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WASDE Report for 9/12/16


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WHEAT: The U.S. 2016/17 wheat supply and demand estimates are unchanged from last month. The marketing year average price received by producers is lowered $0.10 per bushel at the midpoint to a range of $3.30 to $3.90. The reduction is due to lower than expected prices to date.


Global wheat supplies for 2016/17 are raised 0.4 million tons on a 1.4-million-ton production increase that is partially offset by decreased beginning stocks. Production increases for India, Kazakhstan, Australia, Brazil, and Canada are partially offset by reductions for the EU and China. Most changes are attributable to harvest reports and government data. The Australia increase is based on continued excellent growing conditions thus far in the growing season, with yields projected to be nearly record high. Brazil is also experiencing favorable growing conditions with yields projected record high. Global exports are raised 2.1 million tons led by a 1.0-million-ton increase for Australia and a 0.5-million-ton increase for Kazakhstan, both on larger crops. Export gains are partially offset by a 1.0-million-ton decrease in EU exports on the continued decline in supplies. Total global use is up 4.2 million tons with increases in both food and feed use. With total use rising faster than supplies, world ending stocks are lowered 3.8 million tons but remain record large.


COARSE GRAINS: This month’s 2016/17 U.S. corn outlook is for lower production, reduced feed and residual use, lower stocks, and higher prices. Corn production is forecast at 15.093 billion bushels, down 61 million from last month. Corn supplies for 2016/17 are lowered from last month but are still forecast at a record 16.859 billion bushels, as a smaller crop more than offsets a small increase in beginning stocks due to a reduction in 2015/16 exports. Feed and residual use for 2016/17 is lowered 25 million bushels with a smaller crop and higher expected prices. Exports are unchanged from last month, reflecting the competitiveness of U.S. corn on the world market. Corn ending stocks are down from last month but, if realized, would still be the highest since 1987/88. The projected range for the season-average corn price received by producers is raised 5 cents on both ends to $2.90 to $3.50 per bushel. Sorghum production for 2016/17 is forecast 14 million bushels above last month on higher yields. Grain sorghum prices are projected to average $2.75 to $3.35 per bushel, raised 5 cents on each end from last month.


Global coarse grain production for 2016/17 is forecast down 2.8 million tons to 1,319.7 million, but still above the record reached in 2014/15. The 2016/17 foreign coarse grain outlook is for lower production, slightly higher consumption, larger trade, and reduced stocks relative to last month. Brazil corn production is raised, as relatively favorable corn prices in southern Brazil are expected to boost first-crop planted area at the expense of soybeans. Barley production is raised for Argentina, Australia, and Canada. China corn production is lowered, based on drier-than-normal conditions during July and August in western Heilongjiang and eastern Inner Mongolia. EU corn and barley production are reduced; even with lower barley production, EU internal market prices are expected to favor greater barley feeding, offsetting reduced corn feeding. Russia barley production is down based on lower-than-expected yields for spring barley.


Corn exports are raised for Brazil with larger projected supplies for the local marketing year beginning in March 2017. Corn imports are raised for China, reflecting updated expectations of trade by non-state importers. China’s barley imports are lowered as the pace of trade has slowed in recent months, despite global feed barley prices that are well below a year ago. Foreign corn ending stocks for 2016/17 are lowered 0.7 million tons from last month. Stock declines are the largest in Argentina and the EU, with the former reflecting expectations of larger exports during 2015/16. Global corn stocks, at 219.5 million, are down from last month but still projected to be record high.


RICE: U.S. 2016/17 all rice supplies are reduced 0.6 million cwt due to a lower production forecast that is mostly offset by increased beginning stocks. Imports are also lowered 0.5 million cwt. All rice beginning stocks for 2016/17 are raised 7.1 million cwt from last month based on USDA’s August Rice Stocks report. All rice production is lowered 7.2 million tons on both lower area and yield. The production estimate reflects excessive rain and flooding that has taken place in several areas of the Southern production region. The long-grain crop is lowered 4.8 million cwt to 177.9 million, but is 44.9 million cwt above the previous year and the largest crop since the 2010/11 record. Medium- and short-grain production is lowered 2.3 million cwt to 59.3 million. Total rice exports are unchanged, but domestic and residual use is lowered 5.0 million cwt to 133.0. Ending stocks are raised 4.4 million cwt and the all rice season-average farm price is lowered $0.20 per cwt at the midpoint to a projected range of $10.20 to $11.20.


Global rice supplies for 2016/17 are raised 1.8 million tons on higher beginning stocks and production. Production is raised 0.7 million tons and remains record large. India production for 2016/17 is raised 1.5 million tons on an increase in projected harvested area; however, this is partially offset by a 0.7-million-ton reduction for Vietnam. Global exports for 2016/17 are raised 0.3 million tons with stronger shipments from India partially offset by reduced Vietnam exports. Global consumption for 2016/17 is lowered fractionally. With total supplies rising and total use declining, world ending stocks are raised 1.8 million tons to 115.6 million.


OILSEEDS: U.S. oilseed production for 2016/17 is projected at 124.3 million tons, up 4.1 million from last month with higher soybean, peanut, and cottonseed production. Soybean production is projected at a record 4,201 million bushels, up 141 million due to a higher yield forecast. Soybean supplies are raised with higher production more than offsetting lower beginning stocks. Despite higher crush and exports, 2016/17 soybean ending stocks are projected at 365 million bushels, up 35 million from last month due to higher supplies.


Changes for 2015/16 include higher exports and lower ending stocks. Exports are increased 60 million to a record 1,940 million bushels based on official trade through July and indications from record high August export inspections. Ending stocks are projected at 195 million bushels, down 60 million from last month.


The U.S. season-average soybean price is forecast at $8.30 to $9.80 per bushel, down 5 cents on both ends of the range. Soybean meal prices are also projected lower at $300 to $340 per short ton, down 5 dollars on both ends of the range. Soybean oil prices are projected at 30.5 to 35.5 cents per pound, up 1 cent on both ends.


Global oilseed production for 2016/17 is projected at 544.5 million tons, up 1.0 million from last month. A reduction for rapeseed is offset with gains for soybeans, sunflowerseed, peanuts, and cottonseed. Lower soybean production forecasts for Brazil, India, and Canada are more than offset by higher production for the United States and China. Brazil soybean production is reduced on lower area as relatively strong corn prices in southern Brazil are expected to increase first-crop corn planting. Projected soybean production is reduced for India on lower area and yields. Lower yields reflect excessive rainfall throughout the major producing region for July and August. Soybean production is reduced for Canada on lower yields as reported by Statistics Canada. China soybean production is raised as a higher area forecast more than offsets a lower yield. Global rapeseed production is reduced slightly with reduced forecasts for the EU and Russia partly offset by an increase for Canada. The 2016/17 Canada rapeseed crop is raised with both area and yield adjusted in line with the final estimates for the 2015/16 crop recently issued by Statistics Canada. Other changes include increased peanut production for India and increased sunflowerseed production for Argentina.


Global oilseed trade for 2016/17 is reduced this month mainly reflecting reduced soybean imports for China and reduced soybean exports for Brazil and Canada. Rapeseed and sunflowerseed imports are increased for the EU partly offsetting lower rapeseed production. Global oilseed stocks for 2016/17 are projected slightly higher this month mainly reflecting the sharp increase in ending stocks of rapeseed in Canada and increased soybean stocks for the United States.


SUGAR: Sugar production for the fiscal year 2016/17 is increased 63,904 short tons, raw value (STRV) to 9.272 million resulting from new sugar crop forecasts made by NASS in the September Crop Production report. Cane sugar production in Florida is increased by 95,536 STRV based on a higher sugar per acre implied by NASS’s Florida sugarcane yield forecast increase from last month of 2.0 tons/acre to 41.2 tons/acre. Partially offsetting is a beet sugar production decline of 31,632 STRV based on a lower sugar per acre implied by NASS’s sugarbeet yield forecast decrease of 0.1 tons/acre to 31.3 and an area harvested reduction of 3,000 acres.


Beginning stocks for 2016/17 are increased by 70,951 STRV due to changes made to 2015/16 total supply that flowed into the ending stock estimate. The estimate of 2015/16 beet sugar production is increased by 75,951 STRV, primarily based on a lower sugarbeet pile shrink factor implied by Sweetener Market Data (SMD) than was forecast by processors in previous months. Imports for 2015/16 are reduced by 5,000 STRV based on a reduction of 30,000 from Mexico that is partially offset by a pace-to-date increase of 25,000 for re-export imports. The reduction for Mexico reflects the entry of half of the 60,000 STRV of the expanded export access made in May by the Commerce Department at USDA’s request.


Imports for 2016/17 are reduced by 366,000 STRV to 2.652 million. All of the reduction is attributable to a decrease in imports from Mexico for 2016/17. Total use for 2016/17 is unchanged from last month. Ending stocks for 2016/17 are projected at 1.656 million STRV, implying an ending stocks-to-use ratio of 13.5 percent.


Beginning stocks for 2016/17 in Mexico are increased by 25,675 metric tons (MT) reflecting the reduction in 2015/16 exports to the United States. Exports for 2016/17 to the United States are projected to decrease from last month by 313,236 MT to 860,199, based on changes made in this month’s WASDE projections 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 at 1.248 million MT, an amount projected to meet sugar supply requirements of domestic consumption and exports to the U.S. market for the first three months of the following marketing year. Exports for 2016/17 to non-U.S. destinations are projected residually at 223,963 MT.


Beginning stocks for 2016/17 in Mexico are increased by 25,675 metric tons (MT) reflecting the reduction in 2015/16 exports to the United States. Exports for 2016/17 to the United States are projected to decrease from last month by 313,236 MT to 860,199, based on changes made in this month’s WASDE projections 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 at 1.248 million MT, an amount projected to meet sugar supply requirements of domestic consumption and exports to the U.S. market for the first three months of the following marketing year. Exports for 2016/17 to non-U.S. destinations are projected residually at 223,963 MT.


LIVESTOCK, POULTRY, AND DAIRY: The forecast for total red meat and poultry production for 2016 is reduced from last month as beef, pork, and broiler production forecasts are lowered. Turkey production is raised. Beef production is forecast lower on lower expected third quarter steer and heifer slaughter. Pork production for 2016 is lowered on expectations of slightly lower carcass weights for the third quarter. USDA will release the Quarterly Hogs and Pigs report on September 30, providing an indication of producer farrowing intentions into early 2017. Broiler production is lowered on slower expected growth in the second half of the year. Bird weights have been lower than previously expected. Turkey production for second-half 2016 is raised on production and hatchery data. No changes are made to the 2017 production forecasts for red meat or turkey, but the production forecast for broilers was reduced. No changes are made to the egg production forecasts for 2016 or 2017.


Beef import forecasts for 2016 and 2017 are unchanged. Beef exports for 2016 are raised on improving trade prospects in a number of countries, but the forecast is unchanged for 2017. The pork export forecast for 2016 is lowered. Broiler and turkey exports are lowered for 2016 and 2017 as the recovery in exports remains slower than expected.


Cattle, hog, and broiler prices for second-half 2016 are reduced from last month as relatively weak prices are expected through the remainder of the year. The turkey price is raised on current price strength. The cattle price for 2017 is lowered and a small reduction is made to the first-quarter 2017 hog price. Poultry prices are unchanged from last month. Egg prices are lowered for 2017.


The milk production forecast for 2016 is raised from last month as the cow inventory appears to have steadied in the face of expected improvements in returns. The production forecast for 2017 is raised to reflect slightly more rapid growth in milk per cow. Fat basis exports are raised for 2016 and 2017. For 2016, cheese and cream exports have remained firm, and strength in whole milk powder (WMP) exports is expected to carry into 2017. On a skim-solids basis, the export forecasts for 2016 and 2017 are raised on higher WMP and whey sales. Both fat and skim-solids basis ending stocks for 2016 are forecast higher as butter and cheese stocks remain high; fat basis ending stocks are raised for 2017 as well.


Cheese and butter prices are lowered for 2016 and 2017 as supplies remain high, but prices for nonfat dry milk (NDM) and whey are forecast higher as the global supply tightens and demand strengthens. The Class III price is lowered for 2016 and 2017 as the reduction in the cheese price more than offsets the whey price increase. The Class IV price is lowered for 2016 as the lower butter price more than offsets the higher NDM price but is raised for 2017 as higher NDM prices more than offset the lower butter price forecast. The all milk price is forecast lower at $16.10 to $16.30 per cwt for 2016 but is unchanged from last month at $16.15 to $17.15 per cwt for 2017.


COTTON: The 2016/17 U.S. cotton estimates include larger production and ending stocks relative to last month. Production is raised 263,000 bales, as increases for the Southwest and California are partially offset by reductions for the Southeast. Beginning stocks are revised 100,000 bales lower based on indicated stocks as of July 31, 2016, while domestic mill use is reduced slightly in both 2015/16 and 2016/17 based on recent activity. The export forecast is unchanged. Ending stocks are now projected at 4.9 million bales, or 33 percent of total use. The forecast range for the marketing year average farm price is unchanged at 57 to 69 cents per pound.


With larger 2016/17 world cotton production mostly offset by lower beginning stocks, world ending stocks are raised only marginally this month. Beginning stocks are reduced for Brazil, the United States, China, and others due to revisions in the 2015/16 estimates. Production is raised for several countries, including Australia, the United States, Pakistan, Turkey, Burkina Faso, and Mali, but is lowered for India, Tanzania, and Zimbabwe. Global consumption is virtually unchanged and trade is revised down marginally. World ending stocks are projected at 89.8 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”.  
         
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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