THE FARMER’S EDGE
April 2007 Volume 12, Number 4
Hurley & Associates
Agri-Marketing Centers
Why Simple Is Hard
Several reports have come out over the past
few weeks and most with surprises. Everyone wanted
an opinion about how high the wheat market would go
after the record cold Easter weekend. When someone asked for my opinion, my answer was – “No one
knows.” Now what kind of answer is that for someone in the marketing business? The fact is, no one
does know – there are too many factors in the market
place, and too many players with different agendas. We have farmers; consumers; commercials; and
speculators with large sums of money. Modern technology has given us access
to more information than we can possibly read or
comprehend. Everyone has an opinion about where
commodities prices are going and why. Those who
specialize in research spend a great deal of time and
effort in trying to accurately assess the supply/demand
fundamentals. Those who watch technical indicators study a number of them to attempt to catch trend
changes. There is a lot of technology available to
watch weather patterns, but it is not yet sufficient to
accurately predict weather much further than a few
days out. In addition there are many people who try
to assess the moral issues involved in agricultural
programs that are established in the political arena. Article after article is being written on the pros and
cons of ethanol as a renewable fuel. One of the latest
articles we read proposed the premise that biofuels are
starving the poor in third world countries. In the early
1980’s there were those who fought against anyone
who farmed over 2,000 acres being called a family
farm and receiving the benefit of many of the agricultural programs of the day. Many similar viewpoints
are being discussed in the current environment. WTO
(World Trade Organization) and NAFTA (North
American Free Trade Agreement) were organized in
an attempt to level the playing field for agriculture
world-wide.
Each of these paragraphs would be considered by many to be three separate ways to look at the
markets. One – fundamental issues such as supply
and demand, second – technical indicators, considered
to be the only true indicator by those who study them
like a science, and three –political issues. Simple is hard because true economics is a
people science-----and all three of these are people
issues. Greed and fear will always be the biggest factor in any economy. Fundamentals will change when
prices get too high or too low in any business. If only
agriculture would see itself as a business. That is a
people problem. Technical indicators in the markets
are nothing short of the sum total of human psychology, and no government in history has ever been able
to successfully achieve morality for its people through
legislation.
Just for your interest we are including charts
of food, fiber and fuel to let you see how prices have
reacted over the past several months. One could go
nuts trying to watch each of these commodities every
day and determine their relationship to one another,
and at the same time, attempt to specialize in production. At Hurley and Associates, we have chosen not to
be in the business of research. Neither do we devote
all of our time studying every technical indicator. We
certainly don’t pretend to know what will happen in
the political arena, especially in the geopolitical hotbed of the Mideast. We use consultants that we have
found to be the most reliable and consistent over the
past twenty-five years, and who work at the grassroots
level---meaning farmers, consumers, railroads, grain
companies and barge lines. Our specialty is risk management. The obvious thing we can see in these charts
(see chart page insert) is that some good opportunities
came and went. While profitable pricing opportunities
are still there for row-crop farmers, livestock producers and ethanol plants have seen much better chances
to lock in good corn prices to cover feed needs. Farmers in general had opportunities to lock in better fuel
and fertilizer prices. This is why Hurley and Associates has decided to do devote our best efforts to being
a more efficient risk management firm. We work
toward better ways to use risk management tools in all
of these markets every day. We are also stepping up
our educational program to help producers understand
and be comfortable with risk management tools.
It would be much simpler if everyone based
their decisions strictly on good accounting records and
business principles instead of the proverbial “crystal ball”. Accountability is the hardest sell. In many
cases, the lack of accountability makes it difficult for
producers to recognize a profitable opportunity when
w w w. h u r l e y a n d a s s o c i a t e s . c o m
continued on page 2
continued from page 1
Cotton
it presents itself.
The second factor in making simple hard is the
“all I can get” mentality. This is essentially a form of greed
and it gets in the way of good sound business decisions
A close third is the idea that options are for “making money” and not recognizing their insurance value. Failure to use options to protect profits leaves a valuable
tool in the tool box untouched. Even if there are little or
no profits available, options can be used to set floors when
the risk of even greater losses is possible. Usually option
strategies leave the opportunity for higher prices that are
profitable. Buying out of the money calls against forward
sales made early in the year, for instance, is usually a good
option strategy. In the years that these options expire
worthless it leaves a bad taste. However, if you think of
options as another cost of production, in bull market years
like we are in presently in where prices run away – you are
still open for windfall profits. Another benefit is that the
The cotton market finally broke free of the two
cent trading range (basis May from 5470 to 5277) in effect
since our last report. Not surprisingly, the break out was to
the downside the day before the April Supply/Demand and
WASDE reports. The specs had built their gross long position to an all time high while the demand side of the business continued to be unexciting and dull. Monday’s break
appeared mostly technical in nature.
Certainly, the administrations flap with China at the
WTO did not help the bulls cause but neither was it the cause
of the break. Aggressive selling of May against purchases of
July by locals in anticipation of the gigantic “Goldman rolls”
to be done on the close triggered huge sell stops beneath the
lows of the last six weeks. Index funds that are pegged to
the Goldman Sachs Index have a self imposed rule that 20
percent of their long position in the spot month is rolled to
the next month on the fifth through ninth day of the delivery
month. Armed with the knowledge of these “Goldman rolls”
to be done at the close, the aggressiveness of the locals during the session was persistent.
However, the fact that there was sufficient demand
beneath the market to hold the losses to about a cent is impressive. Particularly when you realize the break came on
massive all-time record volume of 73,310 - far surpassing
the previous record daily volume of 68,047 set about two
months ago.
There were no major surprises or market movers
in the April Supply/Demand reports. As pessimistic as it
sounds, the report can best be described as “bearish as expected”. USDA adjusted production downward by 160,000
to bring it in line with the final ginnings figure. Domestic
consumption was reduced by 50,000 bales. The big hit came
as exports were reduced by another 500,000 bales to 13.5
million. All this increased ending stocks by 400,000 to 9.2
million bales - a tall mountain for the bulls to climb.
World numbers showed only small adjustments
with the biggest change being a 500,000 reduction in Chi-
The Farmer’s Edge
increased option values allow you to have less exposure to
losses if you have to buy back contracts due to production
shortfalls.
Another lesson in risk management is seen in the
ethanol profit margin chart (again, see chart page insert).
Profits have dropped dramatically for those who did not
use risk management tools – but for those who did – good
profits were locked in.
The industries that truly understand their business
and the inherent risks are prepared for almost anything
that would change the market outlook. Agriculture simply
needs to put more emphasis on knowing their business and
protecting their risks. Again, no one knows – weather and
politics (people) are simply not predictable.
Huge profits never last forever. SIMPLE IS HARD.
Ida Hurley
nese imports. Chinese demand stayed at record levels but
their policy of showing preference in utilizing their own domestic supplies over cheaper imported cotton is forcing the
US, through the loan, to carry the worlds excess stocks. Last
week a Chinese official commented that they would issue
import licenses (TRQ) only “step by step” to foster (their
domestic) market stability.
Unfortunately, at least for now, the best the bulls
can hope for at this point is that this weeks break in prices
is no more than a slight reduction of the low end of the trading range. Export demand should keep prices well above 50
cents. However, until we resolve the huge (and maybe still
growing) carryout from this year to next, it will be nearly
impossible to sustain old crop rallies above 55 cents. Any
future market rally towards 1,100 points above the prevailing AWP will find heavy commercial offers waiting.
Between now and first notice day for July cotton,
there is a historically reliable trend for July to lose to the
December contract (or Dec to gain on July). According to
Moore Research, the bible of seasonal traders, the only two
years this did not occur in the last fifteen year was 1995 and
1998.
Mike Stevens
© 2007 Hurley & Associates Agri-Marketing Centers of Charleston
Grain Sorghum
Hogs
Prices for hogs are projected higher into Jun/Jul. Hog slaughter was 1-3% larger than expected during first quarter. It is possible that the hog inventory was underestimated
in the December and March quarterly reports. If weekly hog
slaughter continues to exceed projections made based on
the March report, hog prices may fall well short of forecast
summer highs. Pork demand was fairly good in first quarter,
especially export demand. Domestic consumption appeared to
be stronger than a year ago, mostly stimulated to some extent
by high beef prices.
Cash hog prices are forecast to peak in the low/mid
$70s during June and July. Relatively high corn prices will
encourage pork producers to market hogs a few pounds lighter
than when corn prices were relatively low. Marketing at
lighter weights will reduce the amount of pork produced by a
slight to modest amount. Export demand for pork should remain strong through the spring and summer. Hog marketings
are expected to increase seasonally from July into November. Hog prices are forecast to decline to the low $60s in fourth
quarter, close to the average in fourth quarter last year.
BULLISH MARKET FACTORS:
1) Pork export demand remains strong
2) Internationally, a major decline in chicken consumption
continues to support strong export demand for pork
3) Pork prices are competitive with beef and chicken at retail
4) Relatively high corn prices are expected to discourage herd
expansion
5) Retail pork featuring is expected to increase during the
cookout season
BEARISH MARKET FACTORS:
1) Pork export sales may eventually slow due to rising beef
exports
2) Pork production for ’07 is forecast unchanged to up 1% but
may could total less than year earlier if corn prices hit $4 or
higher and hold into the fall
3) Total red meat and poultry production is projected unchanged to up 1% but may be less than last year if corn prices
are high
4) High energy prices may weaken consumer pork buying
A 10 million bushel reduction in exports was the
only change to last month’s USDA supply and demand estimates. At 140 million bushels, this represents the lowest
export figure in 40 years. There is no question that this has
been a drought induced situation as former foreign buyers
have switched to corn to insure adequate year-round supplies. With a much improved moisture situation across the
major sorghum producing areas of the U.S., it is expected
that the export number will improve in the coming season. While drought has been a major culprit in lower foreign
sales, one cannot overlook the fact that the historically
high corn futures prices have also had an impact as feeders
worldwide have been relying more heavily on substitute
commodities, or trimming back on animal numbers and/or
weights.
Planting continues to move north in Texas. The
most recent crop progress shows that approximately 17 percent of the expected acres are planted. Texas is by far the
leader at 59 percent planted, with Louisiana and Arkansas
at 39 and 36 percent respectively. The USDA expects that
sorghum acreage will increase by 9 percent over last year to
7.01 million acres. This would be a welcomed change for
handlers and merchandisers that have watched this market
shrink precipitously over the past decade. While Texas
will see the biggest acreage increase of 45,000, the Southeastern states of Arkansas, Louisiana and Mississippi are
expected to more than double last year’s acreage. Kansas,
while showing a modest 50,000 acre increase over last
year, could see that number increase if we end up finding
wheat acres going to sorghum in a few weeks. The recent
cold snap, while potentially detrimental to wheat in South
Kansas, Oklahoma and some spotted areas in neighboring
states, has so far not seemed to have a significant impact
on sorghum. We did have customers in Central Texas that
received as much as 5 inches of snow on sorghum that was
approximately 6 inches in height, but temperatures did not
stay low enough long enough to be a cause for concern.
With all these acres expected to come back to sorghum, and the much improved moisture situation, merchandisers across the sorghum belt are starting to wonder where
they will put it all come harvest. The potential for a large
supply at harvest is already starting to have an impact on
basis. Old-crop basis at Gulf port locations has fallen to the
20 to 30 over May corn futures level, and is not expected to
improve as foreign have all but disappeared for now. New
crop offers for sorghum delivered to the Texas ports are
lingering in the option December corn futures area. With
little news of vessels being sold at harvest, there is still a lot
of confusion about where harvest time basis will be. Most
suggests that things will get worse before they get better. The past few years has suggested that moving sorghum in
August and September was the most optimal in terms of basis. This may be developing into one of those years where
basis management will have producers trying to store their
sorghum until well into fall. But for sorghum, the problem
of having more bushels to work with will be a welcomed
sight.
© 2007 Hurley & Associates Agri-Marketing Centers of Charleston
The Farmer’s Edge Why Simple Is Hard - Chart Insert
Cent s per Bushel
460
May Corn Futures
460
Cent s per Bushel
560
May KC Wheat Futures
560
450
450
440
440
430
430
420
420
410
410
400
400
390
390
380
380
370
370
360
360
350
350
340
340
330
330
320
320
310
310
300
300
290
290
450
450
440
440
280
9- 19- 31- 10- 22- 4- 14- 27- 9- 22- 1- 13- 26- 8- 20- 30Oct Oct Oct Nov Nov Dec Dec Dec Jan Jan Feb Feb Feb M ar M ar M ar
800
800
780
780
760
760
740
740
720
720
700
700
680
680
660
660
640
640
620
620
600
600
580
580
560
560
9Oct
20- 2- 15- 28- 11- 22- 8- 22- 2- 151- 14- 27- 7Oct Nov Nov Nov Dec Dec Jan Jan Feb Feb M ar M ar M ar Apr
530
520
520
510
510
500
500
490
490
480
480
470
470
460
460
6-Nov
4-Dec
1-Jan
29-Jan
26-Feb
DAP Fertilizer - Gulf
430
26-
430
Dol l ar s per Ton
430
410
410
390
390
370
370
350
350
330
330
310
310
290
290
270
270
250
13-Oct
10-Nov
8-Dec
5-Jan
2-Feb
UREA Fertilizer - Gulf
370
530
2-M ar
30-
250
Dol l ar s per Ton
370
530
520
510
510
500
490
490
480
470
470
460
450
450
440
430
350
350
330
330
310
310
290
290
270
270
250
250
230
230
210
210
430
420
410
9-Oct
540
530
Cent s per Bushel
May Wheat Futures
540
550
430
9-Oct
Cent s per Bushel
820
May Soybean Futures
820
280
550
540
6-Nov
4-Dec
1-Jan
The Farmer’s Edge
29-Jan
26-Feb
26-
410
190
13-Oct
10-Nov
8-Dec
5-Jan
2-Feb
2-M ar
30-
190
© 2007 Hurley & Associates Agri-Marketing Centers of Charleston
Why Simple Is Hard - Chart Insert
Dol l ar s per Bar r el
70
May Crude Oil Futures
70
68
68
66
66
64
64
62
62
60
60
58
58
56
56
54
54
52
52
50
9-Oct
220
6-Nov
4-Dec
1-Jan
29-Jan
26-Feb
May RBOB Unleaded Gas Futures
26-
50
Cent s per Gal l on
220
215
215
210
210
205
205
200
200
195
195
190
190
185
185
180
180
175
175
170
170
165
165
160
160
155
155
150
9-Oct
6-Nov
4-Dec
1-Jan
29-Jan
26-Feb
150
Cent s per Gal l on
195
May Heating Oil Futures
195
26-
190
190
185
185
180
180
175
175
170
170
165
165
160
160
155
155
150
150
145
9-Oct
6-Nov
4-Dec
1-Jan
29-Jan
26-Feb
26-
145
$ per M mbt u
May Natural Gas Futures
8.5
8.5
8.0
8.0
7.5
7.5
7.0
7.0
6.5
6.5
6.0
9-Oct
6-Nov
4-Dec
1-Jan
29-Jan
26-Feb
Ethanol Average Rack Price
275
6.0
26-
Cent s per Gal l on
275
250
250
225
225
200
200
175
150
9-Oct
175
6-Nov
4-Dec
1-Jan
29-Jan
26-Feb
26-
Poi nt s
88
US Dollar Index
88
150
87
87
86
86
85
85
84
84
83
83
82
9-Oct
6-Nov
© 2007 Hurley & Associates Agri-Marketing Centers of Charleston
4-Dec
1-Jan
29-Jan
26-Feb
26-
82
The Farmer’s Edge The corn market was rocked by the USDA’s Planting Intentions Report on March 30, which indicated that U.S.
Farmers would plant over 90 million acres of corn for the
2007/2008 marketing year. Questions abounded, the first
was how much of th e12 million acre increase can really get
planted? Followed closely by what kind of yields can we
expect if we do get that much of an increase? Then we had
Easter week-end with the attendant freezing temperatures
affecting almost all of the southern crop, which was wellemerged. That brings up a whole different set of questions,
how much corn will we actually lose? What happens to the
acres if we do lose some? Cotton? Beans? More corn? Grain
sorghum? How much winter wheat did we lose if any? What
happens to those acres? How does that affect the substitution
of wheat for corn in feed rations? Market analysts are getting
migraines trying to sort it all out. The fact is that many of these questions will only be
answered by our July 15 cut-off for acres certification, others will not be known until harvest. Meanwhile, the market
will nervously bide its time, trading every credible guess and
rumor, trying to balance burgeoning ethanol demand with
unknown acres and unknowable weather possibilities around
the world. This promises to be quite a year!
The USDA is trying to keep track of supply and demand as well as it can be predicted, and in its April 10, supply
and demand report, the U.S. corn ending stocks for 2006/07
are projected at 877 million bushels, up 125 million from last
month based on lower projected feed and residual use. Feed
and residual use is projected at 5,850 million bushels, down
125 million, as the March 1 stocks indicated lower-than-expected use in the December-February quarter. Food, seed,
and industrial use is unchanged this month, despite a small
increase in seed use, based on producer planting intentions
reported in the Prospective Plantings report. Lower projected
food and non-ethanol industrial use offset the increase in seed
use. The season-average farm price is projected at $3.00 to
$3.20 per bushel, 20 cents per bushel lower on the top end
of the range reflecting higher projected carryout, larger 2007
intended area, and prices received by producers to date.
The U.S. balance sheets for grain sorghum and
Corn
Planted Harvested Yield Carryin Production Supply Feed Exports Ethanol Other Ind Demand Carryout CO/Use Price Range
U.S. Corn Supply/Demand (mb)
Apr Apr Mar Apr
USDA
USDA
USDA USDA
04/05 05/06 06/07 06/07
80.9 81.8 78.3 78.3
73.6 75.1 70.6 70.6
160.4 148.0 149.1 149.1
958 2114 1967 1967
11807 11114 10535 10535
12776 13237 12512 12512
6158 6141 5975 5850
1818 2147 2250 2250
1323 1603 2150 2150
1363 1379 1385 1385
10662
11270
11760
11635
2114 1967 752 877
0.198 0.175 0.064 0.075
$2.06 $2.00 $3.00 $3.00
$3.40
$3.20
barley are adjusted this month to reflect small changes in projected use. U.S. grain sorghum exports for 2006/07 are lowered 10 million bushels reflecting lower projected imports by
Mexico. Projected grain sorghum ending stocks are increased
an equal amount. Barley feed and residual use is raised 5
million bushels as the March 1 stocks indicated higher-thanexpected use during the December-February quarter. Barley
ending stocks for 2006/07 are lowered an offsetting amount.
Global 2006/07 coarse grain production is increased
8.1 million tons this month with much of the increase in nonexporter African countries. The biggest increases are for Ethiopia, Nigeria, and Sudan, which together are raised 4.8 million
tons as excellent growing-season weather in these and other
African countries boosted corn, sorghum, barley, and millet output. Global corn production is raised 2.7 million tons
this month reflecting higher output in many African countries
and South America. Corn production for Argentina is raised
0.5 million tons to 22.0 million, as harvest reports continue
to confirm record yields. Despite flooding in key growing
areas of Argentina, part of the crop in the affected areas was
harvested ahead of the late-March downpours. Damage to
remaining unharvested corn is expected to be limited if drier
weather persists. Brazil corn production is raised 1.5 million
tons this month to 49.5 million, reflecting higher official estimates by the Brazilian government for first- and second-crop
area and first-crop yields. South Africa corn production is
lowered to 6.0 million tons, down 1.0 million from last month,
as the El Nino-driven drought continued during March. Production for Thailand is lowered 0.4 million tons this month.
Global 2006/07 coarse grain feeding is reduced
mostly reflecting lower corn feed and residual use in the
United States. Coarse grain feed use is also lowered in Mexico, South Africa, and Thailand, but raised in Argentina and
Brazil. Global exports are nearly unchanged this month for
coarse grains and corn. Corn exports for China are lowered
0.5 million tons as exports for Argentina are raised 0.5 million
tons. Global 2006/07 coarse grain ending stocks are raised 4.6
million tons this month with corn accounting for 4.0 million
tons of the increase. U.S. corn ending stocks are raised 3.2
million tons as feed and residual use is projected lower. Brazil
corn ending stocks are raised 0.8 million tons reflecting higher
expected production. With lower projected exports, ending
stocks for China corn are also raised 0.5 million tons.
World Corn Supply/Demand (mmt)
Apr Apr Mar Apr
USDA
USDA
USDA USDA
04/05 05/06 06/07 06/07
Carryin 103.86 131.28 124.40 124.21
Production 712.63 695.20 693.15 695.85
Supply 816.49 826.48 817.55 820.06
Total Demand 685.20
702.26
729.75 728.24
Carryout CO/Use 131.29 124.22 87.80 91.82
0.192 0.177 0.120 0.126
China Production: 06/07 143.0; unch
Argentina Production: 06/07 22.0; +0.5
© 2007 Hurley & Associates Agri-Marketing Centers of Charleston
The Farmer’s Edge Market Update - Cattle
The cash market for fed cattle is expected to peak
within next 30 days. Live prices have already reached
$100 and are expected to trade around $105-110 the next
couple weeks. Beef prices should continue to increase,
pushing cutout values near $170 or higher on the choice
and $160 or higher on select. While beef production has
declined since February, prices at these projected levels are
expected to be high enough to ration the smaller supply. Prices are expected to trend lower from early/mid May into
July. Live prices on fed cattle are expected to decline to the
upper $80s before bottoming and turning higher into the
fall. Consumer beef buying should increase seasonally as
barbeque season gets into full swing around Memorial Day.
However, retail beef buyers will have contracted for a high
percentage of the weekly needs through June and July. As
a result, even if weekly beef production continues relatively
light through May, packers will have more to sell on the
spot market than in April. Fed cattle prices are expected to
trend back to the mid/upper $90s during fourth quarter.
The April 1 Cattle on Feed report will be released
April 20. March placements are estimated 10-12% more
than year ago. Warmer weather, drying feedlot conditions,
plenty of empty pen space, improving profitability on fed
cattle sales and declining corn prices, all contributed to
increasing the demand for feeder cattle during March. Rising prices for feeder cattle encouraged producer selling. Marketings were strong during March and are estimated
around unchanged vs March ’06. Since March ’07 had one
less slaughter day than last year, marketings at 100% for the
month were the equivalent of 4-5% larger on a day for day
comparison. But, since March placements are estimated
larger than marketings, the April 1 on feed inventory is
estimated down 2% vs down 4% on March 1. Marketings
were current coming into April. Cattle feeders are willing
to continue selling virtually all the cattle packers will bid
on. Consequently, there have more pens of cattle marketed
one to two weeks earlier than originally scheduled. If this
continues through April, average slaughter weights should
continue to decline, further reducing beef production.
Feeder cattle prices are expected to continue
strong to higher while fed cattle prices are increasing. However, feedlot buyers will continue to watch day to day,
week to week changes in corn prices and adjust bids for
feeder cattle accordingly. Feedlot buyer demand will be
mostly good through the spring months. Cattle feeders are
generally bullish on the outlook for fed cattle prices later
this year. But, if corn prices rally to $4 or higher again,
feedlot buyers will lower bids drastically for feeder cattle
as well as buy fewer. Overall supply of feeder cattle and
calves the rest of this year should be equal to slightly smaller than last year. Heavy placements of cattle in feedlots
last year due to widespread drought will limit the supply
available this year. Of course, imports of feeder cattle from
Canada and Mexico can fill at least part of the void.
BULLISH MARKET FACTORS:
1) Availability of well finished, choice fed cattle will be
tight into mid May as feedlot marketings are very current
2) Consumer beef demand should increase seasonally as
cookout season reopens
3) Average slaughter weights are still declining and expected to trend down a few more weeks
4) The drought in ’06 resulted in an increase of 18% in beef
cow slaughter, 12% more total cows were slaughtered than
in ‘05
5) Beef exports are expected to continue relatively light in
’07 but should increase as the year progresses
BEARISH MARKET FACTORS:
1) Imports of feeder cattle from Canada and Mexico will
continue a source of added supply
2) South Korea has not yet resumed importing of U.S. beef
3) High gasoline prices may cause consumers to buy less
beef
4) Threat of discovering another case of Mad Cow Disease
in U.S.
5) Threat of renewed terrorist activities
© 2007 Hurley & Associates Agri-Marketing Centers of Charleston
The Farmer’s Edge Rice
Market Update - Rice Market Update - Wheat
Wheat growers, crop consultants, cattle feeders, flour
millers, and anyone else in the world with an interest in the
2007/2008 wheat crop is watching in abject anticipation as we
try to sort out the extent of damage to the winter wheat crop. Both hard and soft red winter wheat appears to have some
damage. The percent of loss and the number of acres affected
is still being assessed and there will be at least 1-2 week’s delay in the final decisions. The only certainties are that many
have lost some of it, and some have lost all of it, it’s merely
a matter of assigning credible numbers to the categories and
weighing the effect on the markets.
In the USDA’s April 9, supply and demand report,
U.S. 2006/07 ending stocks are projected at 422 million bushels, down 50 million bushels from last month due to increases
in domestic use and exports. Feed and residual use is raised
25 million bushels as the March 1 stocks indicated higherthan-expected use in the December-February quarter. A small
increase in seed use reflects higher winter wheat seedings
reported in USDA’s March 30 Prospective Plantings report.
Exports are raised 25 million bushels to 900 million reflecting
U.S. Wheat Supply/Demand (mb)
Apr Apr Mar Apr
USDA
USDA
USDA USDA
04/05 05/06 06/07 06/07
Planted 59.7 57.2 57.3 57.3 Harvested 50.0 50.1 46.8 46.8
Yield 43.2 42.0 38.7 38.7
Carryin 546 540 571 571
Production 2158 2105 1812 1812
Supply 2775 2727 2498 2498
Food 910 915 925 925
Exports 1066 1009 875 900
Seed 78 78 81 82
Feed/Res
182
153
145
170
Demand
2235
2155
2026
2077
Carryout CO/Use Price Range
World Wheat Supply/Demand (mmt)
Apr Apr Mar Apr
USDA
USDA
USDA USDA
04/05 05/06 06/07 06/07
Carryin 132.60 151.22 147.46 147.88
Production 628.58 621.16 593.11 594.50
Supply 761.18 772.38 740.57 742.38
Total Demand 609.96
Carryout CO/Use 624.50
619.34
621.17
151.22 147.88 121.23 121.21
0.248 0.237 0.196 0.195
Australia Production: 06/07 10.5; unch
Argentina Production: 06/07 14.20; unch
540 571 472 472
0.242 0.265 0.233 0.203
$3.40 $3.42 $4.20 $4.20
$4.30
$4.30
Only minor changes are made to the U.S. 2006/07
rice supply and use projections. On the supply side, all rice
imports are raised 1.0 million cwt to a record 20.0 million cwt with long-grain imports up 1.0 million cwt, while
combined medium- and short-grain imports are unchanged. Imports of fragrant long-grain rice from Thailand, which are
larger than expected through the first half of the marketing
year (based on Census data through January), account for
most of the increase. No changes are made on the use side
from a month ago. Ending stocks of all rice are projected at
31.9 million cwt, 1.0 million cwt above last month, but 11.1
million cwt below a year earlier. The season-average farm
price is projected at $9.75 to $9.95 per cwt, unchanged from
a month ago.
Global production, imports, and exports are raised
The Farmer’s Edge
improved export prospects as U.S. prices, particularly for soft
red wheat, are more competitive in the world market. Adjustments are also made in imports, domestic use, exports, and
ending stocks of wheat by class. The projected range for the
2006/07 farm price is unchanged at $4.20 to $4.30 per bushel. Producers have marketed most of their 2006 production limiting the effect of further price movements on the weighted
season-average farm price.
Global wheat production for 2006/07 is projected at
594.5 million tons, up 1.4 million from last month with nearly
all of the increase in African countries and Mexico. Higher
global consumption more than offsets higher production leaving ending stocks nearly unchanged. Changes in world exports
and imports are also nearly offsetting; however, major export
changes include 1-million-ton reductions for both Canada and
EU-25 and 0.5-million-ton increases for both Kazakhstan and
Russia. Exports are also raised 0.9 million tons for Syria. The
largest increases in projected ending stocks are for Canada,
EU-25, and Pakistan. The largest ending stocks reductions
are for the United States and Syria.
slightly from last month, while beginning stocks, consumption, and ending stocks are lowered slightly. Global production is raised less than 0.1 million tons on a number of
nearly offsetting changes. On the plus side, production is
raised for Egypt, Cote D’Ivoire, Burma, Nigeria, and Venezuela, while production is lowered for Pakistan, Japan, and
Argentina. Exports are raised for Pakistan, Thailand, and
Vietnam and lowered for Burma. Imports are increased for
Colombia, Iraq, and the United States. Global ending stocks
are projected at 78.9 million tons, about 0.2 million tons
below last month, and 2.6 million tons below 2005/06. The
slight decline in ending stocks is due primarily to decreases
for India, Thailand, and Vietnam; which is nearly offset by
increases for Egypt, Cote D’Ivoire, Burma, and Nigeria.
© 2007 Hurley & Associates Agri-Marketing Centers of Charleston
The soybean market has been participating in
the most intense battle for crop acres in recent memory. The March 30, USDA planting intentions report
indicates producers planning to plant over 90 million
acres of corn, a 12 million acre increase over 2006.
While this report was friendly for the soybean market,
subsequent rainy weather has called into question the
ability of producers to get all the corn intended acres
planted. Also, the Easter weekend freeze has damaged some wheat all over the wheat belt and some
of it is damaged badly enough to warrant destroying the wheat crop and replacing with either corn or
soybeans. The choice will be made depending on the
competing markets and weather. Sound confusing? It
is, and will likely continue to be until we get a clearer
picture of corn plantings around May 15. Until then,
we will continue to trade export and feed demand
numbers, weather forecasts and guesses about the
wheat damage.
In its April 9, supply and demand report, the
USDA projected U.S. ending stocks of soybeans to be
up 20 million bushels to a record 615 million bushels
as reduced exports, crush, and seed use are only partly
offset by higher residual use. Soybean exports are
reduced 20 million bushels reflecting slower than expected shipments to date reported by the U.S. Census
Bureau. Soybean crush is forecast at 1,765 million
bushels, down 15 million bushels from last month. The reduction is due to lower projected domestic
soybean meal use and reduced prospects for soybean
meal exports. Although soybean meal exports have
been strong through the first half of the marketing year, sharply higher South American supplies
are expected to reduce the competitiveness of U.S.
soybean meal in the second half of the year. Residual
use is increased this month as indicated by the March
Market Update - Soybeans
U.S. Soybean Supply/Demand (mb)
Apr Apr Mar Apr
USDA
USDA
USDA USDA
04/05 05/06 06/07 06/07
Planted 75.2 72.0 75.5 75.5 Harvested 74.0 71.3 74.6 74.6
Yield 42.2 43.0 42.7 42.7
30,Grain Stocks report.
The U.S. season-average soybean price range
for 2006/07 is projected at $6.10 to $6.50 per bushel,
unchanged from last month. Soybean meal prices are
projected at $190 to $200 per short ton, up $5 on the
low end of the range. Soybean oil prices are projected
at 28.5 to 30.5 cents per pound, up 1 cent on both
ends of the range.
Global oilseed production for 2006/07 is projected at a record 402.9 million tons, up 3.7 million
tons from last month. Soybean production accounts
for almost all of the change. Brazil soybean production is raised 1.8 million tons to a record 58.8 million
tons based on higher yields, especially in southern
states. Soybean production is raised by a combined
2.3 million tons for Argentina and Paraguay. The
Argentina crop is projected at a record 45.5 million
tons, up 1.5 million tons from last month. Despite
heavy rain that fell during the last week in March over
much of the growing area, yields are projected record
high at 2.88 tons per hectare. Soybean production is
also up sharply for Paraguay based on excellent yield
prospects. Other changes include higher soybean
production for Brazil for the 2005/06 crop. The crop
is raised 2 million tons to 57 million tons reflecting
reported crush and export data for the recently completed marketing year.
Global oilseed ending stocks for 2006/07
are increased 3.4 million tons to 67.4 million tons. Most of the increase is due to higher South American
soybean stocks, reflecting sharply higher projected
production for both 2005/06 and 2006/07. Global
vegetable oil stocks are reduced this month mainly
due to reduced palm oil production for Indonesia.
World Soybean Supply/Demand (mmt)
Apr Apr Mar Apr
USDA
USDA
USDA USDA
04/05 05/06 06/07 06/07
Carryin 38.80 48.45 52.23 53.79
Production 215.74 219.93 229.40 233.49
Supply 254.54 268.38 281.73 287.28
Carryin 112 256 449 449
Production 3124 3063 3188 3188
Supply 3242 3322 3642 3642
Total Demand 205.16
Crush 1696 1739 1780 1765
Exports 1097 947 1100 1080
Seed 88 93 87 83
Residual
104
94
79
99
Demand
2986
2873
3046
3027
Brazil Production: Argentina Production: Carryout CO/Use 213.95
223.84
225.51
48.45 53.79 57.50 61.02
0.236 0.251 0.257 0.271
06/07
58.8; +1.8
06/07 44.5; +1.5
Carryout 256 449 595 615
CO/Use 0.086 0.156 0.195 0.203
Price $5.74 $5.66 $6.10 $6.10
Range
$6.50
$6.50
The Farmer’s Edge
© 2007 Hurley & Associates Agri-Marketing Centers of Charleston
Dennis E. Hurley - Chairman of the Board, President and Chief Financial Officer
Ida V. Hurley - Chief Executive Officer
Trent Hurley - Vice President
David Hurley - President of Hurley & Associates, Inc.
Consultants:
Frank McCalla, Bill Hudson, Sid Love, Eric Matsen & Joe Kropf
Hurley & Associates Agri-Marketing Centers
Hurley & Associates, Inc.
415 E. Marshall • P.O. Box 471 • Charleston, MO 63834
Phone: (573)-683-3371 • Toll Free: 1-800-524-0342 • Fax: 573-683-4407
e-mail: mail@hurleyandassociates.com
www.hurleyandassociates.com
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