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WASDE Report for 6/10/16


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WHEAT: Projected U.S. wheat supplies for 2016/17 are raised this month on both increased beginning stocks and larger winter wheat production. Beginning stocks are raised slightly with a 3-million-bushel decrease in 2015/16 imports partially offsetting a 5-million-bushel export reduction. Projected production for 2016/17 is up 79 million bushels mainly on improved prospects for the Hard Red Winter wheat crop in the Great Plains following excellent growing conditions throughout the spring months.

Consequently, the winter wheat yield is forecast to be record high. Feed and residual use for 2016/17 is raised 30 million bushels to 200 million on the larger crop as well as increased wheat price competitiveness with corn. Imports are lowered 5 million bushels, and exports are raised 25 million bushels to 900 million, up significantly from the previous year’s depressed total but still below the five year-average.

Ending stocks are raised 21 million bushels to 1,050 million, the largest in 29 years. Global wheat supplies for 2016/17 are raised 3.9 million tons with production increases for the EU, Russia, and the United States more than offsetting reductions for Brazil and Mexico. The EU production increase is entirely for Spain and reflects favorable growing conditions as confirmed with satellite imagery data. The production forecast for France is unchanged despite heavy rain for the month of May.

Although abundant precipitation can reduce yield prospects in low-lying areas, it may increase yield elsewhere. French wheat was in excellent condition prior to the onset of the rain and expectations for a return to dryness in the latter part of the grain filling stage is anticipated to further mitigate crop losses. Production in Russia is increased on updated government estimates showing larger spring wheat area.

Foreign exports for 2016/17 are up 1.0 million tons with the EU and Russia each up 0.5 million tons given their increased production. The primary global import changes are a 1.0- million-ton increase for India on low international prices increasing demand, and a 0.4- million-ton increase for Indonesia. Total world consumption is up 3.4 million tons led by a 1.2-million-ton increase for India food use, a 1.0-million-ton increase for EU feed use, and a 0.4-million-ton increase for Indonesia feed use.

For the EU, the late season rain in major producing regions is expected to reduce wheat quality and increase feeding. Global ending stocks are raised fractionally and remain record large.

COARSE GRAINS: The 2016/17 outlook for U.S. feed grain supplies is lowered this month with declines for corn, sorghum, and oats beginning stocks more than offsetting an increase for barley.

Projected corn production for 2016/17 is unchanged at a record 14,430 million bushels. Corn ending stocks for 2015/16 are reduced 95 million bushels as a 100-millionbushel increase in the corn export forecast more than offsets a slightly higher import projection. As of early June, total U.S. corn export commitments (accumulated exports plus outstanding sales) are above year-ago levels for the first time in the 2015/16 marketing year. Reduced corn production in Brazil and harvest delays in Argentina have improved the relative competitiveness of U.S. corn in recent weeks. The U.S. corn export projection for 2016/17 is raised 50 million bushels as U.S. supplies are expected to remain more competitive in 2016/17 with less production for Brazil.

Corn ending stocks for 2016/17 are projected at 2,008 million bushels, down 145 million from last month. Changes to 2016/17 sorghum beginning stocks reflect higher 2015/16 forecasts for sorghum use. Projected exports are raised 15 million bushels based on recent food aid shipments and increased export sales. Food, seed, and industrial use is expected 10 million bushels higher based on reported sorghum use for ethanol production in the latest Grain Crushings and Co-Products Production report. Projected feed and residual use and ending stocks are both lowered. The season-average farm price for corn is raised for both 2015/16 and 2016/17.

The 2015/16 price is forecast up 10 cents per bushel at the midpoint with a range of $3.60 to $3.80 per bushel. The 2016/17 price is projected 15 cents per bushel higher at the midpoint with a range of $3.20 to $3.80 per bushel. Price outlooks for the other feed grains in 2016/17 are also raised this month. Foreign coarse grain supplies for 2016/17 are projected up 5.3 million tons, driven mostly by larger corn production in Mexico and greater barley production in the EU and Ukraine. Brazil corn production for 2015/16 is lowered 3.5 million tons to 77.5 million, as an early end to the rainy season in west-central Brazil has reduced yields for second-crop corn. Mexico corn production is raised 1.0 million tons for 2015/16 based on revisions to official government estimates and 0.7 million tons for 2016/17 reflecting a favorable start to the rainy season and improved reservoir levels.

EU barley production for 2016/17 is raised 2.3 million tons, as abundant rainfall and excellent growing conditions during grain fill boost yield prospects for Spain. Ukraine barley production is raised 0.9 million tons on higher area as the impact of fall dryness was not as large as previously expected. Global 2016/17 coarse grain consumption is raised 4.1 million tons with larger corn and barley feeding for Iran and greater barley feeding for the EU and Saudi Arabia. Reductions in 2015/16 and 2016/17 Brazil corn exports are offset by higher exports for the United States and reduced imports for the EU and Mexico. Global corn ending stocks for 2016/17 are projected 1.9 million tons lower as the reduction for the United States more than offsets higher foreign stocks. At the projected 205.1 million tons, world corn stocks are expected to decline slightly in 2016/17.

RICE: U.S. 2015/16 rice ending stocks are lowered 0.5 million cwt this month to 42.9 million on a 1.0-million-cwt increase in exports which is partially offset by a 0.5-million-cwt increase in imports. The larger exports are based on a faster-than-expected pace of sales of southern medium- and short-grain rice to North Africa and the Middle East. Exports for 2016/17 are lowered 1.0 million cwt to 112.0 million, with reductions for medium- and short-grain, due to tightening supplies. Ending stocks for 2016/17 are raised 0.5 million cwt to 50.9 million, and are the largest ending stocks since the mid-1980’s.

The 2015/16 all rice season-average price is lowered $0.10 per cwt on both the high and low ends of the range. The 2016/17 all rice price is raised $0.30 per cwt at the midpoint based on stronger-than-expected forward prices for long-grain rice and strengthening prices in international markets. Global rice supplies are raised fractionally for both 2015/16 and 2016/17. The largest change is a 0.5-million-ton increase in 2015/16 India production to 103.5 million on updated government data. Only slight changes are made this month to global trade, use, and ending stocks for both the 2015/16 and 2016/17 marketing years.

OILSEEDS: This month’s U.S. soybean supply and use projections for 2016/17 include lower beginning stocks, higher exports, and lower ending stocks. Lower beginning stocks in 2016/17 reflect higher crush and export projections for 2015/16. Soybean crush for 2015/16 is raised 10 million bushels to 1,890 million reflecting an increase in projected soybean meal exports. Soybean meal exports are raised in part on commitments through early June. Soybean exports for 2015/16 are projected at 1,760 million bushels, up 20 million with reduced soybean production and exports for Brazil and Uruguay. Soybean ending stocks for 2015/16 are projected at 370 million bushels, down 30 million from last month. Ending stocks for 2016/17 are reduced 45 million bushels to 260 million on lower beginning stocks and increased exports. Exports are raised with reductions for Brazil and Ukraine.

The 2016/17 season-average price for soybeans is forecast at $8.75 to $10.25 per bushel, up 40 cents at the midpoint. Soybean meal prices are forecast at $320 to $360 per short ton, up $20 at the midpoint. Soybean oil prices are unchanged at 30.5 to 33.5 cents per pound. Global oilseed production for 2016/17 is projected at 533.9 million tons, up fractionally from last month. Sunflowerseed production is raised for Ukraine on higher planted area based on reported planting progress to date.

The increase for sunflowerseed is mostly offset with reduced soybean and cottonseed production for Ukraine and China, respectively. Changes for 2015/16 include reduced soybean production for Brazil, Uruguay, and China. The Brazil soybean crop is reduced 2.0 million tons to 97.0 million reflecting the latest crop production report from the Government of Brazil. Hot, dry conditions in parts of the Center-West and northeast resulted in reduced yields. With a lower soybean production estimate, Brazil October-September year exports and stocks are reduced for both 2015/16 and 2016/17. Higher projected U.S. exports in 2015/16 and 2016/17 partly offset the decline to Brazil trade and reduce U.S. ending stocks. Other trade changes in 2015/16 include reduced exports for Uruguay and imports for Bangladesh, Pakistan, and Vietnam. Ukraine 2016/17 soybean exports are also cut with a lower forecast crop. With lower global soybean beginning stocks and production, and a negligible change to crush, global stocks for 2016/17 are projected at 66.3 million tons, down 1.9 million from last month.

SUGAR: U.S. sugar imports for 2015/16 are increased by 182,558 short tons, raw value (STRV) from last month. Although the U.S. Department of Agriculture (USDA) announced the increase of the raw sugar tariff-rate quota (TRQ) by 140,000 STRV on May 17, 2016, it is estimated that 122,558 of that amount will enter, implying an increase in the total raw sugar TRQ shortfall of 17,442 to 45,000. Following the Department of Commerce’s approval of WASDE-554-4 USDA’s request for an additional 60,000 STRV of raw sugar imports from Mexico based on an additional need for “Other Sugar” of polarity of less than 99.2 and consistent with the CVD Suspension Agreement, sugar imports from Mexico are increased by that amount. U.S. sugar production is increased by 7,874 STRV based on end-of-season reporting in Florida and Texas.

Based on pace to date, exports for 2015/16 are reduced by 35,000 STRV to 65,000 and deliveries for re-export products are increased by 30,000 to 130,000. Ending stocks for 2015/16 are calculated residually at 1.939 million STRV, implying an ending stocks-to-use ratio of 15.85 percent. Total U.S. sugar supply for 2016/17 is increased by 192,176 STRV based on the increase in beginning stocks less a small reduction in expected refined sugar TRQ imports. No change in imports from Mexico for 2016/17 is made at this time as the Department of Commerce will announce the first 2016/17 Export Limit in July. Total U.S. sugar use for 2016/17 is decreased by 15,000 STRV as a 25,000 STRV decrease in exports is partially offset by a 10,000 STRV increase in deliveries for re-export products. Mexico sugar exports for 2015/16 are increased by 91,350 metric tons (MT) with exports to the United States increased by 51,350 and exports to third-country destinations increased by 40,000. With no other changes made to the Mexico sugar balance either for 2015/16 or for 2016/17, the reported changes reduce expected ending stocks in both years by the same 91,350 MT.

LIVESTOCK, POULTRY, AND DAIRY: The forecast for total red meat and poultry production in 2016 and 2017 is lowered from last month, largely as higher feed prices dampen the rate of production growth. Beef production for 2016 is reduced mostly on lower carcass weights, but the pace of second-quarter slaughter is slightly slower than previously expected. Production in 2017 is reduced on slightly lower carcass weights as higher feed prices are expected to encourage cattle feeders to minimize the amount of time cattle are on feed. Pork production for 2016 and 2017 is lowered as higher feed prices are expected to impact weights through early 2017.

USDA’s Quarterly Hogs and Pigs report will be released on June 24 and provide an indication of producer farrowing intentions for the remainder of 2016. Broiler and turkey production for late-2016 and early-2017 is lowered as higher feed prices slow the expected rate of expansion. Turkey production in the second quarter 2016 is reduced on the current pace of slaughter. Egg production for 2016 is also reduced on expected weaker returns. Forecasts for 2016 and 2017 beef imports are unchanged from last month; the export forecast is reduced slightly on the pace of trade to date. No change is made to pork imports or exports for 2016 or 2017.

Broiler and turkey export forecasts are unchanged as well. Cattle prices for 2016 are raised from last month on prices to date, but the forecast for 2017 is unchanged. Likewise, hog prices are higher in 2016 but unchanged for 2017. Broiler prices are raised for both 2016 and 2017 as domestic demand has strengthened and the rate of production growth has slowed. Turkey prices are raised for 2016, but unchanged for 2017. Although the rate of production growth is slowed, the recovery in demand has been weaker than expected. Egg prices are reduced from last month on continued weakness in demand.

Milk production forecasts for 2016 and 2017 are raised from last month as recently reported cow numbers indicate the herd continues to expand. No change is made to output per cow. WASDE-554-5 Fat and skim -solids basis export forecasts for 2016 and 2017 are lowered as international supplies of dairy products remain abundant and U.S. prices remain high relative to those of competitors. Fat and skim-solids basis stocks are forecast higher as stocks of butter and cheese are expected to remain relatively high. Fat basis imports are reduced for both 2016 and 2017 on expectations of slower imports of butterfat products, and to a lesser extent, cheese. Cheese and butter prices for 2016 are forecast higher based on recent price data and lower forecast imports, despite relatively large stocks. The nonfat dry milk (NDM) price is raised based on recent price strength.

The whey price forecast is unchanged at the midpoint. Cheese prices are forecast lower for 2017 as relatively high stocks pressure the market, but the prices of butter, NDM, and whey are unchanged from last month. Class III and Class IV price forecasts are raised for 2016 on component product prices. For 2017, the Class III price is lowered on lower cheese prices, but the Class IV price is unchanged. The all milk price is forecast higher at $14.95 to $15.35 per cwt for 2016, but is unchanged at $15.25 to $16.25 per cwt for 2017.

COTTON: A marginal reduction of 50,000 bales in 2015/16 domestic mill use is the sole revision in this month’s U.S. cotton supply and demand estimates. U.S. ending stocks are now forecast at 4.1 million bales for 2015/16 and 4.8 million bales for 2016/17. The forecasts for the marketing year average price received by producers are unchanged for both seasons. The world 2016/17 cotton projections include lower beginning and ending stocks, due mainly to reductions in expected production by China.

The China crop estimates are reduced 1.3 million bales for 2015/16 and 1.0 million bales for 2016/17, based on reports from Chinese sources indicating that 2015-crop production in eastern China was lower than previously estimated. Projected 2016/17 production is also reduced for Egypt and the African Franc Zone, with Egypt’s production pegged at its lowest level since the mid-1800’s. Slightly lower world consumption includes a reduction for India, partially offset by an increase for Turkey. Projected global stocks of 94.7 million bales are 1.7 million bales below last month, reflecting a 2.0-million-bale decrease in China ending stocks.

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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”.  
         
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.
       
My mission is to educate you, giving you my 45 years experience, wisdom, and knowledge from which you will then be able to use and benefit from at will.

I know what will help you make money, and I know what will insure failure. Use my services and prevent, “If I only knew”.  
  

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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