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WASDE Report for 12/9/15


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WHEAT:  No changes are made to the U.S. all wheat balance sheet this month.  By-class, the only changes are a 10-million-bushel increase in 2015/16 Hard Red Winter exports that is offset by a 10-million-reduction in Hard Red Spring exports.  


Global wheat supplies for 2015/16 are raised 2.3 million tons primarily on increased production but also higher beginning stocks.  World wheat production remains record high and is raised 1.9 million tons to 734.9 million.  The primary production change is for Canada, which is raised 1.6 million tons to 27.6 million on a Statistics Canada report.  


Global wheat trade for 2015/16 is raised with exports up 1.3 million tons on larger supplies, expected policy changes in Argentina, and stronger demand in several importing countries. Exports are raised 1.0 million tons for Argentina, and 0.5 million tons each for Canada and Ukraine.  The Argentina change is based on the expectation that the new government will reduce export restrictions.  The Canada change is on a larger crop as well as a strong pace to date.  The Ukraine change is also on a fast pace as well as strong feed wheat demand in Southeast Asia.  Partially offsetting is a 1.0-million-ton reduction for EU exports on a slow pace of licenses and competition, especially from Black Sea origins.  The largest import increases are 0.4 million tons for Ethiopia on expectations of additional tenders in response to emergency food needs, and 0.3 million tons each for Indonesia and Thailand on increased feed wheat purchases.  


Total world wheat consumption for 2015/16 is down 0.2 million tons.  The biggest change is a 1.0-million-ton decrease in EU wheat feeding that is mostly offset by increased consumption in several other countries, notably 0.3 million-ton-increases each for Indonesia and Thailand feeding.  Global ending stocks are projected 2.6 million tons higher with large increases for the EU and Canada partially offset by decreases for Argentina and Ukraine.   


COARSE GRAINS:  Projected U.S. feed grain ending stocks for 2015/16 are raised slightly this month.  U.S. corn use for ethanol production in 2015/16 is projected 25 million bushels higher based on the stronger-than-expected pace of ethanol production during November as indicated by weekly data from the Energy Information Administration (EIA).  EIA also raised its forecasts for 2015 and 2016 gasoline consumption in the December Short-term Energy Outlook.  Corn exports for 2015/16 are projected 50 million bushels lower, reflecting the slow pace of sales and shipments to date and higher projected exports for Brazil and Canada.  U.S. corn ending stocks are projected 25 million bushels higher at 1,785 million bushels.  The projected range for the season-average corn farm price is unchanged at $3.35 to $3.95 per bushel, in line with prices reported to date and current futures price levels.  The sorghum farm price range is lowered 10 cents on each end to $3.20 to $3.80 per bushel, reflecting the latest reported prices through October and continued weakness in interior cash sorghum bids.  

 

Global coarse grain supplies for 2015/16 are projected lower this month with global corn production lowered 1.0 million tons.  Corn production is lowered 1.5 million tons for India with reduced area and yield prospects as a result of limited monsoon rainfall.  South Africa corn production is lowered 0.8 million tons as October and November dryness has significantly delayed plantings in the higher-yielding eastern growing areas, thus reducing yield prospects.  Partly offsetting these reductions is a 1.3-million-ton increase for Canada corn based on the latest official production estimates from Statistics Canada.  Other coarse grain production changes for 2015/16 are mostly offsetting with lower Argentina sorghum, Chile oats, and Australia barley output offset by higher Canada barley and India millet production.


Global coarse grain consumption for 2015/16 is lowered slightly.  Global corn consumption is lowered 1.0 million tons mostly reflecting lower use in India and Taiwan.  Corn use is increased for EU and Chile.  Global barley consumption is raised with increases for EU and Canada.  Millet consumption is higher for India with a larger crop, but oats consumption declines for Chile with a smaller crop.  World corn trade for 2015/16 is lowered with imports reduced for Canada and Taiwan.  Corn exports are lowered for the United States, India, and South Africa, but raised for Canada.  Brazil corn exports for 2014/15 (March 2015 through February 2016) are raised 1.0 million tons to a record 32.0 million putting additional pressure on 2015/16 U.S. corn exports (September 2015 through August 2016).  Global corn ending stocks for 2015/16 are nearly unchanged with higher projected stocks for the United States and Canada offset by lower projected stocks for Brazil and EU.


RICE:  The U.S. 2015/16 rice supply and use is changed very little from a month ago.  The all rice import forecast is lowered 1.0 million cwt to 24.5 million, all in long-grain, as the pace to date is slower than expected.  No changes are made to 2015/16 use.  All rice domestic and residual use and exports are forecast at 127.0 million cwt and 98.0 million, respectively. All rice ending stocks are lowered 1.0 million cwt to 38.8 million, all in long-grain.  Long-grain ending stocks are forecast at 20.8 million cwt and medium- and short-grain stocks at 16.1 million.


The 2015/16 long-grain season-average farm price range is projected at $11.50 to $12.50 per cwt, unchanged from last month.  The medium- and short-grain farm price range is projected at $17.00 to $18.00 per cwt, down 60 cents per cwt on each end of the range.  The California medium- and short-grain rice price, at a midpoint of $21.00 per cwt, is down 50 cents per cwt from last month.  The Other States medium-and short-grain rice price, at a midpoint of $12.30 per cwt, is lowered 70 cents per cwt.  The all rice season-average farm price is forecast at $13.10 to $14.10 per cwt, down 20 cents per cwt on each end of the range.  Lower-than-expected prices published by the National Agricultural Statistics Service (NASS) for October along with price expectations for the remainder of the marketing year support the downward adjustment in rice prices from a month ago.


Global 2015/16 rice supplies are lowered more than the decline in use resulting in a reduction in ending stocks.  This is the third consecutive year that global consumption exceeds production leading to a drawdown in world ending stocks.  Global production is lowered 4.2 million tons to 469.3 million tons, down about 8.9 million tons from the preceding year, and the smallest crop since 2011/12.  Production forecasts are lowered for Australia, India, Madagascar, and the Philippines.

 The 2015/16 India crop is lowered 3.5 million tons to 100.0 million, the smallest crop since 2010/11.  The reduction is due to a drop in expected Kharif rice production as early harvest reports indicate lower-than-expected yields across the northeastern rice growing region.  Additionally, the slow pace of plantings of the Rabi rice crop due mostly to dryness is expected to lower expected yields and production.  Rice production in Australia is lowered 254,000 tons as area is lowered 36,000 hectares to 30,000 hectares.  This is the smallest area in production since 2008/09.  Rice production in the Philippines is lowered 250,000 tons to 11.3 million due to cyclone damage.  The rice crop in Madagascar is lowered 256,000 tons to 2.4 million because of lower yields.


Global rice consumption for 2015/16 is lowered 1.6 million tons to 484.6 million tons, still a record.  Consumption forecasts are lowered in India, Madagascar, Nigeria, Thailand, and Vietnam.  Global exports are unchanged at 41.3 million as India is lowered and mostly offset by increases for Thailand and Vietnam.  Imports are lowered for Nigeria and the United States.  World 2015/16 ending stocks are lowered 2.6 million tons to 88.4 million, largely due to decreases for India, Nigeria, and Thailand.  Stocks are down 15.3 million tons from the preceding year and the smallest since 2007/08.  The 2015/16 stocks-to-use ratio is projected at 18.2 percent, down from 21.5 in 2014/15, and the smallest since 17.9 percent in 2006/07.


OILSEEDS:  Total U.S. oilseed production for 2015/16 is forecast at 117.7 million tons, down slightly due to a small reduction in cottonseed.  Soybean supply and use projections for 2015/16 are unchanged from last month.  Soybean ending stocks are unchanged at 465 million bushels which, if realized, would be the highest since 2006/07.  Soybean oil used for methyl ester is raised 200 million pounds for 2015/16 reflecting the recent Environmental Protection Agency announcement of the biodiesel mandate for 2016.

 

The U.S. season-average soybean price for 2015/16 is forecast at $8.15 to $9.65 per bushel, unchanged from last month.  Soybean meal is forecast at $290 to $330 per short ton, down 10 dollars on both ends of the range.  Soybean oil is forecast at 28.5 to 31.5 cents per pound, up 1 cent on both ends.


Global oilseed production for 2015/16 is projected at 529.0 million tons, down 2.0 million tons with foreign oilseeds accounting for most of the change.  Global soybean production is projected at 320.1 million tons, down 0.9 million.  The India soybean crop is reduced 1.5 million tons to 8.0 million on lower yields resulting from inconsistent rainfall during the growing season and late-season heat.  Larger projections for Canada, Russia, and Ukraine partly offset the reduction for India.  Global rapeseed production is projected at 67.5 million tons, up 0.5 million with a larger crop in Canada only partly offset by a lower forecast for India.  Canada rapeseed production is raised 1.7 million tons to 17.2 million based on the latest survey results from Statistics Canada.  The India crop is reduced on lower projected area, reflecting planting progress to date.  Palm oil production is reduced for Indonesia and Malaysia for 2015/16 reflecting unusually dry conditions from June through October 2015.  The Indonesia crop is reduced 2.0 million tons to 33.0 million and the Malaysia crop is reduced 0.5 million tons to 20.5 million.  Other changes include reduced cottonseed production for China and Pakistan.


Global oilseed trade for 2015/16 is projected at 147.7 million tons, up 0.7 million from last month.  Soybean exports account for most of the change with higher projections for Argentina, Serbia, and Ukraine.  Soybean imports are raised for Pakistan, Taiwan, and Iran.  Rapeseed exports are also higher with an increase for Canada only partly offset by a lower projection for Australia.  Global oilseed crush is projected lower primarily on reduced rapeseed and soybean crush for India.  For Pakistan, increased soybean crush partly offsets lower rapeseed and cottonseed crush.  Global oilseed ending stocks are projected at 95.1 million tons, up 1.0 million mainly reflecting increased rapeseed stocks in Canada.  Global vegetable oil stocks are projected at 16.1 million tons, down 2.3 million mainly on lower palm oil stocks in Indonesia, Malaysia, and India.


SUGAR:  U.S. sugar production for 2015/16 is projected at 8.991 million short tons, raw value (STRV), an increase of 181,104 over last month.  Beet sugar is projected 82,775 STRV higher at 5.158 million based on higher processor estimated sucrose content.  Florida cane sugar production is projected 133,329 STRV higher at 2.073 million based on the NASS forecast of sugarcane for sugar and processors’ projected recovery.  Louisiana cane sugar production is reduced 35,000 STRV to 1.465 million based on the harvest pace to date and planned harvest end dates. 


Imports from Mexico for 2015/16 are reduced by 207,902 STRV to 1.333 million, and deliveries for human consumption are increased by 170,000 to 11.955 million based on final direct consumption import data and full-year alternative sweeteners data.  Ending stocks are projected at 1.659 million STRV, implying an ending stocks-to-use ratio of 13.5 percent.


Mexico 2014/15 sugar imports are estimated at 128,235 metric tons (MT), a reduction of 23,682 from last month based on end-of-year government import reporting.  Sugar exports to the United States for 2014/15 are estimated at 1.311 million MT, a reduction of 15,250.  This is based on a correction to U.S. import data by the Foreign Agricultural Service for a known revision in shipment data that will not be revised by the U.S. Census Bureau until a later date.  Sugar deliveries to the IMMEX sugar-containing products export program are estimated at 336,797 MT, an increase of 12,971 based on government reporting.  This estimate is carried forward for the 2015/16 projection.  For 2015/16, exports to the United States are projected at 1.140 million MT, down 177,929 based on changes made in the December 2015 sugar WASDE for the United States as per the Countervailing Duty (CVD) Suspension Agreement of December 19, 2014 (“Target Quantity of U.S. Sugar Needs”).  Ending stocks for 2015/16 are forecast residually at 1.147 million MT implying an ending stocks-to-consumption ratio of 26.14 percent.


Mexico 2014/15 sugar imports are estimated at 128,235 metric tons (MT), a reduction of 23,682 from last month based on end-of-year government import reporting.  Sugar exports to the United States for 2014/15 are estimated at 1.311 million MT, a reduction of 15,250.  This is based on a correction to U.S. import data by the Foreign Agricultural Service for a known revision in shipment data that will not be revised by the U.S. Census Bureau until a later date.  Sugar deliveries to the IMMEX sugar-containing products export program are estimated at 336,797 MT, an increase of 12,971 based on government reporting.  This estimate is carried forward for the 2015/16 projection.  For 2015/16, exports to the United States are projected at 1.140 million MT, down 177,929 based on changes made in the December 2015 sugar WASDE for the United States as per the Countervailing Duty (CVD) Suspension Agreement of December 19, 2014 (“Target Quantity of U.S. Sugar Needs”).  Ending stocks for 2015/16 are forecast residually at 1.147 million MT implying an ending stocks-to-consumption ratio of 26.14 percent.


LIVESTOCK, POULTRY, AND DAIRY:  The forecasts for total meat production in 2015 and 2016 are reduced from last month.  Beef production is lowered for 2015 due to a slower pace of fed cattle marketings and consequently, lower steer and heifer slaughter.  However, as the pace of marketings is slower, carcass weights are expected to be heavier, providing a slight counterbalance to lower slaughter.  For 2016, lower expected cattle placements during late 2015 will result in lower slaughter and beef production in mid-2016.  However, there is a slight offset from higher expected carcass weights early in the year.  Pork production is raised for 2015 on the pace of slaughter in November and early December.  No change is made to 2016.  USDA will release its Quarterly Hogs and Pigs report on December 23, providing an indication of producers’ hog production intentions into 2016.  Broiler production is lowered for both 2015 and 2016 as hatchery data points to slower growth in broiler production.  Egg production is lowered in 2015 based on recent production data, but hatchery data supports a slightly higher production forecast for early 2016.


Beef imports for 2015 and 2016 are reduced to reflect the pace to date and weakening prices for processing beef.  Beef exports for 2015 and 2016 are unchanged.  Pork imports are unchanged but export forecasts for 2015 and 2016 are reduced as the strength of the dollar is limiting export competitiveness.  Broiler and turkey exports for 2015 and 2016 are unchanged from last month.  


Cattle and hog prices for 2015 are lowered from last month.  A combination of weaker-than-expected packer demand and relatively large supplies of cattle and hogs are expected to pressure prices.  Cattle prices are reduced for all of 2016 and hog prices are lowered for early 2016.  Broiler prices are raised for 2015 on current price movements, but are unchanged for 2016.  Turkey prices for 2015 are reduced on current prices, but are unchanged for 2016.  Egg prices are lowered for the end of 2015 and into early 2016, reflecting recent price movements.


The milk production forecasts for 2015 and 2016 are reduced from last month as growth in milk per cow in 2015 and 2016 is slowed.  Fat basis imports are reduced for 2015 on slower butter imports; on a skim-solids basis, imports are unchanged.  No change is made to 2016 imports. Fat basis exports are unchanged for 2015 but are lowered for 2016 as global supplies of dairy products are expected to remain large and sales of cheese are expected to be pressured.  On a skim-solids basis, exports are lowered for 2015 as lactose and whey protein concentrates sales to date are limiting exports, and weaker expected sales of cheese and lactose in 2016 will dampen skim-solids export growth in 2016.  

 

Butter prices for remainder of 2015 and early 2016 are raised as prices have remained stronger than expected into early December.  Cheese prices are lowered slightly for 2015 and 2016 based on current price movements and expected larger domestic supplies.  The nonfat dry milk (NDM) prices are reduced for 2015 and 2016 as domestic and international supplies are expected to pressure prices.  Whey prices are unchanged from last month.  Class III prices are unchanged for 2015 and 2016 as the cheese price change was small.  Class IV prices are raised for 2015 due to the stronger forecast butter price which more than offsets the lower NDM price.  The 2016 Class IV price is lowered as the NDM price forecast is reduced.  The all milk price is raised to $17.05 to $17.15 per cwt for 2015 and lowered to $15.95 to $16.75 per cwt for 2016.


COTTON:  The U.S. cotton 2015/16 supply and demand forecasts include reduced production and exports this month; ending stocks are revised down marginally.  The U.S. crop is forecast at 13.0 million bales, down 250,000 from last month, due mainly to lower production in North and South Carolina.  Domestic mill use is unchanged, but exports are reduced 200,000 based on the lower available supply and lagging sales to date.  Ending stocks of 3.0 million bales account for 22 percent of total disappearance.  The forecast range for the marketing year average price received by producers of 56 to 62 cents per pound is narrowed 1 cent on each end, with the midpoint unchanged at 59 cents.


The world cotton 2015/16 projections show lower production, consumption, and ending stocks relative to last month.  Global production is reduced 1.9 million bales, as reductions for Pakistan, China, the United States, Turkey, Greece, and Turkmenistan are partially offset by an increase for Australia.  Total consumption is down slightly, reflecting reductions for China, India, and Pakistan, which are mostly offset by increases for Vietnam and Bangladesh.  Projected world trade is raised 1.0 million bales, reflecting larger expected imports for Pakistan, Vietnam, and Bangladesh, but lower imports for China.  Exports are raised for India, Brazil, and Australia, but are reduced for the United States.  World ending stocks are now projected 1.7 million bales below last month at 104.4 million.


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Currently a member of The Chicago Board of Trade (CBOT) and registered with the Commodity Futures Trading Commission (CFTC) as a floor broker and a member of the National Futures Association (NFA). I started my career in 1973 on The Chicago Mercantile Exchange trading floor working for a major firm. Three years later I purchased my first membership and began what would become a thirteen-year commitment to trading soybeans for my own account on the trading floor. I began trading options on futures since their inception in Chicago about twenty years ago; doing so, I traded in various pits on the trade floor. 

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