Corn

This month’s USDA report did not make any changes to the current marketing year’s U.S. ending stocks but did have a couple of surprises. Ending stocks remained at 632 million bushels. However, to reach that number, imports were increased 25 million bushels; exports cut 75 million bushels and corn for feed and residual use increased 100 million bushels. Strong import shipments accounted for the import increase while slow sales and shipments were reflected in the export decrease. The expansion of poultry production attributed to the 100 million bushel increase in feed usage. These feed usage numbers will be more or less confirmed or denied in the March 28 grain stocks report. The stocks to use ratio remained 5.6%. The season average price was lowered 10 cents on the top side with a range of $6.75 to $7.45 a bushel. Global stocks are projected at 4.625 billion bushels, 22 million bushels lower than last month.  May corn closed  at $7.03 ½  a bushel with September corn closing at $5.71 ¾. I would have 10% of 2013 production priced. I am still looking for a bounce for additional pricing or for an opportunity to implement an option strategy. If prices move to the $6 range, that may present a good opportunity. Over the past 31 years the average difference between the March projection for U.S. ending stocks and the final estimate has been 192 million bushels with 20 years below the final estimate and 11 years above.  USDA will release the prospective plantings report and grain stocks report on March 28, 2013 with the next USDA Supply & Demand report released on April 10, 2013.

Supply and Demand Projections and Historical Data Source: USDA

Cotton

USDA offered another friendly report on the U.S numbers that saw exports increased 250,000 bales and ending stocks cut 300,000 bales to 4.2 million bales. The projected price for the 2012/13 marketing year is expected to range from 70 to 73 cents per pound, increased 1 cent on the bottom side. Strong sales and shipments accounted for the export increase. Some analysts expect to see additional export increases in future reports.  Global stocks were projected to decrease a marginal 120,000 bales to 81.74 million bales. China’s stocks increased 1.5 million bales to 44.11 million bales while the rest of the world’s stocks dropped 2 million bales to 37.63 million bales. China now holds 54% of the world stocks, but the quality of their cotton is uncertain.  Keep in contract with your cotton buyer on current quotes.  May cotton closed at 86.88 cents/pound.  I would be priced out of 2012 cotton. December cotton closed at 86.39 cents per pound. I would continue to monitor new crop prices and be ready to price part of the crop or implement an option strategy if prices look to break. An 86 cent put option would cost 6.07 cents and set a 79.93 cent futures floor. Cotton equities on 2013 loan cotton were in the 27 – 27.5 cent range. Over the past 31 years the average difference between the March projection for U.S. ending stocks and the final estimate has been 0.5 million bales with 11 years below the final estimate and 20 years above. These numbers can and will change, but do reflect the best information and estimates at the time of the report. USDA will release the prospective plantings report and grain stocks report on March 28, 2013 with the next USDA Supply & Demand report released on April 10, 2013.

Supply and Demand Projections and Historical Data Source: USDA

Soybeans

USDA’s March report for soybeans is considered neutral to bearish with the projection for U.S. ending stocks at 125 million bushels, unchanged from last month. The trade on the average was expecting a decline to 120 million bushels. Also unchanged was the 4.1% stock to use ratio. Although soybean exports are above pace to meet USDA’s target, it is expected that exports will practically come to a halt when South America’s crop gets into the pipeline. Slow movement and logistic problems of getting the Brazilian crop to the international market may necessitate changes in future reports. At some point, their soybeans will be available and will increase competition.  The season average price was raised 25 cents on the bottom side and lowered 25 cents on the top side from last month and is projected to range from $13.80 to $14.80 a bushel. Global stocks are projected to increase 3 million bushels to 2.212 billion bushels. Production is expected to be down slightly from last month while consumption is also decreased. May soybeans closed at $14.71, while November soybeans closed at $12.68 ½ a bushel. I would have up to 10% priced on 2013 production. I think there may be an opportunity for additional pricing at higher levels or an opportunity to put in place an option strategy. If the market can get back to $13, I would closely at prices in that range.  Over the past 31 years the average difference between the March projection for U.S. ending stocks and the final estimate has been 62.5 million bushels with 8 years below the final estimate and 23 years above. USDA will release the prospective plantings report and grain stocks report on March 28, 2013 with the next USDA Supply & Demand report released on April 10, 2013.

Supply and Demand Projections and Historical Data Source: USDA

Wheat

USDA increased old crop ending stocks 25 million bushels from last month to 716 million bushels. The trade on the average was expecting stocks of 704 million bushels. Reflective of slow sales and shipments, exports were lowered 25 million bushels as the only change made. The stocks to use ratio increased to 29.5%.  The projected season average price of $7.65 to $7.95 a bushel was lowered 5 cents on the bottom side and 15 cents on the top end. Global stocks were increased 55 million bushels to 6.549 billion bushels. May wheat closed at $7.97. July wheat closed at $6.98 ¾. New crop wheat prices will be heavily dependent on the condition of the Plains wheat crop as it breaks dormancy. The market is expecting conditions to have improved with the recent moisture of the last few weeks. Also playing into prices will be whether U.S. wheat prices are now more competitive with foreign competition and whether exports will pick up as the marketing year winds down. I am currently priced 10% on the 2013 crop. Over the past 31 years the average difference between the March projection for U.S. ending stocks and the final estimate has been 48 million bushels with 19 years below the final estimate and 12 years above. These numbers can and will change, but do reflect the best information and estimates at the time of the report. USDA will release the prospective plantings report and grain stocks report on March 28, 2013 with the next USDA Supply & Demand report released on April 10, 2013.

Supply and Demand Projections and Historical Data Source: USDA