Corn

In today’s report, old crop corn ending stocks were raised 118 million bushels from last month at 1.021 billion bushels as imports increased 3 million bushels with food and seed use reduced 15 million bushels, corn for ethanol cut 50 million bushels and exports reduced 50 million bushels. This total usage reduction of 115 million bushels is no doubt the result of price rationing as prices have continued to move higher. The average trade guess for ending stocks was 945 million bushels. The stocks to use ratio rose from 7.2% to 8.2%.  The season average price is increased 10 cents on the lower end from last month and is projected to range from $6.20 to $6.30 a bushel. Global old crop corn stocks increased 260 million bushels from last month to 5.353 billion bushels as higher prices slowed usage. For the new crop year of 2012/13, USDA left planted acreage at 96.4 million acres but did drop harvested acreage 1.5 million acres to 87.4 million acres on an increase in abandoned acres. Yields were reduced down to 123.4 bushels per acre for total production of 10.779 billion bushels. If realized, yields would be the lowest since 1995/96. The trade was expecting yields of 126.2 bushels per acre and production of 10.971 billion bushels. Imports were raised 45 million bushels to a record 75 million bushels. While production from last month was cut 2.191 billion bushels, demand was also cut 1.495 billion bushels resulting in ending stocks of 650 million bushels compared to 1.183 billion bushels in July and the average trade’s guess of 651 million bushels. All categories of usage are cut for the second straight month as lower supplies and higher prices are expected to ration demand. Feed and residual was reduced 725 million bushels, food, seed and industrial use cut 70 million bushels, corn for ethanol cut 400 million bushels and exports reduced 300 million bushels. The new crop season average price as compared to last month is up $2.10 on the bottom side and $2.50 on the top side in a range from $7.50 to $8.90 a bushel indicating that USDA thinks price rationing is not through. The stocks to use ratio is projected at 5.8% compared to last month’s 9.3%.  Global stocks are projected at 4.855 billion bushels, 424 million bushels lower than last month and mostly a reflection of lower U.S. stocks. Foreign stocks are actually up 110 million bushels at 4.206 billion bushels. September corn mid-morning traded down 2 cents at $8.18 a bushel in a range of $8.10 to $8.43 bushel. In weekly comments, I am currently 50% priced of anticipated production with another 30% priced in Put options. As harvest has started in Tennessee, I would be inclined to sell the remainder of un-priced corn at harvest. I would not store corn un-priced or at least without a floor price.  A December $8.20 Put would cost 58 cents and set a $7.62 futures floor. September 2013 corn traded at $6.81 ½, down 5 ¼ cents mid-morning. 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 August projection for U.S. ending stocks and the final estimate has been 404 million bushels with 16 years below the final estimate and 15 years above.  The next USDA Supply & Demand report will be released September 12, 2012.

Supply and Demand Projections and Historical Data Source: USDA

Cotton

USDA did have a few bearish surprises in today’s crop report as old crop ending stocks were left unchanged from last month at 3.30 million bales whereas the trade was expecting exports to be raised more than they were and stocks reduced.  The projected price range for 2011/12 was lowered to 89.5 cents per pound. The stocks to use ratio is 22.0%. World projections for old crop ending stocks were projected 1.12 million bales higher at 67.8 million bales. New crop U.S. production was raised 651,000 bales from July as harvested acres increased while yields went down one pound per acre at 784 pounds per acre. The trade was expecting a cut in production. New crop ending stocks were increased 700,000 bales from July to 5.50 million bales on the increase in production and an adjustment in the unaccounted category. The season average price for new crop is projected to range from 61 to 79 cents per pound, an increase of 1 cent on the lower end and a decrease of 1 cent on the top side. Global stocks are projected to increase 2.28 million bales to 72.67 million bales on higher beginning stocks (mainly adjustments from China) and lower world consumption. China’s stocks of 34.2 million bales account for 46% of the global stocks. Keep in contact with your cotton buyer on current quotes.  December cotton traded mid-day at 74.18 cents/pound, down 1.77 cents today. Over the past 31 years the average difference between the August projection for U.S. ending stocks and the final estimate has been 1.5 million bales with 12 years below the final estimate and 18 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 September 12, 2012.

Supply and Demand Projections and Historical Data Source: USDA

 Soybeans

In an overall friendly USDA report, ending stocks for 2011/12 were lowered 25 million bushels to 145 million bushels compared to trade expectations of 157 million bushels. Crush was increased 15 million bushels while exports were raised 10 million bushels. The season average price for 2011/12 was raised 5 cents to $12.45 a bushel. Stocks to use ratio was projected at 4.6%, down from 5.5% last month.  World ending stocks for 2011/12 are projected to decrease 21 million bushels to 1.908 billion bushels. Demand for old crop soybeans have not slowed down as the U.S. benefits from reduced supplies out of South America. We could see the reverse happen in 2013 as South American production is expected to rebound to record levels. For the new crop year, planted acreage was left unchanged from last month but harvested acres was cut 700,000 acres to 74.6 million acres as it is expected that drought has caused an increase in abandoned acres. Yields were again reduced as USDA lowered soybean yields 4.4 bushels per acre from last month to 36.1 bushels per acre. This compared to the average trade guess of 37.2 bushels per acre. Demand for the new crop soybean marketing year was reduced 363 million bushels due to lower supplies, higher prices and a larger projected South American crop in 2013.  Crush was lowered 95 million bushels from the July report while exports were lowered 260 million bushels. The season average price is increased $2.00 a bushel on both ends from last month and is projected to range from $15.00 to $17.00 a bushel. The stocks to use ratio was left unchanged at 4.2%.  Global new crop stocks are projected to decrease 84 million bushels to 1.961 billion bushels. The drop in U.S. production was somewhat offset by a projected increase in Brazilian production which would put Brazil as the number one soybean producing country. The market will remain uncertain until this large South American crop can be confirmed later this year and early in 2013.  The market has responded favorably to this report as November soybeans traded late morning at $16.43 ½, up 12 cents per bushel. I am currently priced at 50% for the 2012 crop with another 30% priced in Put options.  From a price risk management standpoint, a $16.50 Put would cost 91 cents and set a $15.59 futures floor.  Soybean yields do have the potential to improve if beneficial rains are received this month so there is some downside risk in the market. November 2013 soybeans traded at $12.91 a bushel, up 6 ¾ cents today. Watch for 2013 opportunities for pricing.  Over the past 31 years the average difference between the August projection for U.S. ending stocks and the final estimate has been 96 million bushels with 10 years below the final estimate and 21 years above. The next USDA Supply & Demand report will be released September 12, 2012.

Supply and Demand Projections and Historical Data Source: USDA

 Wheat

USDA offered a neutral to bearish wheat supply and demand report today. The 2011/12 marketing year had a few adjustments but saw ending stocks unchanged at 743 million bushels, stocks to use ratio of 33.3% and a season average price of $7.24 a bushel. World ending stocks were raised slightly 15 million bushels to 7.260 billion bushels. USDA new crop projections estimate ending stocks at 698 million bushels compared to the average pre-report guess of 681 million bushels. Production was increased 44 million bushels on a 0.9 bushel increase in yields to 46.5 bushels per acre. Imports were raised 10 million bushels while feed/residual use increased 20 million bushels. Stocks to use increased slightly to28.6% with a season average price of $7.60 to $9.00 a bushel. Global stocks are expected to decrease 194 million bushels from last month’s projection to 6.510 billion bushels on mostly a reduction in foreign production coupled with an increase in consumption from a shift of corn to wheat for feed. September wheat traded down 20 cents at mid-day at $8.93. July 2013 wheat has also traded down 7 ¼ cents to $8.50 ¼. In my weekly comments, I am currently priced 10% on the 2013 crop and would put serious consideration to pricing more as the wheat crop is planted this fall. Over the past 31 years the average difference between the August projection for U.S. ending stocks and the final estimate has been 114 million bushels with 17 years below the final estimate and 14 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 September 10, 2012.       

Supply and Demand Projections and Historical Data Source: USDA