USDA August WASDE Report Offers Bearish NewsWed, 12 Aug 2015 19:02:13 CDT
Grain prices turned sharply lower after the World Ag Supply & Demand Estimates report came out Wednesday from the U.S. Department of Agriculture. Justin Lewis of KIS Futures called the old crop global crop estimates for corn, soybeans and wheat neutral, but the new crop estimates held more surprises. He said global corn production was increased production by about seven million metric ton, soybean supplies were tightened by about three million metric ton, while wheat supplies were increased by over two million metric ton.
“The overall report, the reason why it was down though was because the surprise yield increase where everyone was expecting a pretty big decrease,” Lewis said.
WHEAT: Projected U.S. wheat supplies for 2015/16 are lowered on a smaller crop and reduced imports. An increase in spring wheat production is more than offset by decreases for Hard Red
Winter, Soft Red Winter, and White Wheat. Hard Red Spring wheat yields in North Dakota are forecast to be a record. Projected imports are lowered 5 million bushels on the larger U.S. Hard Red Spring crop and lower Canadian production. All wheat exports for 2015/16 are projected 25 million bushels lower at 925 million on a slow pace to date and increased foreign supplies. Ending stocks are raised 8 million bushels to 850 million, the largest since 2010/11. The season-average farm price is lowered 10 cents on the low end and 20 cents on the high end to $4.65 to $5.55 per bushel.
Global wheat supplies for 2015/16 are raised 2.2 million tons primarily on increased production in the FSU and Turkey. A 2.4-million-ton reduction in global beginning stocks partially offsets the production increase; EU accounts for over 60 percent of the reduction. World wheat production is projected at a record. Crop conditions in the spring wheat areas of Russia and Kazakhstan continue to be excellent. Winter wheat production in Russia and Ukraine is better than expected,particularly considering last autumn’s drought. A 1-million-ton reduction for Canada, due to drought conditions in the western prairies, is partially offsetting. Argentina production was lowered 0.4 million tons to 11.1 million.
World exports are lower with the biggest decreases for Canada (smaller crop), Argentina (smaller crop and lower carryin), and the United States. Global imports are also down with the biggest changes being a 1-million-ton reduction for Iran offset by a 1-million-ton increase for Morocco. Iran’s imports are reduced as a result of a newly imposed import duty and the Morocco change is from a Foreign Agricultural Service GAIN report. Global use is up slightly, supported by increased feed and residual use for EU, Russia, and Ukraine. With supplies growing faster than use, global ending stocks are raised 1.7 million tons to a record 221.5 million tons.
COARSE GRAINS: Projected 2015/16 U.S. feed grain supplies are increased this month with higher forecast corn, sorghum, barley, and oats production. Corn production is forecast at 13.7
billion bushels, up 156 million from the July projection, with the season’s first survey-based corn yield forecast at 168.8 bushels per acre, 2.0 bushels higher than last month’s trend-based
projection. Corn supplies for 2015/16 are projected at a record 15.5 billion bushels, up 154 million from last month with a small reduction in beginning stocks. Projected ending stocks for 2014/15 decline 6 million bushels with higher expected use. Increased use for sweeteners is partly offset by reductions in other categories of food and industrial use and an increase in imports.
Total U.S. corn use for 2015/16 is projected 40 million bushels higher as increased domestic usage is expected to more than offset a reduction in exports. Feed and residual use is projected 25 million bushels higher with the larger crop and lower expected prices. Food, seed, and industrial use is projected up 40 million bushels with use for ethanol production raised 25 million bushels on the latest forecast for gasoline consumption by the Energy Information Administration. Exports are projected 25 million bushels lower with larger supplies in Brazil and Argentina expected to increase competition for U.S. corn in world markets. U.S. corn ending stocks for 2015/16 are projected 114 million bushels higher. The season-average corn price received by producers is projected 10 cents lower on both ends to $3.35 to $3.95 per bushel. This would be down 5 cents, at the midpoint, from the $3.65 to $3.75 per bushel expected for 2014/15.
Global coarse grain supplies for 2015/16 are projected 4.8 million tons higher with a 3.0-million-ton increase in beginning stocks and a 1.8-million-ton increase in global coarse grain production. Foreign corn beginning stocks are up 3.6 million tons with increases in 2014/15 production for Brazil and Mexico and increases in 2014/15 imports for China, EU, South Korea, and Mexico. Argentina corn production is also raised for 2014/15. Foreign corn production for 2015/16 is reduced 5.5 million tons with reductions for China, EU, and Serbia, only partly offset by increases for Brazil, Ukraine, and Russia. Global barley production is higher this month with increases for Ukraine and Morocco outweighing a reduction for Canada.
Global 2015/16 coarse grain consumption is lowered slightly with a reduction in global corn use driven by reductions in corn feeding for EU, China, and Ukraine. Higher wheat feeding is expected for EU and Ukraine, and higher sorghum feeding for China. Global coarse grain trade is higher with corn imports raised for EU, barley imports raised for Saudi Arabia, and sorghum imports raised for China. Corn exports are raised for Ukraine, Brazil, and Russia with larger crops. Corn exports are reduced for Serbia, EU, and the United States. Barley exports are raised for Ukraine, but lowered for Canada. Sorghum exports are raised for the United States with the larger crop. Global coarse grain ending stocks for 2015/16 are raised this month with a 5.1-million-ton increase for corn mostly on higher stocks in the United States, Brazil, and Mexico.
OILSEEDS: U.S. oilseed production for 2015/16 is projected at 115.4 million tons, up 0.4 million from last month as a higher soybean production forecast offsets lower cottonseed and peanut crops. Soybean production for 2015/16 is projected at 3.916 billion bushels, up 31 million as a higher yield offsets a lower harvested area. Harvested area is revised down 0.9 million acres from the July estimate to 83.5 million mainly on lower acreage in Missouri. The first survey-based soybean yield forecast of 46.9 bushels per acre is 0.9 bushels above last month’s projected trend and 0.9 bushels below last year’s record yield. Soybean supplies for 2015/16 are projected 16 million bushels above last month based on the higher production forecast. Forecast U.S. soybean exports are lowered by 50 million bushels to 1.725 billion, as a result of slow export sales commitments. Soybean crush is raised 20 million bushels based on expected higher domestic use of soybean meal and soybean oil. Soybean ending stocks are projected at 470 million bushels, up 45 million from last month.
The U.S. season-average soybean price for 2015/16 is forecast at $8.40 to $9.90 per bushel, down 10 cents at the midpoint from last month. Soybean meal prices are forecast at $310 to $350, down 5 dollars at the midpoint. Soybean oil prices are forecast at 29.5 to 32.5 cents per pound, down 1 cent at the midpoint.
U.S. changes for 2014/15 include increased soybean crush, which is raised 15 million bushels to 1.845 billion reflecting higher domestic use and exports of soybean meal. With higher expected domestic use, the forecast of season-ending soybean stocks are reduced to 240 million bushels.
Global oilseed production for 2015/16 is projected at 529.1 million tons, down 2.7 million tons from last month. Reductions for rapeseed, sunflowerseed, cottonseed, and peanuts more than offset an increase in soybean production. Soybean production is projected up 1.1 million tons with higher crops for the United States and Ukraine. Rapeseed production is reduced 2.6 million tons as hot and dry weather curtailed yields in Canada and the EU, while harvested area is lowered for Ukraine, Belarus, and Australia. Other changes include lower EU sunflowerseed production, and reduced cottonseed production for India and China.
Projected 2015/16 global soybean ending stocks are lowered 4.9 million tons to 86.9 million with a higher crush for China, the EU, and the United States. Despite this month’s reduction, global soybean stocks remain record high. Projected soybean imports for China in 2015/16 are increased 1.5 million tons to 79 million and up from a revised 2014/15 forecast of 77 million. Soybean exports for Brazil and Argentina are projected higher due to growth in global trade.
COTTON: This month’s 2015/16 U.S. cotton estimates include sharply lower supplies, disappearance, and ending stocks relative to last month. Production for the 2015 crop is reduced 10 percent to 13.1 million bales, based on this season’s first production field survey, which indicates lower planted area, higher abandonment, and a lower average yield compared to last month’s expectations. Beginning stocks are reduced 500,000 bales due to higher-than-expected 2014/15 exports; in addition, the 2014/15 ending stocks estimate includes a preliminary reduction based on reported stocks in public warehouses. U.S. ending stocks for 2014/15 will be revised further as more data becomes available. Domestic mill use for 2015/16 is reduced marginally, but exports are lowered 800,000 bales due to the lower production. Ending stocks of 3.1 million bales would be 23 percent of total use. The range for the marketing year average price is raised to 58 to 72 cents per pound, for a midpoint of 65 cents, which is up 3 cents from last month.
Projected 2015/16 world cotton stocks are reduced nearly 3 million bales this month, due mainly to lower estimated production in the world’s major cotton-producing countries. In addition to the U.S. reduction, production is lowered 1.0 million bales in China based on lower reported area and extreme heat in Xinjiang, and 0.5 million bales in India based on lower-than-expected plantings to date. Production is also reduced for Uzbekistan, but is raised for Brazil, Australia, and Pakistan. World consumption and trade are raised, due to multiple, mostly offsetting, changes, the largest of which incorporates historical and current increases to imports and consumption for Bangladesh (see http://apps.fas.usda.gov/psdonline/circulars/cotton.pdf for detailed explanations of revisions for Bangladesh and other countries). World ending stocks are now projected at 105.2 million bales.
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