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WASDE Report for 2/9/16


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WHEAT: U.S. 2015/16 wheat exports are lowered 25-million-bushels this month to 775 million. U.S. exports are lowered on increased international competition, especially from Canada. This export total is the lowest since 1971/72. U.S. wheat ending stocks are raised 25 million bushels and are the largest since 2009/10. Global wheat supplies for 2015/16 are raised 2.1 million tons primarily on increased beginning stocks and slightly larger production. The largest change to beginning stocks is a 2.0-million-ton increase for China, which is raised on a multi-year revision in total use. World beginning stocks are raised 1.7 million tons. World wheat production remains record high and is raised 0.4 million tons led by a 0.5-million-ton increase for Argentina and a 0.3-millionton increase for Ukraine. Kazakhstan is lowered 0.3 million tons.

Foreign trade is raised 2.3 million tons led by a 1.5-million-ton increase for Canada exports on a fast pace to date. Argentina and Turkey exports are each raised 0.5 million tons. Imports are raised 0.5 million tons for Ethiopia on increased needs stemming from the drought, and 0.3 million tons each for China and South Korea. World wheat consumption for 2015/16 is lowered 4.7 million tons led by a 4.0-million-ton decrease for China as government policies reduce the food and feed uses of wheat in favor of other grains. India consumption is lowered 2.9 million tons on government stocks data that was larger than expected. With wheat supplies increasing and total usage decreasing, global ending stocks are raised 6.8 million tons to a record 238.9 million tons.

COARSE GRAINS: U.S. feed grain ending stocks for 2015/16 are projected higher this month with corn imports raised and exports lowered. Corn imports are projected 10 million bushels higher based on recent imports of corn into southeastern U.S. feed markets.

Corn exports are projected 50 million bushels lower as larger supplies of South American corn further increase competition for U.S. exports. Partly offsetting is a 25-million-bushel increase in projected U.S. corn use for ethanol based on the strong pace of ethanol production during January, as indicated by weekly Energy Information Administration (EIA) data, and higher forecast gasoline consumption. Corn ending stocks for 2015/16 are raised 35 million bushels. The projected range for the corn season-average farm price is narrowed 5 cents on both ends to $3.35 to $3.85 per bushel.

Global coarse grain supplies for 2015/16 are projected 1.3 million tons higher. Higher Brazil and Argentina corn production more than offset lower corn beginning stocks in these same countries and lower production elsewhere. Brazil and Argentina 2015/16 beginning stocks are lowered with higher 2014/15 exports. Brazil corn production for 2015/16 is raised 2.5 million tons based on higher first-crop yields and indications that strong domestic corn prices, reflecting the devalued local currency, will increase second-crop plantings. Argentina corn production is increased 1.4 million tons on higher area. Argentina corn production is revised  higher for 2014/15, also on higher area. South Africa corn production for 2015/16 is lowered 1.0 million tons, as continued historic drought conditions further reduce crop prospects despite some stabilizing rain during the month of January. Indonesia corn production is reduced 0.5 million tons.

Other coarse grain production changes are mostly offsetting with sorghum lowered for Mexico, rye raised for EU, and barley increased for Argentina. Global coarse grain consumption for 2015/16 is raised 0.9 million tons with foreign consumption up 0.2 million tons. The largest change this month is a 2.0-million-ton increase in China corn feed use as relative internal market prices are expected to support greater corn feeding at the expense of wheat. Corn use is also increased for Mexico, India and Turkey.

Partially offsetting are corn feeding reductions for Brazil and Argentina. Sorghum feed use is lowered for Mexico. Global coarse grain imports for 2015/16 are raised 4.3 million tons with corn imports higher for South Africa, Iran, India, Indonesia, Mexico, and Turkey. Corn exports are raised for Brazil, Argentina, and South Africa, but lowered for the United States. Barley exports are raised for Argentina and Kazakhstan, with higher imports for Saudi Arabia.

Global coarse grain ending stocks for 2015/16 are slightly higher, as larger barley and rye stocks more than offset a small reduction for corn.

RICE: There are no changes to this month’s 2015/16 U.S. rice supply and use projections. The all rice price is lowered $0.40 per cwt at the high end and $0.20 at the low end to a range of $12.50 to $13.30. The long-grain price is lowered $0.20 per cwt at the midpoint and the medium/short-grain price is lowered $0.60 per cwt at the midpoint. The price changes are made based on reported prices to date and expectations regarding prices for the remainder of the market year. Global rice supplies for 2015/16 are reduced 1.0 million tons on decreased production and lower beginning stocks. The largest production change is a 0.5-million-ton decline for Thailand on the lack of water available. Brazil is down 0.1 million tons on updated government statistics, while crop estimates are lowered for Nicaragua and other Central American countries to reflect drought conditions.

Beginning stocks are lowered 0.4 million tons primarily due to Vietnam. Global 2015/16 exports are lowered 0.5 million tons led by 0.3-million-ton reductions each for Thailand and Vietnam, both on lower exportable supplies. Global imports are reduced 0.2 million tons with the biggest reduction 150,000 tons for Iran.

World rice consumption for 2015/16 is lowered 0.6 million tons, but remains a record at 483.7 million tons. The largest reduction is for Thailand, which is lowered 0.3 million tons on a smaller crop. With the reduction in global supplies greater than the reduction in total use, world ending stocks are lowered 0.4 million tons to 89.3 million, the smallest since 2007/08.

OILSEEDS: U.S. soybean ending stocks for 2015/16 are projected at 450 million bushels, up 10 million from last month due to a lower crush. Soybean production, trade, and other uses remain unchanged. Crush is reduced 10 million bushels to 1,880 million reflecting a lower soybean meal export forecast. Meal exports are reduced on sluggish shipments and sales as well as greater expected competition from Argentina where larger projected soybean supplies boost soybean meal exports. Lower U.S. soybean meal exports are partly offset by increased domestic soybean meal use which is raised to reflect relatively strong October-December disappearance. Soybean oil stocks are projected lower as reduced  production more than offsets larger imports and a higher extraction rate. Soybean oil imports are raised on large shipments from Canada.

The 2015/16 season-average soybean price range projection is unchanged at $8.05 to $9.55 per bushel. Soybean meal and oil price projections are also unchanged at $270 to $310 per short ton and 28.5 to 31.5 cents per pound, respectively. Global oilseed production for 2015/16 is projected at 527.4 million tons, up slightly from last month as an increase in soybean production more than offsets lower forecasts for peanuts and sunflowerseed. Soybean production in Argentina is projected up 1.5 million tons to 58.5 million on a higher yield projection. The revised yield forecast is in line with an adjustment to last year’s yield and is also supported by beneficial rain that has improved crop prospects. Peanut production in India is reduced this month on lower area.

Global sunflowerseed production is projected lower as a decrease for Russia more than offsets higher production in Ukraine. Global 2015/16 soybean and product supply and use changes include increased soybean crush for Argentina and Canada, increased soybean meal and oil exports for Argentina, increased soybean oil exports for Canada, and reduced soybean meal exports for India. In addition to the United States, higher soybean meal disappearance is projected for India where soybean meal substitutes for lower peanut meal disappearance.

Soybean meal disappearance is also raised for Canada.oilseed stocks are projected at 91.2 million tons, up 0.3 million. Higher soybean stocks in Argentina, the United States, and Turkey, more than offset lower rapeseed stocks in the EU and Canada.

SUGAR: U.S. sugar production for 2015/16 is projected at 8.849 million short tons, raw value (STRV). Production of Florida cane sugar is increased 62,539 STRV to 2.136 million based on a larger sugarcane crop reported by the National Agricultural Statistics Service (NASS).

Beet sugar production is reduced by 147,594 STRV to 5.010 million due to lower expected sucrose recovery from sliced sugarbeets. U.S. cane sugar refiners are expected to import more sugar in 2015/16 under the USDA reexport import program to take advantage of the large margin between domestic and world raw sugar prices. The increase is projected at 61,524 STRV, implying total imports of 300,000. Refiners have more than sufficient room on their license balances for this quantity of imports.

Deliveries for human consumption in 2015/16 are unchanged. Sugar deliveries are running slightly ahead of the same corresponding period last year but there are significant differences. Strong deliveries of sugar sold by U.S. cane sugar refineries are up 2.8 percent year-over-year. There is a stronger pace of direct consumption imports reflecting a pick-up in refined sugar imports from Mexico, and a continuing weakness in beet sugar deliveries to consumers that are down 9.5 percent year-over-year. U.S. ending stocks for 2015/16 are projected at 1.565 million STRV, implying an ending stocks-to-use ratio of 12.8 percent. 

 For the 2015/16 Mexico deliveries for human consumption are reduced 43,953 metric tons (MT) to 4.344 million, reflecting changes by the Comite Nacional Para El Desarrollo Sustentable de la Caña de Azucar (CONADESUCA). 

LIVESTOCK, POULTRY, AND DAIRY: The 2016 forecast of total red meat and poultry production is raised from last month as higher forecast pork and broiler production more than offsets reduced forecasts for beef and turkey. USDA’s Cattle report, released January 29, estimated that the cattle inventory continued to increase and pointed to a higher level of cattle outside feedlots on January 1, 2016. However, with lower year-over placements in fourth-quarter of 2015 and only modest increases expected in first-half 2016 placements, marketings and fed cattle slaughter forecasts for 2016 are reduced.

Partly offsetting the lower fed cattle slaughter is higher expected cow slaughter and an increase in cattle carcass weights as the pace of marketings is slowed. Pork production is raised as slaughter during January was above expectations. Broiler production is higher as recent hatchery data shows faster-than-expected growth in chicks placed and bird weights continue to increase. Turkey production is reduced on hatchery data. Egg production is raised on increased hatching egg production.

Estimates of 2015 meat and egg production are adjusted to reflect December data. Beef and pork import and export forecasts for 2016 are unchanged from last month. The broiler export forecast is lowered as South Korea reinstated its ban on imports of uncooked U.S. poultry following the discovery of HPAI in Indiana in mid-January. Turkey exports are unchanged. The egg export forecast is unchanged, but the import forecast is raised. Meat and egg trade estimates for 2015 are updated based on data for December. Cattle prices for 2016 are raised from last month on higher expected prices in the first quarter. First quarter hog prices are lowered from last month as supplies are expected to support higher slaughter levels; however, the forecast of the annual price is unchanged. Broiler prices are lowered from last month on weaker prices to date.

The turkey price is unchanged. Egg prices are raised in the first quarter, but lowered in the second with the annual average price lowered from last month. The milk production forecast for 2016 is raised from last month as the cow herd is adjusted slightly to reflect the January 1 dairy cow inventory reported in USDA’s Cattle report and milk per cow is raised for the first quarter. Beginning stocks are raised from last month as cheese stocks at the end of 2015 were high. Both fat basis and skim-solids exports for 2016 are reduced from last month reflecting continued pressure on cheese, nonfat dry milk (NDM), whey, and lactose exports, due to large global supplies and a relatively strong dollar. Imports are unchanged from last month. For 2015, production, trade, and stock estimates are updated based on data through December.

Product price forecasts for NDM and whey are forecast lower as U.S. prices continue to reflect weakness in international markets. The butter price forecast is raised as domestic demand remains strong. The cheese price forecast is unchanged from last month, although the range is narrowed. The Class III price is lowered on lower whey prices. The Class IV price is down as a lower NDM price more than offsets a higher butter price. The all milk price is forecast at $15.30 to $16.00 per cwt.

 

 COTTON: A 5-percent reduction in exports is raising projected 2015/16 U.S. cotton ending stocks this month. The production and domestic mill use forecasts are unchanged. Exports are reduced 500,000 bales to 9.5 million, reflecting continued sluggish export sales, attributable mainly to sharply lower imports by China relative to last season. Ending stocks are now projected at 3.6 million bales, or 27.5 percent of total use. The forecast range for the marketing year average price received by producers of 58 to 61 cents per pound is raised 1 cent on the lower end, with the mid-point now forecast at 59.5 cents.

The world 2015/16 cotton forecasts include lower expectations of consumption and trade relative to last month. Consumption and imports are reduced for China, based on continued sluggish demand, and for Pakistan, where a slower pace of imports indicates reduced demand. World consumption is lowered 1.3 million bales, which also includes reductions for India and Brazil. With global imports nearly 1.0 million bales below last month, exports are reduced for Brazil, India, and Pakistan, in addition to the United States. Global stocks are now forecast at just over 104 million bales.

 

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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. 

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”.  
         
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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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