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WASDE Report for 7/12/16


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WHEAT: Projected U.S. supplies for 2016/17 are raised 180 million bushels this month on increased production and slightly higher beginning stocks. A 5-million-bushel decrease in imports is minimally offsetting. Production is raised throughout the wheat belt. Winter wheat yields are projected to be record high, and spring wheat yields are slightly above average. Feed and residual use for 2016/17 is raised 100 million bushels to 300 million on the larger supplies and increased wheat price competitiveness with corn. U.S. exports are raised 25 million bushels to 925 million, which would be the highest in 3 years. Ending stocks are raised 55 million bushels to 1,105 million bushels, the highest since 1988/89. With the large increase in carryover stocks, the season-average farm price is lowered $0.20 per bushel at the midpoint to a projected range of $3.40 to $4.20.


Global 2016/17 wheat supplies are raised 9.2 million tons to 983.0 million on increased production as well as a 1.5-million-ton increase in beginning stocks. Foreign production is raised 2.7 million tons led by 1.0-million-ton increases for both Russia and Ukraine on favorable weather. Production for Argentina, Australia, and Canada are each raised 0.5 million tons. These increases are partially offset by a 1.0-million-ton decrease for the EU on heavy rain in France and a 0.7-million-ton decrease for Algeria on a worse-than-expected impact from drought. Total world production is now projected at a record 738.5 million tons.


Global use for 2016/17 is raised 13.3 million tons to 729.3 million, primarily on increased feed use, stemming from the large world supplies and heavy late-season rain in several production regions. Feed use in China and the EU are raised 5.5 million tons and 1.5 million tons, respectively. Global food and industrial use is raised 1.7 million tons, led by a 1.0-million-ton increase for China. Global 2016/17 exports are raised 2.8 million tons on increased supplies and strong demand in several countries. Foreign export increases are led by a 1.0-million-ton increase for Ukraine, and 0.5 million tons each for Argentina, Australia, Canada, Russia, and Turkey. The increases are partly offset by a 1.5-million-ton reduction for EU exports on a smaller crop and increased domestic feed use. With total use rising faster than supplies, world ending stocks are lowered 4.1 million tons to 253.7 million, but remain record large.


COARSE GRAINS: Projected 2016/17 U.S. feed grain supplies are raised this month as lower beginning stocks are more than offset by increased production. Corn beginning stocks for 2016/17 are lowered 7 million bushels as reductions in 2015/16 feed and residual use and use for ethanol production are more than offset by increases in exports and seed use. Corn production for 2016/17 is projected 110 million bushels higher reflecting the increased planted and harvested areas from the June 30 Acreage report. Projected sorghum production for 2016/17 is raised 13 million bushels on higher expected harvested area. Oats production is forecast 9 million bushels higher and barley production is forecast 10 million bushels lower in today’s Crop Production report mostly reflecting area adjustments in the Acreage report.


Projected 2016/17 U.S. corn use is raised 30 million bushels as increased prospects for exports and higher seed use more than offset lower projected use for feed and residual and ethanol production. Exports are projected 100 million bushels higher on reduced competition from Brazil, as reflected by new-crop export sales that are well above a year ago. Projected feed and residual use for 2016/17 is lowered, despite the larger crop, reflecting implications of the lower-than-expected disappearance for 2015/16 indicated by the June 30 Grain Stocks report. Projected corn use for ethanol is lowered 25 million bushels in line with changes for 2015/16 driven by the latest data from the Grain Crushings and Co-Products Production report. Corn seed use is revised higher back to 1995/96 to better reflect rising plant populations reported in the NASS objective yield survey data. Updated seed use estimates will be available in this month’s Economic Research Service Feed Outlook and from the Feed Grains Database at http://www.ers.usda.gov/data-products/feed-grains-database.aspx.


Corn ending stocks for 2016/17 are projected 73 million bushels higher. Projected season-average prices received by producers for 2016/17 are lowered for all the feed grains, with corn down 10 cents to $3.10 to $3.70 per bushel. For 2015/16 the corn price is lowered 5 cents at the midpoint to a range of $3.60 to $3.70 per bushel.


Global coarse grain supplies for 2016/17 are projected slightly lower this month. Coarse grain beginning stocks are down slightly from last month mostly reflecting reductions in barley for the EU and corn for Brazil. Partly offsetting are higher corn stocks for China and Mexico. Global coarse grain output is largely unchanged with lower corn and barley production mostly offset by higher oats, sorghum, and rye production. Brazil corn production for 2016/17 is reduced 2.0 million tons based on lowered yield expectations. Canada corn production for 2016/17 is lowered 1.3 million tons based on the latest area information from Statistics Canada and lower yield prospects following one of the driest Junes in over 30 years in Ontario. Global barley production for 2016/17 is lowered, mostly on reductions for Turkey, Canada, Algeria, and Morocco, which more than offset increases for Australia, Ukraine and Uruguay.


Brazil corn production for 2015/16 is lowered 7.5 million tons reflecting the latest government statistics which confirm the adverse impact of this year’s early end to the rainy season in much of central Brazil. An unusual early June freeze also adversely affected second-crop corn in Parana following what had been a generally favorable growing season. Argentina corn production for 2015/16 is raised 1.0 million tons based on harvest data reported to date.


Global 2016/17 coarse grain consumption is lowered 3.3 million tons, mostly reflecting reduced corn feeding for the United States, Brazil, China, EU, South Korea, and Indonesia. Larger global supplies of feed-quality wheat are expected to undercut corn in price sensitive markets in the EU and Asia. EU corn imports are lowered for 2015/16 and 2016/17 with greater wheat and barley feeding. Brazil corn exports are lowered for 2015/16 and 2016/17, down 4.0 million tons and 1.0 million tons, respectively. Global 2016/17 corn ending stocks are projected 3.3 million tons higher mostly on a 2.1-million-ton increase for China. Outside of China, corn stocks are 1.2 million tons higher with larger stocks for the United States and Indonesia more than offsetting reductions for Brazil, Japan, and Canada.


RICE: U.S. 2016/17 all rice supplies are raised 12.0 million cwt to 309.9 million on a production increase that is partially offset by lower beginning stocks. Long-grain production is raised 2.0 million cwt while combined medium- and short-grain production is raised 12.0 million cwt. The production increase reflects the 148,000 acre increase in planted area (mostly California medium- and short-grain rice) from NASS’ June Acreage report. Harvested area is forecast at 3.2 million acres, up 24 percent from the previous year. Beginning stocks are reduced 2.0 million cwt on an equivalent increase in 2015/16 exports. For 2016/17, all rice domestic and residual use and exports are each raised 3.0 million cwt to 138.0 million and 115.0 million, respectively. Ending stocks are unchanged for long-grain, but raised 6.0 million to 16.5 million for medium- and short-grain. All rice ending stocks are now forecast at 56.9 million cwt, the largest since 1985/86. The all rice season-average farm price is lowered $0.40 per cwt at the midpoint to a projected range of $11.20 to $12.20, reflecting lower expected California prices.


Global rice supplies for 2016/17 are raised 0.6 million tons primarily on the larger U.S. crop. Several mostly offsetting changes are made for 2015/16 and 2016/17 exports, imports, and domestic use. Global ending stocks for 2016/17 are raised 0.4 million tons to 107.3 million.


OILSEEDS: U.S. oilseed production for 2016/17 is projected at 115.4 million tons, up 2.5 million tons mainly on higher soybean production. Soybean production is projected at 3,880 million bushels, up 80 million due to increased harvested area. Harvested area, forecast at a record 83.0 million acres in the June 30 Acreage report, is 1.6 million above the June forecast. The soybean yield is projected at 46.7 bushels per acre, unchanged from last month. Soybean supplies are raised 60 million bushels with lower beginning stocks partly offsetting production gains. With increased supplies, soybean crush and exports are raised 10 and 20 million bushels respectively. Soybean ending stocks are projected at 290 million bushels, up 30 million from last month.


Soybean exports for 2015/16 are projected at 1,795 million bushels, up 35 million reflecting shipments and outstanding sales through early July. Residual use is reduced based on indications from the June 30 Grain Stocks report. Soybean ending stocks for 2015/16 are projected at 350 million bushels, down 20 million from last month.


The U.S. season-average soybean price for 2016/17 is projected at $8.75 to $10.25 per bushel, unchanged from last month. The soybean meal price is projected at $325 to $365 per short ton, up 5 dollars on both ends. The soybean oil price is projected at 29.5 to 32.5 cents per pound, down 1 cent on both ends of the range.


Global oilseed production for 2016/17 is projected at 536.4 million tons, up 2.6 million from last month with U.S. soybean production accounting for most of the change. Foreign oilseed production is projected at 421.1 million tons, up 0.1 million with higher rapeseed and sunflowerseed production mostly offset with lower forecasts for cottonseed and copra. Rapeseed production is raised for Canada mainly on increased planted area reported by Statistics Canada. Rapeseed production is reduced for the EU on lower harvested area and yields. Lower yields reflect excessive June rainfall, mainly in France. Other changes include increased soybean production for Canada and increased peanut production for the United States. Cottonseed production is reduced for India and Pakistan with partly offsetting increases for the United States and Australia. Global oilseed ending stocks for 2016/17 are projected at 76.1 million tons, up 1.0 million with higher soybean, rapeseed, and sunflowerseed stocks only partly offset with lower peanut stocks. Global vegetable oil stocks are raised mainly reflecting historical revisions for Indonesia.


SUGAR: Sugar production for the fiscal year (FY) 2016/17 is increased 250,896 short tons, raw value (STRV) to 8.961 million resulting from increases made by NASS in the June 30 Acreage report. Sugarbeet planted area is forecast at 1.166 million tons, up slightly from last year and 0.6 percent above Prospective Plantings. Sugarbeet harvested area is projected at 1.149 million acres, an increase of 2.2 percent over the level used for projecting production in the June 2016 WASDE. Projected 2016/17 beet sugar production for the August/July crop year is increased 115,000 STRV to 5.333 million. With 11.5 percent of the crop expected to be harvested prior to the start of the fiscal year, production for FY 2016/17 is increased 101,774 STRV to 5.192 million. NASS projects sugarcane harvested area at 918,200 acres, up 3.5 percent from last year. That increase, along with sugar yield in Texas returning to historical levels, implies an increase in 2016/17 cane sugar production of 149,000 STRV to 3.769 million.


SUGAR: Sugar production for the fiscal year (FY) 2016/17 is increased 250,896 short tons, raw value (STRV) to 8.961 million resulting from increases made by NASS in the June 30 Acreage report. Sugarbeet planted area is forecast at 1.166 million tons, up slightly from last year and 0.6 percent above Prospective Plantings. Sugarbeet harvested area is projected at 1.149 million acres, an increase of 2.2 percent over the level used for projecting production in the June 2016 WASDE. Projected 2016/17 beet sugar production for the August/July crop year is increased 115,000 STRV to 5.333 million. With 11.5 percent of the crop expected to be harvested prior to the start of the fiscal year, production for FY 2016/17 is increased 101,774 STRV to 5.192 million. NASS projects sugarcane harvested area at 918,200 acres, up 3.5 percent from last year. That increase, along with sugar yield in Texas returning to historical levels, implies an increase in 2016/17 cane sugar production of 149,000 STRV to 3.769 million.


Imports for 2016/17 are reduced by 408,090 STRV to 3.068 million. Reduced imports from Mexico totaling 387,109 STRV account for most of the decrease. Beginning stocks for 2016/17 are reduced by 53,308 STRV due to lowered beet sugar production for 2015/16 and fewer imports under tariff-rate quotas for raw sugar and certain free trade agreements for 2015/16. Ending stocks for 2016/17 are projected residually at 1.654 million STRV, implying an ending stocks-to-use ratio of 13.5 percent.


Beginning stocks for 2016/17 in Mexico are reduced 165,107 metric tons (MT) due to less 2015/16 production than projected last month and increased sugar for domestic consumption. Deliveries for consumption in 2016/17 are expected to increase in line with the 2015/16 increase by 100,508 MT. Exports to the United States are projected to decrease 331,302 MT to 1.173 million, based on changes made in this month’s July 2016 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 2016/17 are projected residually at 1.275 million MT, up 65,687 as lower beginning stocks and increased domestic deliveries partially offset the reduction in exports.


Beginning stocks for 2016/17 in Mexico are reduced 165,107 metric tons (MT) due to less 2015/16 production than projected last month and increased sugar for domestic consumption. Deliveries for consumption in 2016/17 are expected to increase in line with the 2015/16 increase by 100,508 MT. Exports to the United States are projected to decrease 331,302 MT to 1.173 million, based on changes made in this month’s July 2016 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 2016/17 are projected residually at 1.275 million MT, up 65,687 as lower beginning stocks and increased domestic deliveries partially offset the reduction in exports.


LIVESTOCK, POULTRY, AND DAIRY: The forecast for total red meat and poultry production for 2016 is raised from last month. Beef production is forecast higher largely on the pace of slaughter in the second quarter, but also as feedlot marketings during the second half of the year are expected to remain relatively high. Pork production for 2016 is also raised, based on second quarter slaughter and larger expected slaughter in the fourth quarter. Broiler production for 2016 is raised on year-to-date production and hatchery data. The turkey production forecast is raised on second quarter production data. For 2017, pork production is reduced. In the June 24 Quarterly Hogs and Pigs report, producers indicated intentions to have fewer sows farrow in the second half of 2016 compared to 2015. No change is made to the 2017 production forecasts for beef or poultry. Table egg production is raised for both 2016 and 2017 on improved returns.


Only small changes are made to the beef and pork trade forecasts for 2016 and no change is made to the 2017 forecast. Both beef imports and exports are raised based on May trade data. Pork imports are lowered, but exports are raised. Broiler exports are raised slightly for 2016 and 2017, based on the recent reopening of South Korea to U.S. fresh and frozen poultry meat. No change is made to turkey exports.


Cattle price forecasts for second-half 2016 are unchanged from last month as is the 2017 forecast. Hog prices are raised for both years on current prices and lower expected supplies of hogs in 2017. Broiler prices are unchanged for both 2016 and 2017. Turkey prices are raised for the second-half of 2016, but are unchanged for 2017. Egg prices are raised for 2016 as demand has begun to recover; the forecast for 2017 is unchanged.


The milk production forecast for 2016 is lowered from last month as the pace of cow herd expansion has slowed. However, the production forecast for 2017 is raised as higher forecast milk prices and lower feed costs in late 2016 and early 2017 are expected to lead to higher 2017 cow numbers. Fat basis exports are lowered for 2016 as slowing sales of butterfat products more than offset higher whole milk powder (WMP) exports. The forecast for 2017 is unchanged. On a skim-solids basis, the export forecasts for 2016 and 2017 are raised on higher WMP sales. For 2016 and 2017, imports are unchanged on a fat basis, but are raised on a skim-solids basis. Fat basis stocks are forecast higher as stocks of butter remain high, but on a skim-solids basis, stocks are reduced.


Cheese, butter, nonfat dry milk, and whey prices for 2016 and 2017 are forecast higher as demand remains robust. Class III and Class IV price forecasts are raised for both 2016 and 2017 as the component product prices forecasts are raised. The all milk prices are forecast higher at $15.55 to $15.85 per cwt for 2016 and $15.70 to $16.70 per cwt for 2017.


COTTON: The U.S. 2016/17 cotton projections show higher production offset by higher exports, with beginning and ending stocks revised down from last month. The 1.0-million-bale increase in the crop projection is attributable mainly to higher planted area as indicated in the June 30 Acreage report, combined with slightly more favorable assumptions about abandonment and yield based on current conditions. Domestic mill use is unchanged, but exports are projected sharply higher due to the larger U.S. supply and an expectation of continued tight foreign stocks. The projected range of 52 to 66 cents per pound for the marketing year average price received by producers is raised 5 cents on the lower end and reduced 1 cent on the upper end; the midpoint of 59 cents is raised 2 cents from last month.


A combination of modestly lower production and significantly higher consumption is reducing this month’s global cotton stock forecasts for both 2015/16 and 2016/17. The world carryin for 2016/17 is decreased 1.8 million bales owing to a sharp increase of 1.5 million bales in estimated 2015/16 China consumption. Recent strong demand for the government’s reserve sales indicates that mills are consuming more cotton than previously estimated. A parallel increase is made in projected China consumption for 2016/17. World 2016/17 production is reduced about 600,000 bales, despite the higher expected U.S. crop, mainly on reduced area expectations for Pakistan and India. Production is also raised for Australia, but is lowered for Greece and Uzbekistan. Smaller foreign crops are raising imports and reducing exports, especially for Pakistan. World 2016/17 ending stocks are now projected at 91.3 million bales, a reduction of 9.0 million from the beginning level.


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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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