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WASDE Report for 5/10/16


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WHEAT:  U.S. wheat supplies for 2016/17 are projected up 6 percent from 2015/16 on higher beginning stocks and imports.  All wheat production is projected at 1,998 million bushels, down 3 percent.  The year-to-year decrease is due to a sharp reduction in planted area that more than offsets increased yields.  The all wheat yield is projected at 46.7 bushels per acre, up 7 percent from the previous year.  The survey-based forecast for 2016/17 winter wheat production is up with higher yields more than offsetting reduced harvested area.  Winter wheat has benefited from excellent spring growing conditions and yields are projected higher for Hard Red Winter, Soft Red Winter, and White Winter.  Spring wheat and Durum production for 2016/17 is projected to decline 16 percent on lower area, as well as a return to trend yield, which is below last year’s level.  


Total U.S. wheat use for 2016/17 is projected up 7 percent from the previous year on higher exports, feed and residual use, and food use. The 2016/17 exports are projected at 875 million bushels, up 95 million bushels from the previous year’s low level but still well below average. Large supplies in several major competing countries will continue to limit U.S. exports. Feed and residual use is projected up 30 million bushels on increased supplies. U.S. ending stocks are projected to rise 51 million bushels from the elevated 2015/16 total to 1,029 million, the highest since the 1987/88 crop year. The all wheat season-average farm price is projected at $3.70 to $4.50 per bushel; the mid-point of this range is the lowest in 11 years.  


Global wheat supplies are projected to rise 2 percent from 2015/16 as increased beginning stocks more than offset a decline in production from the previous year’s record. Total wheat production is projected at 727.0 million tons, the second highest total on record. Large crops are expected in most key competing countries and favorable spring growing conditions suggest that yields will be well above trend in the EU, Russia, and Ukraine.  Global wheat consumption for 2016/17 is projected slightly higher than in 2015/16 with higher food use more than offsetting a reduction in world wheat feeding. Global import demand for 2016/17 is down from last year’s record, but still very large.  Global ending stocks for 2016/17 are projected at a record 257.3 million tons, up 14.4 million from 2015/16.


COARSE GRAINS:  U.S. feed grain supplies for 2016/17 are projected up 4 percent from the 2015/16 record with increases in both beginning stocks and production.  Corn production for 2016/17 is projected at 14.4 billion bushels, up 829 million from 2015/16 and 214 million higher than the previous record in 2014/15.  A 5.6-million-acre increase in corn plantings more than offsets a small reduction in yield.  The U.S. corn yield is projected at 168.0 bushels per acre, down 0.4 bushels from 2015/16.  Corn supplies for 2016/17 are projected at a record 16.3 billion bushels, up 886 million from 2015/16, which more than offsets projected declines for sorghum, barley, and oats.


U.S. corn use for 2016/17 is projected at a record 14.1 billion bushels, 4 percent higher than for 2015/16.  Feed and residual use for 2016/17 is projected 300 million bushels higher with higher production, lower expected prices, and further expansion in animal numbers in 2016/17.  Corn used to produce ethanol is projected 50 million bushels higher than in 2015/16 with a reduction in sorghum use for ethanol and higher expected ethanol blending.  Exports for 2016/17 are projected 175 million bushels higher than this month’s upwardly revised projection for 2015/16.  More competitive prices and reduced supplies and competition from Brazil support gains in U.S. exports for 2016/17 and 2015/16.  U.S. corn ending stocks for 2016/17 are projected at 2.2 billion bushels, up 350 million from the 2015/16 projection.  If realized, stocks would be the highest since the mid-1980s; however, the stocks-to-use ratio remains far lower than in those years when domestic support policies ballooned stocks to more than 50 percent of annual usage.  The season-average 2016/17 farm price is projected at $3.05 to $3.65 per bushel, down 25 cents at the midpoint from this month’s slightly higher outlook for 2015/16.


Global coarse grain supplies for 2016/17 are projected at a record 1,543.2 million tons, up 41.0 million tons from 2015/16 with nearly half of the increase on larger U.S. beginning stocks and production.  Global corn production for 2016/17 is projected at 1,011.1 million tons, up 42.2 million from 2015/16, and just short of the record 1,013.5 million in 2014/15.  In addition to the projected 21.1-million-ton U.S. increase, 2016/17 corn production is also higher for most of the world’s major producing countries with production rebounds for South Africa and EU, and higher area in Argentina, Russia, and Ukraine.  Brazil corn production for 2016/17 is 1.0 million tons higher than this month’s lowered outlook for 2015/16 as area is expected to decline slightly, but yields rise from those now expected for the 2015/16 crop.  Partly offsetting these increases for 2016/17 is a 6.6-million-ton reduction for China corn, as changes in support policies and lower domestic prices reduce incentives for corn planting.


Global corn consumption for 2016/17 is projected at a record 1,011.9 million tons, 43.0 million tons higher than in 2015/16.  The largest increases are for China with consumption projected up 9.5 million tons and the United States with consumption projected up 9.2 million tons.  Smaller increases are projected for EU, Argentina, Brazil, India, Russia, Vietnam, Mexico, and South Korea.  


Global corn exports for 2016/17 are higher with increases for Argentina, EU, and Ukraine more than offsetting a reduction for Brazil.  Corn imports for 2016/17 are lower with declines for South Africa, EU, Vietnam, and China partly offset by increases for Mexico, Turkey, Egypt, Iran, and South Korea.  Much of the imbalance in global marketing year imports and exports is driven by the timing of Brazil and Argentina exports and the South Africa change from a net importer to a net exporter.  The 2016/17 local marketing years for these Southern Hemisphere exporting countries do not start until 2017, while the local marketing years for many major importers begin in October 2016.  Corn shipments by Southern Hemisphere exporters between October 2015 and February 2016 were strong, appearing as 2014/15 exports, but accounted for as 2015/16 imports.  Reduced 2015/16 Brazil second-crop corn limits export prospects between October 2016 and February 2017.  As a result, global imports decline in 2016/17 at the same time that U.S. exports expand.  Global 2016/17 corn ending stocks are projected at 207.0 million tons, down slightly from the 207.9 million for 2015/16.  Lower stocks in China, EU, and Brazil more than offset the projected U.S. increase.


RICE:  U.S. 2016/17 all rice production is forecast at 231.0 million cwt, up 38.7 million cwt from the previous year and the largest since 2010/11.  The increase reflects larger area and a higher yield.  Long-grain harvested area is forecast at 2.4 million acres, up 32 percent from the previous year and the largest in six years.  Combined medium- and short-grain harvested area is forecast at 0.6 million acres, down 17 percent from 2015/16 due to a sharp reduction in southern medium-grain planted area.  The yield increase for both classes of rice reflects a return to trend.  Total U.S. 2016/17 all rice supplies are forecast to increase 13 percent from the previous year.  Long grain supplies are up, while medium- and short-grain supplies are down.  


U.S. 2016/17 total use is projected at 248.0 million cwt, up 12 percent from the previous year with both domestic and residual use and exports projected higher.  Long-grain exports for 2016/17 are forecast at 81.0 million cwt, up 12 million from the previous year and the largest in more than a decade.  Combined medium- and short-grain exports are forecast at 32.0 million cwt, up 1.0 million cwt from 2015/16.  Despite increased domestic use and exports, 2016/17 all rice ending stocks are forecast to rise 7.0 million cwt to 50.4 million.  Long-grain stocks are forecast at 38.0 million cwt, up 15.5 million cwt from the previous year and the largest since 1985/86.  Combined medium- and short-grain ending stocks are forecast down 8.5 million cwt to 10.5 million.  The 2016/17 all rice season-average price is forecast at $11.30 to $12.30 per cwt; down $0.60 at the midpoint the previous year.  


Global 2016/17 rice production is forecast at a record 480.7 million tons and total supply at 587.1 million tons, up 2.3 million from the previous year.  Total global rice consumption is forecast at 480.5 million tons, up 2.1 million tons from the previous year’s revised level and a record.  Reductions in historical domestic use estimates are made for several countries, most importantly for China and Thailand, that led to lower global domestic use and increased ending stocks.  World exports are forecast at 40.7 million tons, down 0.7 million tons from 2015/16 and the second consecutive decline.  Thailand and India show the largest year-over-year export reductions.  Global ending stocks of 106.7 million tons are up fractionally from 2015/16.  


OILSEEDS:  U.S. oilseed production for 2016/17 is projected at 112.9 million tons, down 3.1 million from 2015/16 mainly on lower soybean production.  Production forecasts are also lower for sunflowerseed, canola, and peanuts, but higher for cottonseed.  Soybean production is projected at 3,800 million bushels, down 129 million from the 2015 crop on lower harvested area and trend yields.  Supplies are projected at 4,230 million bushels, up 1.9 percent from 2015/16 with higher beginning stocks more than offsetting lower production.


The U.S. soybean crush for 2016/17 is projected at 1,915 million bushels, up 35 million from 2015/16.  Domestic soybean meal disappearance is projected to increase with expected gains in U.S. meat production.  With limited gains for competing exporters, U.S. soybean meal exports are projected at 12.0 million short tons, up 0.5 million from 2015/16.  Soybean exports are forecast at 1,885 million bushels, up 145 million from the revised 2015/16 projection.  Sharply reduced stocks in South America this fall will limit competition during the first half of the marketing year.  In addition, limited soybean production gains are projected for the 2016/17 South American harvest in early 2017.  With forecasted global soybean import growth of 3.8 percent, the U.S. soybean export share is projected at 37 percent, up slightly from 2015/16 and near the 5-year average.  U.S. ending stocks for 2016/17 are forecast at 305 million bushels, down 95 million from the revised 2015/16 projection.  The 2016/17 U.S. season-average soybean price range is forecast at $8.35 to $9.85 per bushel compared with $8.85 per bushel in 2015/16.  Soybean meal prices are forecast at $300 to $340 per short ton, compared with $310 per ton for 2015/16.  Soybean oil prices are forecast at 30.5 to 33.5 cents per pound compared with 30.0 cents for 2015/16. 


Global oilseed production for 2016/17 is projected at 533.8 million tons, up 2.1 percent from 2015/16.  Global soybean production is projected at 324.2 million tons, up 8.3 million with gains for India, Brazil, Ukraine, and Argentina, partly offset by lower U.S. production.  The Brazil soybean crop is projected at 103.0 million tons, up 4.0 million on higher area and yields.  China soybean production is projected higher on increased harvested area as policy changes reduce incentives to plant corn.  The Argentina soybean crop is projected at 57.0 million tons, up 0.5 million from the revised 2015/16 crop.  The 2015/16 crop is projected at 56.5 million tons, down 2.5 million mainly on lower area resulting from flooding in April.  Total global oilseed supplies are up less than 1 percent from 2015/16.  With crush projected to increase 2.3 percent, global oilseed ending stocks are projected at 76.9 million tons, down 9.5 percent from 2015/16. 

 

Global protein meal consumption is projected to increase 3.2 percent in 2016/17.  Protein meal consumption is projected to increase 3.7 percent in China which accounts for 32 percent of global protein consumption gains.  Global soybean exports are projected at 138.3 million tons, up 4.3 percent from 2015/16.  China soybean imports are projected at 87.0 million tons, up 4.0 million from 2015/16.  Global vegetable oil consumption is projected at 183.8 million tons, up 3.0 percent in 2016/17 led by increases for India, China, and Indonesia.  Global vegetable oil ending stocks are projected at 16.9 million tons, down 7.9 percent from 2015/16.


SUGAR:  Beet sugar production for the 2016/17 October-September fiscal year is projected at 5.090 million short tons, raw value (STRV).  Early planting of the 2016/17 sugarbeet crop implies above-average yields and a larger proportion of the crop harvested in August and September prior to the start of the coming fiscal year.  The estimate for 2015/16 beet sugar production is raised to 5.064 million STRV.  Cane sugar production for 2016/17 is projected at 3.620 million STRV.  Projections for Florida and Louisiana assume trend yields and the same area harvested as the previous year.  Production in Texas is projected the same as 2015/16, and Hawaii is projected at 40,000 STRV for the 3 months of processing before the mill closure at the end of the calendar year.


Sugar imports for 2016/17 are projected at 3.479 million STRV.  Total TRQ imports are projected at 1.531 million STRV, the sum of the WTO TRQs less a shortfall projected at 99,208, as well as imports under several Free Trade Agreements with sugar import provisions.  Re-export imports are projected at 175,000 STRV, imports from Mexico at 1.758 million, and high-tier tariff imports at 15,000.


Deliveries for human consumption for 2016/17 are projected at 12.080 million STRV, an increase of 0.7 percent relative to 2015/16. The estimate of 2015/16 deliveries is increased by 45,000 STRV to 12.0 million based on share-to-date analysis of deliveries of sugar processed in the United States and expected direct consumption imports. 


Mexico sugar production for 2016/17 is projected at 6.1 million metric tons (MT), slightly below the estimate of 6.184 million for 2015/16. Sugar deliveries for human consumption are projected at 4.398 million MT, slightly above 2015/16. Sugar deliveries for Mexico’s sugar-containing products export program (IMMEX) are projected at 254,717 MT, the same level now projected for 2015/16 after Mexico cut off duty-free imports from the United States that benefitted from the U.S. re-export import program. Exports to the United States are projected at 1.505 million MT, as per the limit set in the December 2014 Countervailing Duty Suspension Agreement.


LIVESTOCK, POULTRY, AND DAIRY:  Total U.S. red meat and poultry production in 2017 is projected to be above 2016.  Beef production is forecast higher as larger 2015 and 2016 calf crops are expected to support year-over-year increases in cattle placements in late 2016 and early 2017.  Marketings of fed cattle are forecast higher during 2017 while carcass weights are expected to increase with good forage conditions and lower feed costs.  Pork production is expected to increase with larger hog supplies and heavier carcass weights.  A modest expansion of farrowings is expected during the latter part of 2016 and early 2017, and continued growth in pigs per litter will support larger pig crops.  Broiler production is forecast higher as the industry continues its current expansion path.  Turkey production will continue to increase during 2017, but not at the rate of growth expected for 2016 when the sector is rebuilding following the outbreak of Highly Pathogenic Avian Influenza (HPAI) in 2015.  Egg production for 2017 is forecast to expand as the egg sector continues to recover from the effects of HPAI. 


The total red meat and poultry production forecast for 2016 is lowered from last month as production forecasts for beef, and poultry are reduced.  Pork is raised on the pace of slaughter, but beef production is reduced on lowered first-half carcass weights.  Broiler production is adjusted to reflect first quarter data.  Turkey production is reduced on a slower expected pace of recovery from HPAI.  Egg production for 2016 is raised on higher expected first-half production.  


Red meat and poultry exports are expected to increase in 2017 with expanding production and moderating prices; conversely, imports of beef are expected to decline.  For 2016, the beef trade forecast is adjusted to reflect March trade data; no change is made to the forecast.  The pork export forecast is adjusted to reflect March data; imports are reduced on the slow pace of trade to date.  Broiler exports are forecast weaker on a slower expected pace of recovery in the first half of the year.  Turkey exports are adjusted for March data.  


For 2017, prices of fed cattle, hogs, broilers, and turkeys are all forecast below 2016 as supplies of meat are forecast higher.  Egg prices are forecast higher on firm demand.  As for 2016, the fed cattle price forecast is lowered from last month as prices have weakened and cattle supplies remain relatively large.  The annual average hog price is unchanged from last month.  Broiler and turkey prices are forecast higher as prices remain strong with slower expected growth in production.  Egg prices are lowered.  


Milk production for 2017 is forecast higher as improved forage availability and continued favorable feed costs are expected to support gains in milk per cow.  Cow numbers are expected to remain near 2016 levels.  Commercial exports on both a fat and skim-solids basis are forecast higher as expected tighter world supplies and increasing demand lead to expanded export opportunities.  Imports are forecast lower as domestic production increases.  With stronger domestic and export demand, cheese, nonfat dry milk (NDM), and whey prices are forecast higher but butter prices are forecast lower.  The Class III price is forecast higher on stronger cheese and whey prices, and the Class IV price is forecast higher as a weaker butter price is more than offset by the higher NDM price.  The all milk price is forecast higher than 2016 at $15.25 to $16.25 per cwt.


Milk production in 2016 is forecast higher than last month, as the cow inventory is expected to expand slightly and growth in milk per cow during the first half of the year is forecast higher.  Imports are raised on both a fat and skim-solids basis; exports on a fat basis are raised but are unchanged on a skim-solids basis.  Cheese, butter, and NDM prices are forecast lower on weaker demand and larger supplies, but whey prices are raised.  Both Class III and Class IV prices are reduced.  The milk price is forecast lower at $14.60 to $15.10 per cwt.


COTTON:  A projected 2016/17 U.S. cotton crop of 14.8 million bales is expected to boost next season’s ending stocks well above the beginning level.  Production is anticipated to rise 15 percent from 2015/16, based on 9.6 million planted acres as indicated in Prospective Plantings, combined with below-average abandonment, due to relatively favorable moisture, and average yields.  Domestic mill use is projected stable at 3.6 million bales, while exports are expected to rise to 10.5 million, on higher available supplies and more marketable qualities.  Ending stocks are projected at 4.7 million bales, or one-third of total use.  The preliminary range for the marketing year average price received by producers is 47.0 to 67.0 cents per pound.


For 2015/16, U.S. cotton production is increased marginally.  The export forecast is reduced to 9.0 million bales, reflecting lower-than-anticipated export sales to date, with ending stocks raised accordingly. 


The world 2016/17 cotton projections show a decline in stocks of more than 6.0 million bales, as consumption exceeds production for the second consecutive season.  Global production is expected to rise nearly 5 percent, despite marginally lower area, as yields recover from weather and pest pressures that affected crops in 2015/16.  Production is forecast to rise mainly in Pakistan, the United States, India, and Turkey, partially offset by a 1.3-million-bale reduction for China.  Global consumption is projected to rise 1.6 percent, as prices overall remain low and mills in China gain access to domestic cotton at more competitive prices.  Projected world trade is lowered slightly from 2015/16 as increased production, especially in Pakistan, reduces reliance on imports.  Ending stocks are projected at 96.5 million bales, 87 percent of world consumption.  Falling China stocks exceed the projected global decline while stocks outside of China show a slight increase.  Despite the projected decrease, China stocks are equivalent to nearly 170 percent of China’s total disappearance.


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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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