currently 50% priced of anticipated production with another 15% priced in Put options.  A December $7.00 Put would cost 58 cents and set a $6.42 futures floor. September 2013 corn closed at $6.38 ½, down 12 ½ cents for today. I am currently priced 10% for 2013 production and will look for additional opportunities to price more. Over the past 31 years the average difference between the July projection for U.S. ending stocks and the final estimate has been 495 million bushels with 13 years below the final estimate and 18 years above.  The next USDA Supply & Demand report will be released August 10, 2012.

Supply and Demand Projections and Historical Data Source: USDA

Cotton

USDA’s raised old crop ending stocks 100,000 bales to 3.3 million bales on a like decrease in domestic use. The old crop marketing year ends this month for cotton so it is possible that we could see exports higher than what is projected, but there could also be cancellations as the marketing years comes to a close. The projected price range for 2011/12 was also unchanged at 91 cents per pound. The stocks to use ratio is 22.2%. World projections for old crop ending stocks were projected 640,000 bales lower at 66.68 million bales on lower production and higher usage. New crop production was left unchanged from June, however, planted acreage decreased to 12.64 million acres based on the June 30 Acreage report while estimated harvested acres was lowered only 100,000 acres. An updated abandonment adjustment based on current conditions and an 8 pound increase in projected yield to 785 pounds per acre accounted for the non-change. New crop ending stocks were lowered 100,000 bales from June at 4.80 million bales as the increase in beginning stocks and 100,000 bale decrease in domestic use was offset by a 300,000 bale increase in exports. The season average price for new crop is projected to range from 60 to 80 cents per pound, unchanged from last month. Global stocks are projected to decrease 2.12 million bales to 72.39 million bales on lower beginning stocks and lower foreign production. India’s production was lowered 1 million bales on lowered than expected planted area and lower yield prospects on a delayed monsoon season. India will bear watching for any further adjustments in production and maybe policies. Keep in contact with your cotton buyer on current quotes.  December cotton closed at 71.02 cents/pound, up 0.30 cents today. Technical analysis has a sell bias with support at 69.08 and resistance at 72.42. Over the past 31 years the average difference between the July projection for U.S. ending stocks and the final estimate has been 1.6 million bales with 15 years below the final estimate and 16 years above. These numbers can and will change, but do reflect the best information and estimates at the time of the report. The next USDA Supply & Demand report will be released August 10, 2012.

Supply and Demand Projections and Historical Data Source: USDA

Soybeans

In an overall friendly to bullish USDA report, ending stocks for 2011/12 were lowered 5 million bushels to 170 million bushels which was about expected. Crush was increased 15 million bushels; exports were raised 5 million bushels; seed use increased 2 million bushels and residual use was decreased 17 million bushels. The season average price for 2011/12 was raised 10 cents to $12.40 a bushel. Stocks to use ratio was projected at 5.5%, down from 5.6% last month.  World ending stocks for 2011/12 are projected to decrease 31 million bushels to 1.929 billion bushels. Most of the bullishness is in the new crop year, ending stocks are projected 10 million bushels lower than last month at 130 million bushels compared to the average trade guess of 134 million bushels. Yields were where the big surprise was as USDA lowered soybean yields 3.4 bushels per acre from last month at 40.5 bushels per acre. This compared to the average trade guess of 42.3 bushels per acre. Acreage was also changed to 76.1 million acres planted and 75.3 million acres harvested but these numbers are based on the June 30 Acreage Report and were expected. Harvested acreage could be high as some double crop acres and maybe full season acreage are thought to have higher than normal abandonment in some areas. While production was cut based on declining crop condition ratings, demand was also decreased due to lower supplies, higher prices and a larger projected South American crop in 2013.  Crush was lowered 35 million bushels from the June report while exports were lowered 115 million bushels. The South American soybean crop won’t be available until after the mid-point of the new crop marketing year so any hint of weather or production problems there would lead to increased volatility. The season average price is increased $1.00 a bushel on the average from last month and is projected to range from $13.00 to $15.00 a bushel. Global new crop stocks are projected to decrease 107 million bushels to 2.045 billion bushels. The market responded favorably on the open but has closed down as the overbought market has taken a breather on even bullish news. Expect volatility to reign during the summer. November soybeans closed at $15.22 ½ down 16 cents per bushel. Technical analysis has a strong buy bias with support at $14.64 and resistance at $16.04 a bushel. I am currently priced at 50% for the 2012 crop with another 15% priced in Put options.  From a price risk management standpoint, a $15.20 Put would cost 99 cents and set a $14.21 futures floor. November 2013 soybeans closed at $12.92 a bushel, down 24 ½ cents today. Watch for 2013 opportunities for pricing.  Over the past 31 years the average difference between the July projection for U.S. ending stocks and the final estimate has been 99 million bushels with 10 years below the final estimate and 21 years above. The next USDA Supply & Demand report will be released August 10, 2012.

Supply and Demand Projections and Historical Data Source: USDA

 Wheat

USDA offered a friendly wheat supply and demand report today. The 2011/12 marketing year having ended May 31 saw adjustments reconciling it to the June 30 Grain Stocks report. Ending stocks were raised 15 million bushels from June to 743 million bushels as imports were cut 5 million bushels and usage was reduced 20 million bushels from the previous estimate. The stocks to use ratio was raised from 32.3% to 33.3%. The estimated season average price was $7.24 a bushel. World ending stocks are projected at 7.245 billion bushels, up 60 million bushels from June. USDA new crop projections estimate ending stocks at 664 million bushels compared to the average pre-report guess of 725 million bushels and June’s projection of 694 million bushels. Production was lowered 10 million bushels on a 0.4 bushel decline in yield to 45.6 bushels per acre and a 400,000 acre drop in harvested acres. Feed and residual use is projected 20 million bushels less than in June while food use is 5 million bushels higher and exports increased 50 million bushels. Stocks to use are expected to drop to 27.4% with a season average price of $6.20 to $7.40 a bushel. Global stocks are expected to decrease 122 million bushels from last month’s projection to 6.703 billion bushels. Fifty-two percent of those stocks are held in China (31%), India (12%) and the U.S. (10%). The nearby wheat contracts are up while July 2013 wheat closed at $8.20 ¼ down 3 cents. Technical analysis shows a strong buy bias with support at $7.76 ½ with resistance at $8.63 a bushel. In my weekly comments, I am currently priced 10% on the 2013 crop and would put serious consideration to pricing more. While wheat stocks have tightened, they still are abundant and prices have taken advantage of the weather market in corn. Over the past 31 years the average difference between the July projection for U.S. ending stocks and the final estimate has been 125 million bushels with 16 years below the final estimate and 15 years above. These numbers can and will change, but do reflect the best information and estimates at the time of the report. The next USDA Supply & Demand report will be released August 10, 2012.      

Supply and Demand Projections and Historical Data Source: USDA