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U.S. Agricultural Markets: Weather Sensitive

July 28, 2013
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This month the U.S. Department of Agriculture issued the World Agricultural Supply and Demand Estimates (“WASDE”) highlighting: – 

  • A tightening of old crop supplies have provided some support to spot export quotations and near-term futures.
  • New-crop futures are sensitive to weather forecasts and conditions. A large percentage of the Corn Belt’s crop will soon pollinate.  Corn crop conditions declined the week ended July 14th and a heat wave since July 11th has stressed shallow rooted corn in the western Corn Belt. While weather conditions were stressful to the crop, new-crop futures faced price pressure as traders looked ahead to forecasts calling for relief via cooler temps and improved rain chances. Traders feel the first big wave of pollination will occur under non-threatening conditions and therefore, crop concerns are limited. If the weather relief doesn’t pan out, however, attitudes could shift and a fresh wave of buying would likely enter the market.
  • With wheat reliant on the corn market for direction, the key to price action in the wheat market is Corn Belt weather. China bought another 120,000 metric tons (“mt.”) of U.S. Spring Red Winter Wheat (“SRW”) wheat during the week of July 15th and also purchased 600,000 mt. of Australian wheat. China is looking to cover shortfalls of this year’s domestic crop due to weather problems through the growing season and replenish state wheat reserves. Hard Red Winter Wheat (“HRW”) has slightly strengthened as the wheat harvest is into the home stretch in Kansas, Oklahoma and Texas. With seasonal pressure easing, market focus may begin to shift towards demand. Global end-user buying is picking up, but unless they are willing to pay for quality, U.S. wheat is priced above other exporters’ supplies.


USDA World Agricultural Supply and Demand Estimates (Wheat & Corn Segments Published Below: July 11, 2013)

WHEAT: Projected U.S. wheat supplies for 2013/14 are raised slightly this month with lower beginning stocks more than offset by higher production, both based on the latest survey-based estimates and forecasts. Beginning stocks are reduced 27 million bushels as indicated by the June 1st stocks estimate reported in the June 28nd Grain Stocks. Production is forecast up 34 million bushels with lower forecast harvested area from the June 28nd Acreage report more than offset by higher yields. Production is raised 11 million bushels for HRW and 30 million bushels for SRW wheat. White Winter wheat is forecast down 7 million bushels. For durum, a reduction in area is only partly offset by a higher yield with production forecast down 5 million bushels. For other spring wheat, a reduction in area is more than offset by a higher yield forecast in July 11th’s Crop Production report, adding 4 million bushels to this month’s production forecast. The July survey-based yield forecasts for durum and other spring wheat are up 1.6 bushels per acre from last month’s trend based projections.

Total U.S. wheat use for 2013/2014 is raised 89 million bushels as lower expected domestic use is more than offset by higher projected exports. Projected feed and residual disappearance is lowered 10 million bushels with stronger export demand, especially for SRW wheat. Exports are projected 100 million bushels higher reflecting strong sales, particularly to China. Ending stocks are projected down 83 million bushels. At 576 million tons, stocks are expected to remain well above the 60-year low of 306 million in 2007/2008. The projected range for the 2013/2014 season- average farm price is raised 20 cents on both ends to $6.45 to $7.75 per bushel. At the $7.10-per- bushel midpoint, this would be down from the record $7.77 per bushel reported for 2012/2013.

Global wheat supplies for 2013/2014 are lowered 3.5 million tons reflecting lower projected beginning stocks as world production rises 1.9 million tons. Higher 2012/2013 feed use in China accounts for most of the reduction in beginning stocks with smaller increases in domestic consumption for Pakistan, Russia, and Iran adding to the decline in 2012/2013 global carryout. World production for 2013/2014 is raised with increases for Australia, the European Union, and the United States offsetting a reduction for Kazakhstan. Australia production is raised 1.0 million tons reflecting the latest government estimates for area and a slightly higher yield outlook as early season conditions have been especially favorable in the country’s southern and eastern growing areas. Production for the European Union is raised 1.2 million tons, however, the addition of Croatia accounts for most of the increase. Higher production prospects for Romania, Hungary, United Kingdom, and several smaller countries outweigh reductions for France, Ireland, and Spain. Production is lowered 0.5 million tons for Kazakhstan with lower planted area reported by the Ministry of Agriculture.

Global wheat consumption for 2013/2014 is raised 5.4 million tons mostly reflecting higher expected feeding in China.  Wheat consumption is also raised for India, Pakistan, Iran, and Japan, offsetting reductions for the European Union and the United States. Global wheat trade is raised with a 5.0 million ton increase in China imports.  A 0.5 million ton increase in imports for Iran is offset by the same size reduction for the European Union.  World exports are raised 5.0 million tons with increases for Australia, the European Union, and the United States.  Exports are lowered for India and Kazakhstan. World ending stocks for 2013/2014 are projected 8.9 million tons lower.  At 172.4 million tons, stocks would be the lowest since 2008/2009, but well above the 128.8 million in 2007/2008.

COARSE GRAINS: Projected 2013/2014 U.S. feed grain supplies are lowered this month with reduced beginning stocks for corn and sorghum and lower forecast harvested areas for corn and sorghum from the Acreage report. Corn beginning stocks for 2013/2014 are projected 40 million bushels lower.  Corn production for 2013/2014 is lowered 55 million bushels with the lower harvested area and the projected yield unchanged at 156.5 bushels per acre.  Projected production remains just below 14 billion bushels and would be 858 million above the record in 2009/2010.  Corn supplies for 2013/2014 are lowered 90 million bushels as a 5 million bushel increase in imports only partly offsets the lower beginning stocks and production.

This month’s changes to corn use for 2012/2013 and 2013/2014 largely reflect the lateness of the 2013 crop and expectations for extremely tight supplies later this summer and into early fall.  Feed and residual disappearance for 2012/2013 is raised 50 million bushels as early harvest of new-crop corn is expected to be sharply reduced from last year.  A 10 million bushel increase in projected imports for 2012/2013 also reflects the tight supply situation expected for old-crop corn during the summer quarter.  Imports for 2013/2014 are raised because the tight supply situation is expected to continue into September.  Feed and residual use for 2013/2014 is lowered 50 million bushels with tighter beginning stocks and lower production, and also on the lack of early new-crop usage which tends to boost indicated disappearance during the September-December quarter of the new marketing year. Projected exports for 2013/2014 are lowered 50 million bushels as tight supplies of corn in early September are expected to limit early season shipments.  With lower projected use in 2013/2014, ending stocks are raised 10 million bushels and remain just under 2 billion bushels. The projected 2013/2014 season average farm price for corn is unchanged at $4.40 to $5.20 per bushel.

The 2013/2014 other feed grain farm price projections are also unchanged. Global coarse grain supplies for 2013/2014 are projected 3.6 million tons lower with 2.9 million tons of the decline resulting from the tighter supply situation for corn and sorghum in the United States. Foreign coarse grain supply and use changes this month are relatively small in the aggregate.

Corn beginning stocks for 2013/2014 are lowered for Brazil with higher 2012/2013 exports and for Indonesia with lower 2012/2013 production.  China corn production for 2013/2014 is lowered 1.0 million tons on lower indicated area.  European Union corn production is increased 1.8 million tons when adjusted for this month’s inclusion of Croatia, however, last month’s 27-member union is lowered 0.4 million tons.  Barley production is raised 0.5 million tons for Canada and 0.2 million tons for Kazakhstan, both on higher reported area.  European Union barley production is raised 0.5 million tons with the addition of Croatia accounting for less than half the increase. Global 2013/2014 coarse grain trade is mostly unchanged this month with exports down slightly on the reduction for U.S. corn. Global corn consumption is down 2.6 million tons with half of the reduction in the United States.  Corn consumption is also lowered for Indonesia.  Global corn ending stocks for 2013/2014 are projected at 151.0 million tons, down 0.9 million, with reductions for Brazil and China.  World corn stocks are expected to be the highest since 2001/2002.

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