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WASDE Report for 12/9/16


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WHEAT: The U.S. 2016/17 all wheat supply and demand estimates are unchanged from November. The marketing year average price received by producers is unchanged at the midpoint, but the range is narrowed $0.20 per bushel to $3.60 to $3.80.

Global wheat production for 2016/17 is raised 6.5 million tons led by a 4.7-million-ton increase for Australia, a 0.9-million-ton increase for China, and 0.4-million-ton increases for both the EU and Brazil. Higher area estimated by ABARES combined with a USDA yield projection that reflects near ideal weather support the large Australia production increase. Prior to this change, USDA had already projected a record Australia yield. However, the new yield is up 18 percent from the previous record. Production increases for China, the EU, and Brazil are due to updated official data. Global exports are increased 2.6 million tons. Australia exports are raised 3.5 million tons reflecting the large crop. Russia exports are lowered 1.0 million tons due to a slower-than-expected pace. Total consumption is raised 3.3 million tons with higher food and feed and residual use. With supplies growing faster than use, ending stocks are raised 2.9 million tons and remain record large.

COARSE GRAINS: No changes are made to this month’s 2016/17 U.S. corn supply and use projections. Forecast U.S. corn exports are unchanged this month, despite a sales and shipment pace that is well above a year ago. In recent years early-season U.S. corn export commitments have not been a robust indicator of final exports, and it is expected that the U.S. will likely face strong competition from South America beginning in the first part of 2017. The projected range for the season-average corn price received by producers is raised 5 cents on both ends to $3.05 to $3.65 per bushel, on continued higher-than-expected early-season prices. The 2016/17 projection of grain sorghum use for ethanol is raised 5 million bushels, based on the latest indications from the NASS Grain Crushings and Co-Products Production report. With no other changes to grain sorghum supply or use, forecast ending stocks are lowered 5 million bushels from last month. Grain sorghum prices in 2016/17 are projected to average $2.80 to $3.30 per bushel, down 10 cents on the high end of the range.

Global coarse grain production for 2016/17 is forecast 9.7 million tons higher to 1,329.4 million. This month’s 2016/17 foreign coarse grain outlook is for greater production and consumption, increased trade, and larger stocks relative to last month. China corn production is increased reflecting the latest information released by the National Bureau of Statistics. Corn production for Brazil is raised this month on increases in both area and yield and if realized would be record-high. In the Center-West, first-crop corn has had a good start to the growing season while conditions for crop development in most of southern Brazil were generally favorable during the month of November. The latest information from the Government of Brazil also indicates an area level above previous expectations, and the soybean crop is progressing ahead of schedule in the Center-West. Russia corn production is higher based on harvest results to date. Canada corn production is raised based on the latest data from Statistics Canada. Indonesia corn production is increased, primarily reflecting updated information indicating a government-supported expansion in area on previously idle land. Australia barley production is raised and is projected to be record high.

Major global trade changes this month include larger projected corn exports for Brazil and Russia. Notable increases in corn imports are forecast for Vietnam, Iran, Taiwan, Colombia, and Egypt. Partly offsetting are reductions in projected imports for Canada, the EU and Indonesia. Foreign corn ending stocks for 2016/17 are raised 4.1 million tons this month, with the largest stock increases projected for China, Vietnam, Brazil, and Russia.

RICE: The U.S. 2016/17 all rice supply and demand estimates are mostly unchanged from last month. The only adjustment to the balance sheet is a 1.0-million-cwt increase in rough exports that is offset by an equivalent reduction in milled exports. These changes reflect export pace to date. Overall rice exports remain projected at 112.0 million cwt. The all rice marketing year average price is lowered $0.20 per cwt at the midpoint to a range of $9.90 to $10.90 on lower projected California prices.

Global rice production for 2016/17 is lowered 2.3 million tons to 481.5 million tons led by a 1.7-million-ton reduction for China and a 0.5-million-ton reduction for the Philippines. The China reduction is based on updated government statistics. The Philippines reduction reflects updated assessments showing storm-related damage following October’s typhoons. Global exports are lowered 0.3 million tons and total use is lowered 0.6 million tons. With total supplies falling faster than use this month, world ending stocks are lowered 1.5 million tons but up 3 percent from the prior year.

OILSEEDS: Total U.S. oilseed production for 2016/17 is forecast at 128.8 million tons, up slightly due to an increase for cottonseed. Soybean supply and use projections for 2016/17 are unchanged from last month. Although early-season soybean exports are sharply higher than a year ago, competition from South America is expected to be strong in the second half of the marketing year, limiting U.S. export prospects during the summer of 2017 relative to the prior year. Soybean ending stocks are projected at 480 million bushels which, if realized, would be the highest since 2006/07. Soybean oil used for methyl ester is raised 250 million pounds to 6.2 billion for 2016/17 reflecting the recent EPA Renewable Fuel Standard announcements for 2017.

The U.S. season-average soybean price for 2016/17 is forecast at $8.70 to $10.20 per bushel, up 25 cents on both ends of the range. Soybean oil is forecast at 34.5 to 37.5 cents per pound, up 2 cents on both ends. The soybean meal price forecast is unchanged at $305 to $345 per short ton.

The 2016/17 global oilseed supply and demand estimates include higher production, exports, and ending stocks compared to last month. Global oilseed production is projected up 3.4 million tons to 554.7 million on increases for soybeans, peanuts, sunflowerseed, and cottonseed partly offset by a reduction for rapeseed. Global soybean production is raised 1.9 million tons to 338.0 million on higher projected yields for India and Canada. Peanut production is raised 0.7 million tons to 42.5 million mainly on increased production in India. Sunflowerseed production is raised 0.6 million tons to 44.3 million on increased production in Russia and South Africa.

Global oilseed trade for 2016/17 is projected at 159.9 million tons, up 0.1 million from last month. Soybean exports account for most of the change with a higher projection for Canada partly offset by a reduction for Argentina. Soybean imports are raised for the EU. Global oilseed ending stocks are projected at 94.6 million tons, up 1.7 million mainly on increased soybean stocks in Argentina and higher soybean and peanut stocks for India. Global 2016/17 soybean and product supply and use changes include increased soybean crush for the EU and India, increased soybean meal exports for India, and reduced soybean meal exports for Argentina, Brazil, and the United States.

SUGAR: Minor adjustments are made to the 2015/16 U.S. sugar supply and use balance based on revised Sweetener Market Data (SMD) submitted by processors to USDA. For 2016/17, Hawaii cane sugar production is raised by 6,000 short tons, raw value (STRV) based on close to end of season processor reporting. Texas cane sugar production is raised by 5,000 STRV based on increased crop yield reported by NASS. The projection of 2016/17 beet sugar production is unchanged as lower-than-expected sucrose levels in certain parts of the Red River Valley and Michigan are countered by strong content and record crop yields in western growing areas. Imports of re-export sugar are raised by 50,000 STRV to 175,000 based on pace to date while imports from Mexico are reduced by 45,330 STRV to 972,246. Total use is unchanged. Ending stocks for 2016/17 are projected at 1.912 million STRV, implying an ending stocks-to-use ratio of 15.7 percent.

Mexico sugar production for 2016/17 is increased by 70,922 metric tons (MT) to 6.371 million. Deliveries for human consumption are reduced by 65,219 MT to 4.389 million. These changes are made on the basis of forecasts made on November 14, 2016 by Comite Nacional Para El Desarrollo Sustentable de la Caa de Azucar (CONADESUCA). The ending stock total for 2016/17 is projected at 1.229 million MT, an amount projected to meet sugar supply requirements of domestic consumption and IMMEX deliveries for 2 months of the following marketing year and exports to the U.S. market for the first three months of that same year. Exports are projected residually at 1.470 million MT. Exports to the United States are reduced by 38,795 MT based on the larger of the Target Quantity of U.S. Sugar Needs from this month’s WASDE or the effective 2016/17 Export Limit previously calculated by the U.S. Department of Commerce, as per the Countervailing Duty (CVD) Suspension Agreement of December 19, 2014. Exports for 2016/17 to non-U.S. destinations are projected at 637,500 MT.

Mexico sugar production for 2016/17 is increased by 70,922 metric tons (MT) to 6.371 million. Deliveries for human consumption are reduced by 65,219 MT to 4.389 million. These changes are made on the basis of forecasts made on November 14, 2016 by Comite Nacional Para El Desarrollo Sustentable de la Caa de Azucar (CONADESUCA). The ending stock total for 2016/17 is projected at 1.229 million MT, an amount projected to meet sugar supply requirements of domestic consumption and IMMEX deliveries for 2 months of the following marketing year and exports to the U.S. market for the first three months of that same year. Exports are projected residually at 1.470 million MT. Exports to the United States are reduced by 38,795 MT based on the larger of the Target Quantity of U.S. Sugar Needs from this month’s WASDE or the effective 2016/17 Export Limit previously calculated by the U.S. Department of Commerce, as per the Countervailing Duty (CVD) Suspension Agreement of December 19, 2014. Exports for 2016/17 to non-U.S. destinations are projected at 637,500 MT.

LIVESTOCK, POULTRY, AND DAIRY: The 2016 forecast of total red meat and poultry production is raised from last month as higher forecast beef production offsets lower poultry and pork production. Beef production is raised on the current pace of slaughter. Pork production is lowered due to counter-seasonally lighter-than-expected carcass weights this quarter. Broiler and turkey production is forecast lower, largely reflecting the slower pace of slaughter in the fourth quarter. For 2017, pork and broiler production forecasts are unchanged from the previous month, but beef and turkey production forecasts are lowered. USDA will release its Quarterly Hogs and Pigs report on December 23 which will provide an indication of producer farrowing intentions into the first part of 2017. Beef production is forecast lower, reflecting lower expectations for cattle placements in late 2016. However, the ensuing decline in fed cattle slaughter will be slightly offset by higher expected cow slaughter. The turkey production forecast is lowered from the previous month as a slower pace of slaughter is expected in the second half of the year. Egg production is forecast higher for both 2016 and early 2017.

The beef import forecast is raised for 2016 based on the recent pace of trade, but is unchanged for 2017. Beef exports are raised for 2016, reflecting stronger export demand, but are unchanged for 2017. Pork imports are lowered for 2016 and 2017 on recent trade data and the expected impact of forecast growth in production on import demand. Forecast pork exports for 2017 are unchanged. Broiler and turkey export forecasts are unchanged for 2016 and 2017.

Cattle prices are forecast higher for the remainder of 2016 and through the first half of 2017 as demand has improved and is expected to carry into early 2017. Hog prices are unchanged. Broiler prices are raised for 2016 and 2017 on recent price strength. Turkey prices are lowered in 2016 and 2017 on weaker-than-expected demand. For 2016, egg prices are lowered reflecting current price data, but the price forecast for 2017 is unchanged.

The milk production forecast is lowered for both 2016 and 2017 as slower growth in cow numbers more than offsets slightly higher growth in milk per cow. Fat basis exports are raised for 2016 on higher butter exports, and skim-solids basis exports are increased on stronger sales of lactose. For 2017, fat basis exports are reduced on expected increased competition in cheese markets, but strength in lactose and nonfat dry milk (NDM) exports are expected to support higher skim-solids basis exports. Import forecasts are lowered from last month for both fat and skim-solids bases. Fat basis ending stock forecasts for 2016 and 2017 are raised on higher expected cheese stocks. Although the skim-solids basis ending stock forecast for 2016 is raised on higher-than-expected cheese and NDM stocks, the forecast for 2017 is unchanged as robust NDM exports are expected to draw down stocks during the year.

Price forecasts for cheese and butter are raised for 2016 on current price strength, but the forecasts for NDM and whey prices are unchanged. Product prices are forecast higher for 2017 as domestic demand strength is expected to carry into next year and higher export demand will support NDM and whey prices. As a result of the higher cheese and butter price forecasts, Class III and Class IV price forecasts are raised for 2016. Class III and IV prices are forecast higher for 2017 on higher component product prices. All milk prices are forecast higher at $16.05 to $16.15 per cwt for 2016 and $16.85 to $17.65 per cwt for 2017.

COTTON: This month’s 2016/17 U.S. cotton forecasts include increased production, lower domestic mill use, and higher exports and ending stocks. Production is raised 362,000 bales to 16.5 million due to an increase for Texas, which is partially offset by decreases for the Carolinas. Domestic mill use is reduced 200,000 bales as recent activity indicates a slowdown in pace compared to the year-ago level. The export projection is raised 200,000 bales on higher production. Ending stocks are now projected at 4.8 million bales or 31 percent of disappearance. The forecast range of 64 to 70 cents per pound for the marketing year average price received by producers is narrowed one cent on each end.

The global 2016/17 forecasts likewise show higher production and increased ending stocks compared with last month. Production is raised for Australia, the United States, and others. Consumption is reduced for India, the United States, and South Korea, and raised for China and Vietnam. World trade is revised marginally. World ending stocks are raised 842,000 bales to 89.1 million.


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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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