Grain Marketing Highlights – September 16, 2011

Carl German, Extension Crops Marketing Specialist; clgerman@udel.edu

U.S. Supply and Demand Summary

 

Million Bushels

 

Corn

Soybeans

Wheat

Crop Year

10-11

11-12

11-12

10-11

11-12

11-12

10-11

11-12

11-12

Report Date

09/12

08/11

09/12

09/12

08/11

09/12

09/12

08/11

09/12

Carryin

1,708

940

920

151

230

225

976

861

861

Production

12,447

12,914

12,497

3,329

3,056

3,085

2,208

2,077

2,077

Imports

30

20

15

15

15

15

97

100

110

Tot Supply

14,185

13,874

13,432

3,495

3,301

3,325

3,281

3,037

3,047

 

Feed

5,000

4,900

4,700

133

240

240

Crush/mill*

1,380

1,380

1,380

1,650

1,635

1,635

926

945

940

Ethanol Prod.

5,020

5,100

5,000

Seed/other

30

30

30

125

111

111

73

82

82

Exports

1,835

1,750

1,650

1,495

1,400

1,415

1,289

1,100

1,025

Total

13,265

13,160

12,760

3,270

3,146

3,161

2,420

2,367

2,287

Carryout

920

714

672

225

155

165

861

671

761

Stocks/Use Rat

6.90%

5.40%

5.30%

6.90%

4.90%

5.20%

35.60%

28.30%

33.30%

Avg Price

5.2

6.7

7

$11.35

$13.50

$13.65

$5.70

$7.60

$7.85

*Excludes corn for ethanol

USDA’s September supply and demand report was viewed as bearish for soybeans and wheat, and neutral to bearish for corn. Soybean ending stocks of 165 million bushels were higher than expected, with wheat ending stocks of 761 million bushels, above the high end of pre-report estimates. Ending stocks-to-use for wheat are now computed at 33.3%. Corn ending stocks were reduced to 672 million bushels, 41 million bushels less than last month, which is slightly bullish. However, corn ending stocks were above pre-report estimates as demand fell by 400 million bushels. The demand estimates for U.S. corn were reduced 200 million bushels for feed, 100 million bushels for ethanol, and 100 million bushels for exports. The reduced total demand estimate cast a negative light on the September report.

World Supply and Demand Summary

 

Million Metric Tons

 

Corn

Soybeans

Wheat

Crop Year

10-11

11-12

11-12

10-11

11-12

11-12

10-11

11-12

11-12

Report Date

09/12

08/11

09/12

09/12

08/11

09/12

09/12

08/11

09/12

Carryin

143.9

122.93

124.3

59.34

68.42

68.82

199.87

191.74

193.34

Production

823.97

860.52

854.67

264.12

257.47

258.99

648.2

672.09

678.12

Tot Supply

967.87

983.45

978.97

323.46

325.89

327.81

848.07

863.83

871.46

 

Feed

495

510.09

505.11

115

127.9

130.1

Crush

222.3

232.11

232.09

Other

348.56

358.83

356.47

30.32

30.21

30.15

539.73

547.06

546.76

Total Use

843.56

868.92

861.58

252.62

262.32

262.24

654.73

674.96

676.86

End Carryout

124.3

114.53

117.39

68.82

60.95

62.55

193.34

188.87

194.59

Stocks/Use Rat

14.70%

13.20%

13.60%

27.20%

23.20%

23.90%

29.50%

28.00%

28.70%

 

 

World ending stocks for all three grains were increased for both 2010-2011 and 2011-2012. This eases some of the concern in corn, as demand was reduced more the 7 million metric tons and South American production was increased 5.5 MMT. Wheat ending stocks grew to almost 195 MMT putting world ending stocks-to-use at 28.7%. World soybean ending stocks increased to 62.55 MMT with ending stocks-to- use just short of 24%.

Market Strategy
The negative tone of this report could quickly be erased depending upon whether traders believe the production estimates for 2011 U.S. corn and soybeans. Historically, short crops have a tendency to get shorter as harvest progresses. Local cash prices and basis levels remain attractive for making harvest sales.

Commodity Markets At Large
The next item of interest concerning the commodity markets will be the September 30 Grain Stocks in all Positions report. That report is expected to shed light on the extent of the demand reduction that is taking place in U.S. corn. USDA lowered U.S. corn use by 400 million bushels in their September 12 supply and demand report. There are some skeptics concerning whether USDA’s projections for drops in domestic corn and export use were too large. The grain stocks report may help to shed some light on that concern.

Then there is the matter of 2011 U.S. corn and soybean production. Two things could happen concerning previous production estimates. First, USDA could make further adjustments to planted acres. Second, yield projections can be adjusted further. Any further adjustments to planted acres are likely to be down while yield adjustments could be up or down. Those pending adjustments could sway these markets higher or lower.

Along the line of 2012 production concerns is the possibility of an early frost occurring in the Northern tier of the Corn Belt. Due to the lagging development concerning crop maturity in that region of the country, a killing frost occurring within the current week would be detrimental to corn and soybean yields. Reports of a possible frost were rumored into the market on Tuesday, expected to materialize on Thursday if the frost event occurs.

Outside market forces continue to influence the commodity markets. Recent strengthening in the value of the dollar is detrimental to U.S. exports. The value of the dollar may have made a turn recently which could mean further strength occurring in the weeks ahead. Energy prices and the Dow are also playing a role in providing strength or weakness to prices. Slackening energy prices are negative while a stronger Dow is positive to prices.

Market Strategy
Due to the tight U.S. corn supply, corn prices are expected to remain firm going into the ‘12/‘13 marketing year. Domestically, the stocks-to-use ratio for U.S. corn is now calculated at 5.3%, as compared to 5.4% a month ago and 6.9% last year. The corn market will lend support to the soybean and wheat markets through the fall and winter. Harvest pressure on commodity prices will build as harvest progresses. Downed corn, besides causing harvest delays, is playing havoc with advancing sales decisions, locally. Due to the downed corn factor, making harvest sales off the combine makes more sense than making additional forward cash sales. At the same time, with corn and soybean harvest prices at historically high levels it is a good idea to make those sales frequently and heavily. Currently, Dec ‘11 corn futures are trading at $7.24; Nov ‘11 soybeans at $13.89; and July ‘12 SRW wheat at $7.60 per bushel.

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