Hedging Corn and Soybeans

wasde report for 5/10/19

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 COARSE GRAINS: The U.S. feed-grain outlook for 2019/20 is for larger production and domestic use, lower exports, and greater ending stocks. The corn crop is projected at 15.0 billion bushels, up from last year and the second largest on record behind 2016/17 as an increase in area more than offsets a reduction in yield. The yield projection of 176.0 bushels per acre is based on a weather-adjusted trend assuming normal planting progress and summer growing season weather, estimated using the 1988-2018 time period. With beginning stocks down from a year ago, total corn supplies are forecast record high at 17.2 billion bushels.

Total U.S. corn use in 2019/20 is forecast to rise relative to a year ago as greater domestic use offsets a slight decline in exports. Food, seed, and industrial (FSI) use is projected to rise 50 million bushels to 7.0 billion. Corn used for ethanol is projected to increase 1 percent from a year ago, based on expectations of modest growth in motor gasoline consumption, a slight decline in ethanol’s inclusion rate into gasoline, and larger exports. Feed and residual use is projected higher on a larger crop, lower expected prices, and continued growth in grain consuming animal units.

U.S. corn exports are forecast to decline 25 million bushels in 2019/20, despite larger world corn trade. Increased exports out of Argentina and Brazil during 2018/19 (local marketing years beginning March 2019 and ending February 2020) are expected to limit U.S. exports during the first half of 2019/20. Combined corn exports for Ukraine and Russia in 2019/20 are projected to decline, mostly reflecting a return to normal weather for Ukraine following a bumper harvest in 2018/19.

With total U.S. corn supply rising more than use, 2019/20 U.S. ending stocks are up 390 million bushels from last year and if realized would be the highest since 1987/88. Stocks relative to use at 16.9 percent would be the highest since 2005/06. With larger stocks relative to use, the season-average farm price is projected at $3.30 per bushel, down 20 cents from 2018/19 and the lowest since 2006/07.

The global coarse grain outlook for 2019/20 is for record production and use, and lower ending stocks. World corn production is forecast record high, with the largest increases for the United States, South Africa, Russia, Canada, India, and Brazil. Partly offsetting are smaller crops projected for China and Ukraine. Global corn use is expected to grow 1 percent, while global corn imports are projected to increase 2 percent. Notable forecast increases in corn imports include China, Iran, Kenya, Mexico, Saudi Arabia, Turkey, and Vietnam. Global corn ending stocks are down 11.2 million tons from a year ago, mostly reflecting a forecast decline for China. Outside of China, stocks are up 6.8 million tons, and if realized would be the highest since 2016/17.

For China, total coarse grain imports are forecast at 15.1 million tons, up 2.7 million from 2018/19. Corn imports are forecast to increase, based on expectations of sharply reduced sorghum imports and a wider price wedge between China’s domestic and world market prices relative to a year ago, particularly in the feed deficit South.

WHEAT: The initial outlook for 2019/20 U.S. wheat is for larger supplies, higher domestic use, lower exports, and larger stocks. Supplies are increased by 41 million bushels year to year with higher carry-in stocks and larger production. The 2019/20 U.S. wheat crop is projected at 1.897 million bushels, up less than 1 percent from last year as a higher yield more than offsets reduced harvested acreage. The all-wheat yield is projected at 48.6 bushels per acre, up 1.0 bushel from last year. The first 2019 NASS survey-based winter wheat production forecast indicated larger Hard Red Winter production more than offsetting smaller Soft Red Winter and White Wheat crops. Total 2019/20 domestic use is projected up 5 percent with increases in all usage categories. Exports are projected at 900 million bushels, down 25 million from the revised 2018/19 exports. The 2019/20 global export situation is expected to be highly competitive for the United States with all of the other major exporters projected to have larger supplies. Ending stocks for 2019/20 are projected 14 million bushels higher than last year at 1,141 million. The projected season-average farm price is $4.70 per bushel, down from last year’s estimated $5.20 on the expectation of greater export competition and lower U.S. corn prices.  

The initial outlook for 2019/20 international wheat is for larger supplies, increased trade, greater consumption, and higher ending stocks. Foreign supplies are projected to increase 38.5 million tons to 966.4 million as all of the major wheat exporters (Argentina, Australia, Canada, EU, Russia, and Ukraine) are expected to have higher production for 2019/20. The EU is projected to have the largest increase to 153.8 million tons, as it recovers from last year’s drought. Russia is projected to have its second-largest wheat production on record at 77.0 million tons. Collectively, the major foreign exporters’ projected output rises 33.9 million tons, up 11 percent from last year. Additionally, the Middle East region is expected to have significantly larger production with abundant rainfall as both Iran and Iraq are projected to have record output while Syria and Turkey have near-record production.

Projected 2019/20 global trade is 6.7 million tons or 4 percent higher at 184.6 million with greater exportable supplies and lower expected export prices. Russia is projected as the leading world wheat exporter for the third consecutive year with exports at 36.0 million tons, down slightly from 37.0 million for 2018/19. But all other major foreign exporters are projected to have higher exports than last year. Projected 2019/20 world consumption increases 21.6 million tons from last year to a record-large 759.5 million tons with both food, seed, and industrial use and feed use significantly higher. Global ending stocks increase 18.0 million tons or 7 percent to a record-large 293.0 million. World stocks less China are projected at 146.8 million tons, up 11.8 million from last year.

RICE: The 2019/20 outlook for U.S. rice is for higher supplies, exports, domestic use, and ending stocks. For the 2018/19 market year, imports and exports are each reduced 1.0 million cwt, and the season-average farm price is lowered $0.10 per cwt to $12.00. U.S. 2019/20 all rice production is projected at 218.2 million cwt, down 3 percent from the previous year. Both long-grain and combined medium- and short-grain production are projected to be smaller this year. The year-over-year supply increase stems from an 82 percent increase in beginning stocks. Total U.S. rice supplies are projected to increase more than 6 percent to 299.8 million cwt.  

U.S. 2019/20 total use is projected at 241.0 million cwt, up nearly 6 percent from the previous year with both domestic and residual use and exports higher. Long-grain exports are projected up 9 percent to 72.0 million cwt, and combined medium- and short-grain exports are up 7 percent to 29.0 million cwt. Both export changes are based on improved price competitiveness and larger exportable supplies. All rice ending stocks are projected at 58.8 million cwt, up 10 percent and the largest since the 1985/86 market year. The 2019/20 all rice season-average farm price is projected at $11.20 per cwt, down $0.80 from last year’s revised price.

World rice production for 2019/20 is projected at 498.4 million tons, down fractionally from the previous year’s record. China and India lead production declines with crops reduced 2.5 million tons and 1.0 million tons, respectively. Vietnam, Thailand, Bangladesh, and Indonesia have the largest production increases. Global rice consumption is projected at a record 496.1 million tons, up 4.1 million. Global exports for 2019/20 are projected at a record 47.6 million tons, up 0.9 million from the previous year. World 2019/20 ending stocks are projected at a record 172.2 million tons with China projected to hold 68 percent of global stocks.

OILSEEDS: The 2019/20 outlook for U.S. soybeans is for higher supplies, crush, exports, and slightly lower ending stocks compared to 2018/19. The soybean crop is projected at 4,150 million bushels, down 394 million from last year’s record crop on lower harvested area and trend yields. With sharply higher beginning stocks, soybean supplies are projected at 5,165 million bushels, up 3 percent from 2018/19. Total U.S. oilseed production for 2019/20 is forecast at 124.2 million tons, down 9.6 million from 2018/19, mainly on lower soybean production. Production forecasts are also lower for canola, but higher for sunflowerseed, peanuts, and cottonseed.  

The U.S. soybean crush for 2019/20 is projected at 2,115 million bushels, up from the 2018/19 forecast with higher soybean meal disappearance partly offset by lower soybean meal exports. U.S. soybean exports are forecast at 1,950 million bushels, up 175 million from the revised forecast for 2018/19. Despite limited growth in global soybean import demand, U.S. export share is expected to rise to 35 percent from the 2018/19 record low of 32 percent on higher supplies and competitive prices. U.S. ending stocks for 2019/20 are projected at 970 million bushels, down 25 million from the revised 2018/19 forecast. The 2019/20 U.S. season-average soybean price is projected at $8.10 per bushel, down 45 cents from the 2018/19 forecast. Soybean meal prices  are forecast at $290 per short ton, down $15.00 from 2018/19. Soybean oil prices are forecast at 29.5 cents per pound, up 1.5 cents from 2018/19.

Global oilseed production for 2019/20 is projected at 598.0 million tons, down 2.9 million from 2018/19. Global soybean production is forecast at 355.7 million tons, down 6.4 million with lower production for the United States, Argentina, and Canada partly offset by a higher Brazilian crop. Brazil’s soybean production is projected at a record 123.0 million tons, up 6.0 million on higher area and trend yield. Argentina’s soybean production is forecast at 53.0 million tons, down 3.0 million from the revised 2018/19 forecast due to a lower trend yield. China’s soybean production is projected 1.1 million tons higher to 17.0 million on reported higher planting intentions. Global production of high-oil content seeds (rapeseed and sunflowerseed) is projected up 1 percent from 2018/19 on increased rapeseed production for Australia and Ukraine, which is partly offset by lower production for the EU and India. Sunflowerseed crops for Turkey, Russia, and Ukraine are also lower.

 Global soybean beginning stocks for 2019/20 are forecast to increase 14.1 million tons compared to 2018/19, leading to higher supply despite lower production. Global protein meal consumption is projected to increase 2 percent in 2019/20, compared to the prior 5-year average of 4 percent. Protein meal consumption growth in China is flat, largely due to suppressed feed demand from outbreaks of African Swine Fever. Global soybean exports at 151.2 million tons are also relatively flat compared to 2018/19. China’s soybean imports are projected at 87.0 million tons, up only 1.0 million from the revised 2018/19 projection and significantly lower than growth seen in prior years. With stagnant trade and a 2 percent increase for crush offsetting the higher global supply, ending stocks at 113.1 million tons are forecast to decline slightly from 2018/19.

Global vegetable oil production is projected to increase 2 percent to 208.2 million tons, led by increases for palm oil production for Indonesia, soybean oil for Argentina, and sunflowerseed oil for Russia. Global consumption is projected to increase 3 percent in 2019/20, led by palm oil increases for Indonesia, China, Malaysia, and India. With higher consumption, global ending stocks are projected down 1.3 million tons to 20.1 million.

 SUGAR: U.S. sugarbeet production for 2019/20 is projected at 33.556 million tons with yield forecast at 30.5 tons/acre. Slower-than-average planting progress in the Upper Midwest and Michigan has dampened prospects for significant gains in the national yield over last year and for harvesting prospects prior to October 1. Assuming average levels of beet pile shrink and slicing recovery, beet sugar production from this crop is projected at 4.943 million short tons, raw value (STRV). Beet sugar produced prior to October 1 is projected at 502,000 STRV, or about 123,000 STRV lower than the average of the 5 previous years. Beet sugar production for 2018/19 is estimated to fall to 4.910 million STRV, as the drop in August-September production is only marginally offset by a small increase in estimated slicing recovery. Beet sugar production for the new 2019/20 fiscal year is projected at 5.114 million STRV. The increase over the crop year total is due to a higher level of assumed 2020 August-September production. Cane sugar production for 2019/20 is projected at 4.001 million STRV. Small increases over 2018/19 are projected for both Florida and Texas. Louisiana production is projected to fall from the 2018/19 record to 1.800 million STRV as a lower sugarcane yield closer to trend more than offsets expected area expansion and less sugarcane used for seed.

 Imports for 2019/20 are projected at 3.219 million STRV. Projected 2019/20 TRQ imports of specialty sugar include only the WTO minimum quantity as additional quantities have not been announced by the Secretary of Agriculture. The WTO raw sugar TRQ shortfall for 2019/20 is projected at 99,000 STRV and the shortfall for 2018/19 is increased 22,046 STRV based on FAS Post reporting. High-tier tariff imports for 2018/19 are increased to 70,000 STRV based on the pace to date. Deliveries to domestic users for 2019/20 are projected at 12.320 million STRV, an increase of 50,000 in deliveries for human consumption over 2018/19. Ending stocks for 2019/20 are residually projected at 1.484 million STRV, implying a stocks-to-use ratio of 12.01 percent. Ending stocks for 2018/19 are estimated at 1.505 million STRV, a reduction of 119,930 matching estimated supply reductions. The estimated 2018/19 stocks-to-use ratio is 12.23 percent.

Mexico sugar production for 2018/19 is increased to 6.200 million metric tons (MT) as increases to sugarcane yield and sucrose recovery more than offset an area harvested decrease. Total deliveries for human consumption are reduced by 378,883 MT to 4.236 million. Ending stocks available for the domestic market are projected to be the quantity of sugar needed at the end of September to meet projected delivery requirements until the start of the 2019/20 harvest in mid-November. Exports to the United States are unchanged but exports to third-country destinations and commitments under the CEDES export certificate program now total 1.186 million MT. Production for 2019/20 is set at 6.100 million MT; deliveries for human consumption are

projected at the same level of per capita sweetener consumption as in 2018/19; and ending stocks are calculated in the same manner as in 2018/19. Total exports are residually projected but exports to the United States are projected at the expected level of U.S. Needs as defined in the amended Suspension Agreements.

LIVESTOCK, POULTRY, AND DAIRY: Total U.S. red meat and poultry production for 2020 is forecast above 2019. Beef production is forecast higher primarily on higher projected steer and heifer slaughter and heavier carcass weights. Pork production in 2020 is forecast to increase as producers in late 2019 and into 2020 continue to expand hog supplies. Hog carcass weights are also forecast higher in 2020 as feed prices are forecast lower. Broiler production is expected to surpass 2019 levels as the industry responds to increased expansion of processing capacity late in 2019 and favorable feed prices. Turkey production is forecast to increase as producers respond to lower feed prices and a continued gradual recovery in prices. Egg production is forecast to increase modestly as margins improve with lower feed prices and higher egg prices during 2020.  

The total red meat and poultry production forecast for 2019 is little changed from last month. Small reductions are made to beef and pork, largely due to offsetting changes in slaughter and carcass weights. Broiler production is lowered on hatchery and slaughter data to date, but the turkey forecast is raised on recent hatchery data. Egg production for 2019 is raised on continued expansion of the laying flock.

For 2020, tightness in competitor beef supplies and firm global demand are expected to support stronger U.S. beef exports relative to 2019. Pork exports are forecast to increase next year on stronger global demand for U.S. pork. Both beef and pork imports are projected to decline year over year. Broiler and turkey exports are forecast higher on expected gains in foreign demand. These forecasts assume current trade policies remain in place.

The 2019 beef export forecast is reduced from last month on slower-than-anticipated exports to key trading partners. The pork export forecast is raised as higher expected sales of pork in the second half of the year are expected to more than offset the slower-than-expected pace of exports to date. Small changes are made to beef and pork import forecasts reflecting first-quarter trade data; however, forecasts for the remainder of the year are unchanged. The broiler export forecast is reduced on lower-than-expected shipments in the first quarter. The turkey export forecast is virtually unchanged from the previous month.

For 2020, fed cattle, hog, broiler, and turkey prices are forecast above 2019 on expectations of strengthening demand. The egg prices are forecast higher as improved demand and modest growth in production are expected to support higher prices.

 The 2019 cattle price forecast is lowered from the previous month on recent price weakness. However, the hog price forecast is raised each quarter on stronger prices to date and expected price support from global pork demand in the second half of the year. Broiler, turkey, and egg price forecasts are all reduced from the previous month on weaker demand expectations for the remainder of the year.

Milk production for 2020 is forecast higher than 2019. Dairy herds are expected to begin to expand as producers respond to higher milk prices and lower feed costs. Milk per cow is expected to continue increasing, and the forecast also reflects the one extra day due to leap year. Commercial exports on both fat and skimsolids bases are expected to grow in 2020 as U.S. products are expected to become more competitive due to slower growth in competitor supplies. For 2020, fat basis imports are forecast higher while skim-solids basis imports are expected to decline slightly next year. Cheese, butter, and nonfat dry milk (NDM) prices are forecast higher than the previous year on robust demand expectations. However, the whey price forecast is slightly lower on continued softness in export demand. The Class III price is forecast to increase as stronger cheese prices more than offset the weaker expected whey price. The Class IV price is expected to increase due to higher NDM and butter prices. The 2020 all milk price is forecast at $18.80 per cwt.

 The 2019 milk production forecast is reduced from the previous month on declining milk cow inventories and slow growth in milk per cow. Fat basis exports are raised from the previous month on strong cheese sales to key trading partners. The skim-solids basis export forecast is also raised on higher expected cheese and lactose sales. The fat basis import forecast is unchanged from last month while the skim-solids basis import forecast is reduced on lower imports of milk protein products. Cheese and NDM price forecasts are raised from the previous month resulting in both Class III and Class IV prices being raised. The 2019 all milk price is forecast at $18.05 per cwt.

COTTON: Led by higher production, the U.S. cotton forecasts for 2019/20 includes higher exports and ending stocks. Production is forecast at 22.0 million bales, based on 13.8 million planted acres as indicated in the NASS March Prospective Plantings report. While planted area is expected lower in 2019/20, increased precipitation to date in the Southwest suggests abandonment will fall from 2018/19’s above-average level and harvested area will rise. With harvested area up, production is projected 20 percent higher than in 2018/19. Domestic mill use is projected unchanged at 3.1 million bales, while exports are expected to rise 15 percent to 17.0 million. At 6.4 million bales, 2019/20 ending stocks are projected 1.8 million higher than the year before, equivalent to 32 percent of use. This would be the highest U.S. stocks-to-use ratio since 2008/09. The marketing year price received by producers is forecast to average 65 cents per pound, 5 cents lower than in 2018/19.

For 2018/19, U.S. cotton production is reduced marginally from last month. The export forecast is reduced 250,000 bales to 14.75 million bales as the expected U.S. share of world trade declines, and endings stocks are increased about 200,000 bales.

The world 2019/20 cotton projections show a small decline in stocks and rebounding production and consumption. With global harvested area for cotton projected at its highest in 7 years, and yields rebounding in major producing countries, production is expected to rise 7.0 million bales to a near-record 125.5 million. U.S. production is expected to rise the most, closely followed by India, while lower crops are foreseen for Australia and Brazil, and China’s crop is projected unchanged. World consumption is expected to rise 2.6 percent to 125.9 million bales, slightly above the previous consumption record realized in 2006/07. Projected world trade is raised from 2018/19 as import-oriented consumers such as Bangladesh and Vietnam are accounting for a larger share of world consumption, and China’s imports rise. Global ending stocks are projected down 0.8 million this year, to 75.7 million bales, 60 percent of consumption. An even larger decline is expected in China’s stocks, and stocks outside of China are expected to rebound from their decline in 2018/19 to a new record level.

 For 2018/19, both world production and consumption is decreased about 500,000 bales from last month, leaving ending stocks virtually unchanged. Production is lower in India, more than offsetting an increase in Brazil. Use is reduced in Indonesia and Vietnam.

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