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WASDE Report for 3/9/17


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WHEAT: U.S. wheat imports for 2016/17 are reduced this month by 10 million bushels to 115 million. Ending stocks are projected lower by the same amount to 1,129 million bushels. The season-average farm price is unchanged with the midpoint of the range at $3.85 per bushel.


Internationally, global production increased 2.8 million tons to 751.1 million, mainly due to larger crops in Argentina and Australia more than offsetting a slight reduction in the European Union. Australia’s 2016/17 wheat production is raised 2.0 million tons to a record-large 35.0 million. USDA model-based analysis of weather data estimates Australia’s yield in line with the latest Australia Bureau of Agricultural and Resource Economics and Sciences (ABARES) estimate. Projected exports are increased for both Australia and Argentina on their larger supplies while Canada’s exports are reduced on a sluggish export pace. Global imports are raised this month led by India, which was raised 1.8 million tons to 5.5 million. This would be the largest wheat import total for India since 2006/07; India stocks have successively declined since 2012/13. Despite higher projected global use, driven by India, 2016/17 global ending stocks are increased by 1.3 million tons to 249.9 million.


COARSE GRAINS: This month’s 2016/17 U.S. corn outlook is for increased corn used to produce ethanol and reduced feed and residual use. Corn used to produce ethanol is raised 50 million bushels to 5,400 million based on the most recent data from the Grain Crushings and Co-Products Production report and strong pace of weekly ethanol production during February as indicated by Energy Information Administration data. Offsetting is a 50 million bushel reduction in projected feed and residual use to 5,550 million bushels based on indicated use during 2015/16, increased corn used to produce ethanol, and higher expected sorghum feeding. Ending stocks are unchanged from last month. The projected range for the season-average corn price received by producers is unchanged at $3.20 to $3.60 per bushel.


Corn for food, seed, and industrial use (FSI) is raised 11 million bushels for 2015/16 reflecting a 18-million-bushel increase in estimated corn used in ethanol production based on revisions to monthly data reported in the March 1 Grain Crushings and Co-Products Production 2016 Summary. Partially offsetting is a marginal reduction in non-ethanol FSI. With stocks and trade known, a change is made to feed and residual use.


Global coarse grain production for 2016/17 is forecast 12.7 million tons higher from last month to 1,341.7 million. This month’s foreign coarse grain outlook is for increased production, consumption, trade, and stocks relative to last month. Brazil corn production is raised on increases to both projected area and yield. Reported first crop yields have been record high, while the rapid planting progress of second crop corn in the Center-West boosts expected area and yield prospects, allowing for greater crop development prior to the normal end of the rainy season. South Africa corn production is higher as above normal rainfall and benign temperatures during grain fill support an increased yield forecast. India corn production is raised based on the latest government statistics. Argentina corn production is increased based on higher-than-expected yield results for early-planted corn and indications of larger planted area. Barley production for Australia is projected sharply higher based on the latest information from ABARES.


Major global trade changes for 2016/17 this month include higher projected corn exports for Brazil, Argentina, and South Africa. Corn imports are raised for Iran, while barley imports are raised for Saudi Arabia and China. Foreign corn ending stocks are raised from last month, mostly reflecting increases for Brazil, Argentina, Iran and South Africa.


RICE: The U.S. 2016/17 rice supply and demand estimates are unchanged this month. The all rice marketing year average price is also unchanged with the midpoint of the range at $10.50 per cwt. Medium-and short-grain prices are raised slightly.


Global rice production is minimally increased to 480.4 million tons with Brazil accounting for all of the increase. World exports are modestly reduced as lower exports by Australia, India, and Vietnam are only partially offset by increases for Brazil and China. Global use is fractionally raised this month, resulting in projected ending stocks declining to 117.7 million tons, which is still the highest level since 2001/02.


OILSEEDS: U.S. soybean supply and use changes for 2016/17 include higher crush, lower exports, and increased ending stocks compared with last month’s report. Soybean crush is raised 10 million bushels to 1,940 million on increased domestic soybean meal disappearance. Soybean exports are reduced 25 million bushels to 2,025 million with increased production and exports for Brazil. Soybean stocks are projected at 435 million bushels, up 15 million from last month. With increased crush, soybean oil production, exports, and ending stocks are forecast higher.


The season-average soybean price range forecast of $9.30 to $9.90 per bushel is raised 10 cents at the midpoint. Soybean oil prices are forecast at 32 to 35 cents per pound, down 2 cents at the midpoint. Soybean meal prices are unchanged at $310 to $340 per short ton.


The 2016/17 global oilseed supply and demand forecasts include higher production, exports, and ending stocks compared to last month. Global oilseed supplies are raised 3.2 million tons to 646.9 million mainly on a 4-million-ton increase to the Brazilian soybean crop, which is projected at a record 108 million tons. The crop has benefited from favorable weather with ample rainfall throughout the growing season, raising the prospects for record yields. Also adding to oilseed supplies are increases to rapeseed production in Australia and sunflowerseed in Turkey and Serbia.


Global oilseed exports are raised 1.4 million tons from last month mostly on a 1.0-million-ton increase to soybean exports. Higher soybean shipments for Brazil and Paraguay offset lower U.S. exports. Parallel to higher exports is a 1-million-ton increase to Chinese soybean imports reaching a record 87 million tons. Forecast global oilseed stocks are raised 2.6 million tons to 94.3 million mainly on higher soybean stocks, which are increased 2.5 million tons for Brazil, China, and the United States combined. Production changes to oilseed products include increased meals and lower vegetable oils. Higher oilseed meal is mainly driven by increased soybean meal production for Brazil, the United States, and Thailand. Global vegetable oil production is lowered 0.6 million tons mostly on a reduction in palm oil for Malaysia and Colombia.


SUGAR: U.S. fiscal year 2016/17 beet sugar production is decreased 265,000 short tons, raw value (STRV) to 5.106 million. Sucrose recovery from sugarbeet slicing reported by processors in the Sweetener Market Data (SMD) for the period covering the 6 months between August 2016 and January 2017 of this year’s sugarbeet harvest cycle imply a final crop year recovery projection from slicing at 13.9 percent, much less than the 14.7 percent underlying previous projections based on historical averages. Projected imports of sugar from Mexico for 2016/17 are increased by 189,780 STRV to 1.162 million, and projected tariff-rate quota imports (TRQ) are increased by 44,093 STRV to 1.576 million based on USDA’s increase of the specialty sugar TRQ, announced on February 24. Deliveries for human consumption for 2016/17 are increased by 100,000 STRV to 12.100 million based on strong deliveries in the first 4 months of the fiscal year and a continuation of that growth, but at a reduced rate for the remainder of the year. Ending stocks for 2016/17 are projected residually at 1.677 million STRV, implying a stocks-to-use ratio of 13.6 percent. Included in ending stocks are 12,476 STRV of sugar recorded by the U.S. Census Bureau as imported from Mexico in 2016/17 but which entered under a 2015/16 Mexico export license.


For Mexico, exports to the United States for 2016/17 are projected at 994,502 metric tons (MT), based on changes made in the March 2017 WASDE for the United States as per the Countervailing Duty (CVD) Suspension Agreement of December 19, 2014 (“Target Quantity of U.S. Sugar Needs”). The ending stock total for 2016/17 is forecast at 1.278 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 426,354 MT. Total exports are 1.421 million MT, the sum of projected exports to the United States and to other countries.


For Mexico, exports to the United States for 2016/17 are projected at 994,502 metric tons (MT), based on changes made in the March 2017 WASDE for the United States as per the Countervailing Duty (CVD) Suspension Agreement of December 19, 2014 (“Target Quantity of U.S. Sugar Needs”). The ending stock total for 2016/17 is forecast at 1.278 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 426,354 MT. Total exports are 1.421 million MT, the sum of projected exports to the United States and to other countries.


LIVESTOCK, POULTRY, AND DAIRY: Total U.S. meat production for 2017 is increased from the previous month as higher forecast beef production more than offsets lower forecast pork and turkey production. The broiler production forecast is unchanged from the previous month. First quarter beef production is raised on current slaughter data, and third-quarter production is raised as higher expected first quarter placements are marketed in the second half of the year. However, carcass weights for the year are forecast lower as feedlot operators are expected to remain current in their marketings. The pork production forecast is slightly lower as a result of lighter carcass weights in the first half of the year. USDA will release the Quarterly Hogs and Pigs report March 30th, providing an indication of producer intentions for farrowings in the next 2 quarters. Small changes are made to 2016 poultry production estimates, reflecting recent data revisions. For 2017, the turkey production forecast is decreased on slower expected second-half production growth. Egg production estimates for 2015 and 2016 reflect recent NASS revisions. Forecast egg production is increased.


The forecast for 2017 beef imports is unchanged, but the export forecast is raised on stronger-than-expected export shipments thus far in the quarter. Pork imports are lowered for 2017, reflecting larger domestic supplies and limited demand for foreign product. Forecast pork exports are raised on robust international demand and large domestic supplies of pork. No change is made to broiler and turkey trade forecasts. The egg export forecast is reduced as South Korea’s ban on imports of U.S. poultry and products, due to the recent Highly Pathogenic Avian Influenza outbreak in the United States, limits expected export growth.


Cattle, hog, and broiler price forecasts for 2017 are raised from last month on continued demand strength. The 2017 turkey price forecast is lowered as the first-quarter price forecast is reduced. Egg price forecasts are lowered from last month on current price movements.


The 2017 milk production forecast is raised as milk cow numbers are expected to increase more rapidly. However, growth in milk per cow is reduced on January data. Dairy exports on a fat basis for 2017 are unchanged, while skim-solids basis exports are lowered on expected strong competition in international skim milk powder markets. Both fat basis and skim-solids basis imports forecasts are unchanged. Skim-solids basis ending stocks are forecast higher for 2017 on higher production of dairy products and weaker exports. Fat-basis ending stocks are unchanged. Historical milk production and stock estimates reflect recently released revisions.


The cheese price forecast for 2017 is reduced as stocks of cheese are high and are expected to pressure prices. The butter price forecast is raised on continued demand strength. The nonfat dry milk price is forecast lower on expectations of slower export growth due to increased competition from global competitors. The whey price forecast is raised reflecting recent market strength. The Class III price is raised as the higher whey price more than outweighs the reduced cheese price. The Class IV price forecast is lowered, reflecting a weaker nonfat dry milk price which more than offsets a higher forecast butter price. The all milk price for 2017 is forecast at $17.80 to $18.40 per cwt.


COTTON: This month’s 2016/17 U.S. cotton forecasts show higher production and exports relative to last month. Production is raised 271,000 bales to 17.2 million based on the March 9 Cotton Ginnings report. The final estimates for this season’s U.S. area, yield, and production will be published in the May 2017 Crop Production report. Domestic mill use is unchanged from last month, but exports are raised 0.5 million bales to 13.2 million based on recent very strong sales and shipments. U.S. exports are projected to capture nearly 37 percent of world trade, a 7-year high. Ending stocks are lowered 300,000 bales to 4.5 million. The projected range for the marketing year average price received by producers of 67.0 to 70.0 cents per pound is reduced 1 cent on the upper end, as the reported average price for January fell below previous expectations.


The forecast 2016/17 global production is raised slightly this month due to the revision in the United States, while world consumption is virtually unchanged. Consumption is raised for Indonesia and Vietnam and reduced for Turkey and other countries. World beginning stocks are raised marginally due to higher estimated 2015/16 production in Australia. Forecast world trade is raised slightly, with imports and exports revised for several countries based on activity to date. World ending stocks are now projected at 90.5 million bales, nearly 600,000 bales above last month.


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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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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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