Corn

In today’s report, old crop corn ending stocks were lowered 193 million bushels from last month to 988 million bushels and reflect the September 29 Grain Stocks report. Feed/residual use was increased 162 million bushels; food, seed, and industrial uses increased 31 million bushels; and imports and exports offset each other with 3 million bushel increase for imports and the same for exports. The stocks to use ratio dropped from 9.6% to 7.9%.  The season average old crop price is estimated at $6.22 a bushel. Global old crop corn stocks dropped 317 million bushels from last month to 5.179 billion. For the current marketing year of 2012/13, USDA bumped up planted acreage 500,000 acres to 96.9 million acres and estimated harvested acreage 300,000 acres to 87.7 million acres. Yields were reduced down 0.80 bushels per acre to 122.0 bushels per acre for total production of 10.706 billion bushels. The trade was expecting yields of 122.7 bushels per acre and production of 10.598 billion bushels. The trade was expecting a cut in harvested acreage and some look for that to happen in future reports.  Supply was reduced 214 million bushels on the lower beginning stocks and 21 million bushel cut in production. With the exception of a 100 million bushel cut in exports usage was unchanged. The 2012/13 ending stocks were projected at 619 million bushels, down 114 million bushels from last month and 26 million bushels less than the average pre-report guess. The new crop season average price as compared to last month is down 10 cents on both sides in a range from $7.10 to $8.50 a bushel. The stocks to use ratio is projected at 5.6% compared to last month’s 6.5%.  Global stocks are projected at 4.617 billion bushels, 263 million bushels lower than last month. December corn closed up 36 ½ cents at $7.73 ¼ a bushel. In weekly comments, I am 50% priced of anticipated production with another 30% priced in Put options and the remainder sold at harvest. If storage is available, I would consider storing for basis improvement. As harvest is essentially through in Tennessee, the difference in cash prices between today and in a couple of months has narrowed and taken away some of the storage advantage for basis improvement.  I would not store un-priced or without a floor price in place through buying a Put option.  December $7.75 Put would cost 29 cents and set a $7.46 futures floor. This option expires November 23.  If more time is needed a March $7.70 Put costs 48 cents and would set a $7.22 futures floor. September 2013 corn closed at $6.75 ½, up 19 ¾ cents. 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 October projection for U.S. ending stocks and the final estimate has been 321 million bushels with 17 years below the final estimate and 14 years above.  The next USDA Supply & Demand report will be released November 9, 2012.

Supply and Demand Projections and Historical Data Source: USDA

 Cotton

USDA raised the current crop ending stocks 300,000 bales from last month on a 178,000 bale increase in production, a 200,000 bale reduction in exports and a 80,000 bales change in the unaccounted category. Ending stocks are 5.60 million bales with a 37.3% stocks to use ratio. The projected price for the 2012/13 marketing year is expected to range from 62 to 74 cents per pound, a decrease of 4 cents on the top side. U.S. production of 17.29 million bales was increased on a 9 pound per acre increase in yields from September with the estimate at 795 pounds per acre. Tennessee yields were raised 77 pounds per acre to 832 pounds. Nationwide, acreage was unchanged from last month at 12.36 acres of cotton planted and 10.44 million acres harvested.  Domestic use was left unchanged while exports were reduced 200,000 bales on lower forecast imports by China. Global stocks are projected to increase 2.8 million bales to 79.11 million bales on a combination of sharply higher production and reduced consumption. China’s ending stocks of 36.61 million bales account for 46% of the world’s record stocks. Keep in contact with your cotton buyer on current quotes.  December cotton closed at 70.71 cents/pound, down 1.39 cents today.  Over the past 31 years the average difference between the October projection for U.S. ending stocks and the final estimate has been 1.2 million bales with 9 years below the final estimate and 21 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 November 9, 2012.

Supply and Demand Projections and Historical Data Source: USDA

 Soybeans

USDA’s report while considered friendly raised both old crop and new crop ending stocks as compared to last month. Ending stocks for 2011/12 (old crop) were raised 39 million bushels to 169 million bushels as 2011 production was revised upward 38 million bushels. Crush was lowered 2 million bushels, seed use increased 2 million bushels and residual use cut 1 million bushels. The season average price for 2011/12 was adjusted up a nickel at $12.50 a bushel. Stocks to use ratio was 5.4%, up from 4.1% last month.  World ending stocks for the 2011/12 marketing year are projected at 2.013 billion bushels, an increase of 42 million bushels from last month. For the 2012/13 crop year, planted acreage was raised 1.1 million acres to 77.2 million acres with harvested acreage also increased 1.1 million acres to 75.7 million acres. Yields increased 2.5 bushels per acre from last month to 37.8 bushels per acre. This compared to the average trade guess of 37 bushels per acre. Overall soybean supply was up 265 million bushels based on the 39 million bushel increase in beginning stocks and 226 million bushel increase in production. Demand for the new crop soybean marketing year was increased 250 million bushels as crush increased 40 million bushels from the September report while exports were raised 210 million bushels and residual use up 1 million bushels. Ending stocks are projected at 130 million bushels, up 15 million bushels from last month and 4 million bushels less than expected. The season average price was lowered 75 cents on both ends from last month and is projected to range from $14.25 to $16.25 a bushel. The stocks to use ratio ticked up 0.2% to 4.5%.  Global new crop stocks are projected to increase 164 million bushels to 2.115 billion bushels. This report reflects a record South American crop that is in the beginnings of the planting period. The market does appear to be cautious as to this record production as weather outlook is not quite as favorable as it once was.  The market has responded favorably to this report as November soybeans closed at $15.48 ½, up 25 ¼ cents per bushel. I am currently priced at 50% for the 2012 crop with another 30% priced in Put options.  At these levels, I would be inclined to sell any un-priced soybeans at harvest. Storage should be used for basis appreciation and not necessarily futures price speculation. From a price risk management standpoint, a January $15.50 Put would cost 52 cents and set a $14.98 futures floor.  This option expires December 21, 2012. November 2013 soybeans closed at $13.53 ½ a bushel, up 18 ¼  cents today. Watch for 2013 opportunities for pricing.  Over the past 31 years the average difference between the October projection for U.S. ending stocks and the final estimate has been 73.5 million bushels with 6 years below the final estimate and 25 years above. The next USDA Supply & Demand report will be released November 9, 2012.

Supply and Demand Projections and Historical Data Source: USDA

Wheat

USDA offered a somewhat neutral wheat supply and demand report today that has seen favorable reaction from the market and could be more in tune with the corn and soybean market upticks. USDA 2012/13 projections estimate ending stocks at 654 million bushels compared to the average pre-report guess of 627 million bushels. Supply was raised 1 million bushels to 3.142 billion bushels with usage increased 45 million bushels at 2.488 billion bushels. Demand changes include a 95 million bushel increase in wheat for feed and residual use and a 50 million bushel reduction in exports. The stock to use ratio was lowered 2.3% to 26.3%. The projected season average price of $7.65 to $8.55 a bushel was raised 15 cents on the bottom side and lowered 15 cents on the top end. Global stocks are expected to decrease 136 million bushels from last month’s projection to 6.357 billion bushels on mostly lower production for Australia, Russia, and the EU-27. December wheat closed up 16 ¼ cents at $8.86. July 2013 wheat has also closed up 15 ¼ cents to $8.61½. 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 October projection for U.S. ending stocks and the final estimate has been 77 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 November 9, 2012.     

Supply and Demand Projections and Historical Data Source: USDA