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WASDE Report for 1/12/16


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WHEAT:  Feed and residual use for 2015/16 is lowered 30 million bushels reflecting disappearance for June-November as indicated by the December 1 stocks released in the Grain Stocks report.  Seed use is lowered 6 million bushels on the winter wheat planted area reported today in the Winter Wheat Seedings report.  U.S. supplies for 2015/16 are lowered 6 million bushels on reduced imports and slightly lower beginning stocks.  Projected 2015/16 ending stocks are raised 30 million bushels.  The 2015/16 season average farm price range is narrowed 10 cents on both the high and low ends to $4.90 to $5.10 per bushel.  


Global wheat supplies for 2015/16 are raised 1.2 million tons on both increased beginning stocks and production.  World wheat production remains record high and is raised 0.5 million tons led by 0.5-million-ton increases for both Russia and Pakistan and a 0.3-million-ton increase for the EU.  Partly offsetting is a 0.7-million-ton reduction for Uruguay and a 0.4-million-ton reduction for Brazil; both reductions are on updated government statistics and reflect crop damage from excessive rain.  World wheat trade for 2015/16 is down fractionally with several, mostly offsetting, changes.  Global use is reduced, mostly in the United States.  With supplies increasing and use reduced, ending stocks are raised 2.2 million tons to a record 232.0 million tons.  This total is 9 percent larger than the previous stocks record set last year.  


COARSE GRAINS:  U.S. feed grain supplies for 2015/16 are lowered as small increases in corn and sorghum imports and sorghum production are more than offset by a reduction in corn production.  Harvested area for corn is raised slightly, but the national average yield is estimated 0.9 bushel per acre lower than the previous forecast at 168.4 bushels per acre.  Corn production for 2015/16 is estimated 53 million bushels lower, but remains the third largest crop on record at 13.6 billion.  Sorghum production is estimated 3 million bushels higher as an increase in harvested area more than offsets a reduction in yield.


Total projected corn use for 2015/16 is reduced slightly with lower projected food, seed, and industrial use and exports.  Feed and residual use is unchanged as September-November disappearance, as indicated by the December 1 stocks, was largely in line with expectations.  Corn used to produce ethanol is unchanged, but projected use for sweeteners is lowered 10 million bushels.  Exports are lowered 50 million bushels based on the slow pace of sales and shipments to date and continued strong competition from South American suppliers.  Corn ending stocks are projected 17 million bushels higher at 1.8 billion bushels, stocks remain the highest since 2005/06.  The projected range for the 2015/16 season-average corn farm price is lowered 5 cents on each end to $3.30 to $3.90 per bushel reflecting weakness in export demand and recent declines in cash and futures prices.  The sorghum farm price is lowered 20 cents at the midpoint to a range of $3.05 to $3.55 per bushel reflecting the weakening relationship to cash corn prices in interior markets.


Global coarse grain supplies for 2015/16 are projected 6.8 million tons lower mostly on lower corn production for South Africa and the United States and lower rye production for Russia.  Foreign coarse grain supplies are lowered 5.9 million tons.  Corn production is lowered 4.0 million tons for South Africa as continued heat and dryness during December further reduced prospects for area and yields, particularly in the western producing areas where satellite imagery suggests much of this year’s crop may not have been planted.  Russia corn production is lowered 0.5 million tons with reductions in area and yields, but an area increase for Ukraine corn raises production an offsetting 0.5 million tons.  Other corn production changes include small reductions for China and Peru.  Reductions in rye and oats production for Russia more than offset an increase for barley.


Global coarse grain consumption for 2015/16 is reduced with the biggest reduction for Russia, down 1.2 million tons with lower rye, oats, and corn consumption reflecting tighter supplies with the smaller crops.  Corn consumption for South Africa is lowered 0.7 million tons with reduced supplies.  Corn consumption is also lowered for Saudi Arabia, Argentina, and Pakistan.  


Global coarse grain imports for 2015/16 are raised with increases for South Africa, Mexico, and Peru corn more than offsetting reductions in corn imports for China and Saudi Arabia.  Corn exports are raised for Brazil, Mexico, and Ukraine, but lowered for South Africa, India, and Russia.  Corn exports are also raised for Argentina and Brazil for the 2014/15 (March 2015 through February 2016 local year) further reducing prospects for 2015/16 U.S. corn exports (September 2015 through August 2016).   Global 2015/16 corn ending stocks are projected 2.9 million tons lower with reductions for Brazil, China, South Africa, Pakistan, Russia, Argentina, and Saudi Arabia.  World corn ending stocks remain record large at 208.9 million tons; however, more than half of those stocks are held in China. 


RICE: The U.S. 2015/16 all rice crop is projected at 192.3 million cwt, up 1.6 million from last month.  Long-grain production is up 0.7 million cwt to 133.0 million, and medium- and short-grain is raised 0.9 million cwt to 59.3 million.  The all rice production increase stems from both higher harvested area and yield.  The all rice yield increased 47 pounds per acre to 7,470, and harvested area increased 5,000 acres to 2.58 million.  Imports are lowered 0.5 million cwt to 24.0 million on a slower pace to date.  Changes are made on the use side with domestic and residual lowered 6.0 million cwt and exports raised 4.0 million (both changes are all long-grain).  The reduction in domestic and residual use reflects implied use from the December 1 Rice Stocks report and very strong August-November exports, especially to Latin America.  Ending stocks are projected at 41.9 million cwt, up 3.1 million cwt from last month, but down 6.6 million from the previous year.  The all rice season average price is lowered $0.40 on each end of the range to $12.70 to $13.70 per cwt.  The long-grain price is lowered $0.50 on each end of the range to $11.00-$12.00 per cwt.  The all medium- and short-grain price is lowered $0.40 on each end of the range to $16.60-$17.60 per cwt.  


Global 2015/16 rice supplies are raised 0.9 million tons to 574.0 million primarily on increased production.  The largest production gains are 0.3 million tons each for China and the Philippines.  The China increase is on updated government data.  The Philippine increase comes from reported damage related to Typhoon Koppu, that struck a key rice growing region last October, which was less severe than initially thought.  World exports are raised 0.8 million tons to 42.2 million on increased demand, especially in Southeast Asia.  Global consumption is lowered 0.4 million tons to 484.3 million, but remains record large.  Ending stocks are raised 1.3 million tons to 89.7 million, but are still 14.2 million tons below last year and the tightest stocks since 2007/08.  


OILSEEDS:  U.S. oilseed production for 2015/16 is estimated at 116.2 million tons, down 1.5 million from last month.  Smaller crops for soybeans, canola, and cottonseed are only partly offset by increases for sunflowerseed and peanuts.  Soybean production is estimated at 3,930 million bushels, down 51 million on lower harvested area and yields.  Harvested area is estimated at 81.8 million acres, down 0.6 million from the previous forecast.  Yield is estimated at 48.0 bushels per acre, down 0.3 bushels, but still a record.  With lower supplies, exports are reduced 25 million bushels to 1,690 million.  Ending stocks are projected at 440 million bushels, down 25 million from last month.  Although soybean crush is unchanged, soybean meal production is reduced on a lower extraction rate.  Soybean meal exports are reduced on a slowing pace of sales and increased competition from Argentina.  Soybean oil balance sheet changes include increased production on a higher extraction rate, increased imports, and increased domestic use.


The 2015/16 U.S. season-average farm price forecast for soybeans is projected at $8.05 to $9.55 per bushel, down 10 cents at the midpoint based on prices reported to date.  Soybean meal is forecast at $270 to $310 per short ton, down 20 dollars on both ends.  The soybean oil forecast is unchanged at 28.5 to 31.5 cents per pound.  


Global oilseed production for 2015/16 is projected at 526.9 million tons, down 2.0 million with lower forecasts for soybeans, sunflowerseed, peanuts, and cottonseed.  Global soybean production is projected at 319.0 million tons, down 1.1 million on smaller crops in the United States and South Africa.  Larger soybean production in China is partly offsetting.  Global sunflowerseed production is reduced with lower projections for Argentina and South Africa partly offset by an increase for Russia.  Other changes include reduced cottonseed production for China, India, and Pakistan.


Global oilseed trade for 2015/16 is projected at 148.0 million tons, up 0.3 million from last month.  Increased soybean exports for Argentina and increased soybean and rapeseed exports for Canada more than offset lower U.S. soybean exports.  Global oilseed crush is projected higher mainly on increased soybean crush for Argentina, China, and Vietnam and increased rapeseed crush for Canada and China.  Global oilseed stocks are projected at 90.9 million tons, down 4.2 million on reduced soybean stocks for the United States, Argentina, and China, and reduced rapeseed stocks for Canada.


SUGAR:  U.S. sugar production for 2015/16 is projected at 8.934 million short tons, raw value (STRV), a decrease of 57,000 from last month.  Louisiana cane sugar production is reduced 42,000 STRV to 1.423 million based on industry reports for a harvest that is nearly over.  Texas cane sugar production is reduced 15,000 STRV to 115,000 based on the updated processor forecast.  The Hawaii Commercial & Sugar Company (HC&S), the only remaining sugarcane processor in Hawaii, announced on January 6 that it will be terminating cane sugar production by the end of 2016.  This announcement has no effect on projected 2015/16 production.  Beet sugar is unchanged although sugar recovery from beet slicing from August through November is lower than expected.


Projected sugar imports are reduced 91,370 STRV to 3.100 million.  Tariff-rate quota (TRQ) imports are reduced 14,846 STRV as calendar year 2015 sugar access under certain Free Trade Agreements went unfilled.  On January 6, the Government of Mexico officially announced that effective February 4, duty free imports of sugar from the United States that have benefitted from the U.S. re-export import program will be prohibited.  Re-export imports are reduced by 76,524 STRV to 238,476.  The sugar export projection is reduced by that same 76,524 STRV amount to 123,476 STRV.


Although 2015/16 sugar deliveries through the first two months of the fiscal year are behind the pace expected, no change is made at this time.  2015/16 ending stocks are projected at 1.588 million STRV.  The implied stocks-to-use ratio is 13.0 percent, down from last month’s 13.5. 


The only change for Mexico is a 65,492 metric ton (MT) reduction in 2015/16 imports stemming from the prohibition of duty-free imports from the United States that have benefitted from the U.S. re-export import program.  The reduction is expected to reduce the amount of imported sugar going to Mexico’s sugar-containing product export IMMEX program.  With no change to total sugar deliveries to the IMMEX program, more domestically produced sugar is assumed to go to that use.  Ending stocks for 2015/16 are reduced to 1.081 million MT, implying a stocks-to-consumption ratio of 24.6 percent, a reduction of 1.5 percentage points from last month.  


LIVESTOCK, POULTRY, AND DAIRY:  The estimate of 2015 total meat production is lowered from last month as lower pork, broiler, and turkey production more than offsets higher beef production.  For 2016, the forecast is raised as higher pork, broiler, and turkey production more than offsets lower forecast beef production.  Higher cattle slaughter in late 2015 resulted in a higher beef production estimate, but lower-than-expected cattle placements in late 2015 are expected to result in lower fed cattle marketings and slaughter in 2016 and the beef production forecast for 2016 is lowered.  USDA will release its semi-annual Cattle report on January 29, providing estimates of heifers held for breeding and an insight into the number of cattle which might be available for placement during 2016.  Pork production for 2015 is lowered as end of year slaughter was lower than expected.  Pork production is increased slightly for 2016.  The Quarterly Hogs and Pigs report, released on December 23, indicated that producers intend to farrow slightly fewer sows on average during the first half of 2016, which may limit growth in the pig crop despite growth in pigs per litter.  However, higher carcass weights will support increased pork production.  Broiler production is lowered for 2015 based on slaughter and hatchery data, but the forecast for 2016 is raised primarily on higher forecast broiler prices.  Turkey production is raised for both the end of 2015 and early 2016 on slaughter and hatchery data.  Egg production for 2015 and 2016 is unchanged.


Beef imports for 2015 and 2016 are reduced, reflecting the pace of trade to date and relatively weak prices for processing beef.  Beef exports for the last quarter of 2015 and early 2016 are raised on gains in sales to a number of markets.  Pork imports and exports are unchanged from last month.  Broiler and turkey exports for 2015 and 2016 are reduced from last month as the export recovery has been slower than expected. 

   

Livestock and poultry prices for 2015 are adjusted for December data.  For 2016, no change is made to the cattle price forecast.  The 2016 hog price forecast is reduced as large supplies of hogs and competition from other meats pressured prices in late 2015 and is expected to pressure prices in early 2016.  Broiler prices improved in late 2015 and early 2016 and the price forecast for 2016 is raised.  Egg prices are lowered for 2016 reflecting recent price movements.


Milk production for 2015 is raised on slightly stronger growth in milk per cow.  Forecast 2016 milk production is reduced from last month.  Cow numbers are lowered due to lower expected milk prices and the recent blizzard in Texas and New Mexico.  Growth in milk per cow is reduced on lower milk prices.  Exports are lowered on both a fat- and skim-solids basis as global supplies of dairy products remain large and demand remains relatively weak.  Continued strength in domestic butter use will also limit the competitiveness of U.S. butter in world markets.  Fat and skim solid-basis imports for 2015 are unchanged.  For 2016 both fat and skim-solids imports are raised largely on higher cheese imports.

 

Dairy product prices for 2015 are adjusted for December data.  For 2016, butter prices are raised from last month on relatively strong demand and lower expected production.  Cheese, nonfat dry milk (NDM), and whey prices are reduced.  Relatively large beginning stocks of cheese and weaker beginning year prices underlie the reduction in the cheese price forecast.  NDM and whey prices are expected to be pressured by weakness in exports.  The Class III price for 2016 is lowered on lower cheese and whey prices and the Class IV price is reduced as a lower NDM price more than offsets a higher butter price.  The all milk price is lowered to $15.35 to $16.15 per cwt for 2016.


COTTON:  The 2015/16 U.S. cotton balance sheet shows marginally lower production and higher ending stocks relative to last month.  Production is lowered 88,000 bales to 12.9 million.  Domestic mill use is reduced 100,000 bales based on spinning activity through November, but exports are unchanged.  Ending stocks are now forecast at 3.1 million bales.  The forecast range for the marketing year average price received by producers is narrowed 1 cent on each end, with the midpoint unchanged from last month at 59 cents per pound.


The world 2015/16 cotton supply and demand estimates include sharply lower production and ending stocks compared with last month, with consumption reduced slightly.  Global production is reduced more than 2.0 million bales, based on updated harvest reports for Pakistan, China, India, and Turkmenistan.  Pakistan’s crop is reduced 800,000 bales to 7.2 million, its lowest level since 1998, as falling gin arrivals indicate more extensive whitefly damage than previously expected.  World consumption is reduced nearly 500,000 bales, reflecting decreases for India, Pakistan, and the United States.  Imports are raised 725,000 bales, virtually all in Pakistan, while exports are raised for India and others.  World ending stocks are now projected at 102.9 million bales, down 8 percent from the beginning level.


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About the author


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. 

One of the major lessons that I have learned from all my years of experience is that knowledge is an important condition for the possibility of successful trading. Knowledge gives you a better chance to succeed by eliminating obvious mistakes: with it, you will never find yourself shamefully uttering, “If I only took the time to learn”.  
         
I want to save you from such regrets by teaching you where the danger is, what it looks like, and how to go around it, while still keeping an eye on your destination of success. In short, I will teach you how to combat error with knowledge.
       
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Howard Tyllas

Futures trading involves the substantial risk of loss and may not be suitable for all investors. Past performance does not mean future results.

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