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Commodity Market Commentary

Released November 9, 2017, by the National Agricultural Statistics Service (NASS), Agricultural Statistics Board, United States Department of Agricultural (USDA).


WHEAT: Projected U.S. 2017/18 ending stocks are lowered 25 million bushels due to increased exports. Recent sales to Iraq support a higher export projection with Hard Red Winter accounting for the entire increase. The latest NASS Flour Millings Products report, issued November 1, indicated only a modest increase for food use for 2016/17 and supported the current projection of 950 million bushels for 2017/18. Ending stocks are projected at 935 million bushels, down 246 million from the previous year but still above the 5-year-average. The season-average farm price is unchanged at a midpoint of $4.60. Global 2017/18 wheat supplies are down fractionally with decreased beginning stocks but increased production. Global production is raised 0.8 million tons led by a 1.0-million-ton increase for Russia and a 0.5-million-ton increase for the EU on updated harvest results. Partly offsetting is a 0.5-million-ton decrease for Pakistan. Exports are raised 0.6 million tons with the United States and Russia up 0.7 million, and 0.5 million, respectively. Australia exports are lowered 0.5 million. Global use is raised fractionally this month. With supplies decreasing and total use increasing, ending stocks are lowered 0.6 million tons but remain record large.

COARSE GRAINS: This month’s 2017/18 U.S. corn outlook is for larger production, increased feed and residual use and exports, and greater ending stocks. Corn production is forecast at 14.578 billion bushels, up 298 million from last month on a record-high yield. Feed and residual use is raised 75 million bushels based on a larger crop. Exports are raised 75 million bushels, reflecting expectations of improved U.S. competitiveness, reduced exports for Ukraine, and increased demand from Mexico based on sharply lower sorghum production prospects. With supply rising faster than use, corn ending stocks are up 147 million bushels from last month. The projected range for the season-average corn price received by producers is unchanged with a midpoint of $3.20 per bushel. Global coarse grain production for 2017/18 is forecast 3.2 million tons higher to 1,322.6 million. The 2017/18 foreign coarse grain outlook is for lower production, reduced consumption, and smaller stocks relative to last month. Foreign corn production is forecast lower mostly reflecting reductions for Ukraine, Russia, and Vietnam that are only partially offset by an increase for the European Union. The projected corn yields for Russia and Ukraine are reduced based on reported harvest results to date. Sorghum production in Mexico is lowered based on area indications from the government and lower forecast yields as a result of the prevalence of the sugarcane aphid. Corn exports are lowered for Ukraine but raised for the United States. Imports are raised for Mexico and Canada, but lowered for South Korea. China’s barley imports are raised reflecting expectations of continued demand for imported feedstuffs. Foreign corn ending stocks are down from last month, mostly reflecting declines for China, Vietnam, Canada, and WASDE-571-2 Ukraine that more than offset increases for the EU and Argentina. Global corn stocks, at 203.9 million tons, are up 2.9 million from last month.

RICE: Total 2017/18 U.S. rice supplies are increased marginally this month to 248.9 million cwt as higher projected imports (primarily Thai fragrant rice) offset slightly lower production. In the November Crop Production report, NASS reduced the 2017/18 U.S. crop size by 0.2 million cwt to 178.4 million on lower forecast yield. This is 20 percent less than last year and would be the lowest U.S. rice production since 1996/97. Projected U.S. rice exports are reduced by 2 million cwt to 104 million, down 1 million each for both long- and medium- and short- grain rice to 74 and 30 million cwt, respectively. Exports for both classes are projected lower than last year due to reduced exportable supplies, greater competition, and higher U.S. prices. Projected 2017/18 ending stocks are increased 2.1 million cwt to 29.9 million, still the lowest all rice ending stocks since 2007/08. The projected 2017/18 season-average farm price for all rice is reduced 20 cents at both ends of the range to $12.50 to $13.50 per cwt based on monthly NASS prices reported to date and price expectations for the rest of the marketing year. The midpoint of $13.00 per cwt is $2.60 above the previous year. Global 2017/18 rice supplies are decreased to 619.3 million tons, primarily on a smaller crop projected for India. World 2017/18 consumption is down fractionally to 480.4 million tons. Global 2017/18 trade is raised to 44.9 million tons on higher exports by Thailand, Vietnam, Burma, and China more than offsetting reductions for India, Pakistan, and the United States. Trade is still below the 2016/17 record of 45.3 million tons. World ending stocks are lowered this month to 138.9 million tons for 2017/18, still higher than last year and at the highest level since 2000/01.

OILSEEDS: Total U.S. oilseed production for 2017/18 is projected at 132.0 million tons, down 0.2 million from last month due to lower soybean, peanut, and cottonseed production. Soybean production is forecast at 4,425 million bushels, down 5 million due to a fractionally lower yield. With use unchanged, soybean ending stocks are projected at 425 million bushels. Prices for soybeans and soybean meal are raised this month. The U.S. season-average soybean price is projected at $9.30 per bushel, up 10 cents at the midpoint. The soybean meal price is projected at $295 to $335 per short ton, up 5 dollars on both ends of the range. The soybean oil price projection is unchanged at 32.5 to 36.5 cents per pound. The foreign oilseed supply and demand forecasts for 2017/18 include higher production, exports, and stocks compared to last month. Foreign production is forecast at 446.7 million tons, up 2.0 million with higher soybean, peanut, cottonseed, and rapeseed partly offset by lower sunflowerseed. Soybean production for Brazil is increased 1 million tons to 108 million on higher reported area for Parana and Rio Grande do Sul. Peanut production is increased for India on higher yields for the state of Gujarat. Sunflowerseed production is lower for Ukraine, Argentina, and South Africa. Major foreign soybean trade changes for 2017/18 include higher exports for Brazil and Paraguay, with increased soybean imports for China. Foreign soybean ending stocks for 2017/18 are up from last month, mostly reflecting increases for China, Argentina, and Brazil.

SUGAR: Changes in supply and use for 2016/17 in both the United States and Mexico are made on the basis of full fiscal year data published by USDA in Sweetener Market Data and by CONADESUCA in their September National Balance Report. U.S. beet sugar production WASDE-571-3 is estimated at 5.101 million short tons, raw value (STRV) after record production in the month of September. U.S. deliveries for human consumption are reported at 12.130 million STRV, a reduction of 70,411 from last month’s estimate, likely due to stronger-than-expected hurricane-related operational and shipping disruptions in the final months of 2016/17. U.S. ending stocks are estimated at 1.834 million STRV, up 102,294 over last month for an ending stocks-to-use ratio of 14.8 percent. In Mexico, deliveries for human consumption are estimated at 4.515 million metric tons (MT). Along with an increase of deliveries of high fructose corn syrup (HFCS) to 1.531 million MT, dry weight, per capita domestic sweetener consumption in Mexico is estimated at 48.5 kilograms, up from the previously estimated 47.8. Mexico ending stocks are estimated at 1.002 million MT, a reduction of 43,749 from last month. For 2017/18 imports in Mexico are increased by 20,000 MT, in line with reported 2016/17 import estimates. Deliveries for human consumption are increased by 48,555 MT to 4.582 million MT on the basis of unchanged per capita sweetener consumption and projected total HFCS consumption equal to the previous year estimate. The combination of reduced supply and increased use implies sugar available for export to the U.S. market at 1.450 million MT, a reduction of 81,044 from last month. This amount allows Mexico to maintain an ending stocks-to-consumption bound of 18.0 percent for anticipated use in 2018/19. For 2017/18, the increase in U.S. beginning stocks are more than offset by slightly lower beet sugar production, reduction in imports from Mexico, and fewer expected 2016/17 raw sugar tariff-rate quota imports entering after September 30. Total supply is reduced by 44,741 STRV. Deliveries for human consumption are reduced by 123,000 STRV to 12.400 million. Ending stocks are projected up 78,259 STRV to 1.775 million for an implied stocks-to-use ratio of 14.1 percent.

LIVESTOCK, POULTRY, AND DAIRY: The forecast for 2017 total red meat and poultry production is lowered from last month as lower beef, pork, and turkey production more than offsets higher broiler production. Beef production is reduced from the previous month on a slower expected marketing pace for fed cattle in the fourth quarter and lighter carcass weights. The pork production forecast is reduced as lower expected fourth-quarter commercial hog slaughter more than offsets slightly heavier carcass weights. The broiler production forecast is raised on third-quarter slaughter data, but no change is made to the fourth-quarter forecast. The turkey forecast is reduced slightly on lower than expected thirdquarter slaughter data; no change is made to the fourth quarter forecast. The 2017 egg production forecast is lowered from last month as lower table egg production more than offset higher hatching egg production. For 2018, the total red meat and poultry forecast is raised from the previous month as higher expected beef and pork production more than offsets lower turkey production. Beef production is raised from last month as higher expected placements in the latter part of 2017 and first-half 2018 are expected to support higher marketings and fed cattle slaughter in 2018. However, carcass weights are expected to be slightly lower. Pork production is raised from last month on higher expected first-quarter slaughter and slightly heavier carcass weights; no changes are made to outlying quarters. The 2018 broiler production forecast is unchanged from the previous month. Turkey production forecasts are lowered on weakness in prices which will dampen expansion in 2018. The 2018 egg production forecast is raised from last month. WASDE-571-4 The beef import forecast for 2017 is raised from the previous month, but no changes are made to the 2018 beef import forecasts. Beef export forecasts for 2017 and 2018 are raised from the previous month on expected strong global demand for U.S. beef. For 2017, the pork import forecast was reduced fractionally on recent third-quarter trade data, but no change is made to the outlying pork import forecasts. The 2017 and 2018 pork export forecasts are lowered from the previous month on slower-than-expected export demand in the third quarter which will carry forward into 2018. Both 2017 and 2018 broiler export forecasts are reduced from the previous month on an expected slower pace in global demand. The annual turkey import forecast is reduced for 2017, while the export forecast is raised. No changes are made to 2018 turkey trade forecasts. Cattle prices are raised for 2017 and first-half 2018. The hog price forecast is unchanged for 2017, but the first-quarter 2018 hog price forecast is reduced on larger slaughter hog availability. However, the annual hog price forecast remains unchanged. The 2017 and 2018 broiler price forecasts remain unchanged from the previous month. Turkey price forecasts are lowered for both 2017 and 2018 reflecting current price weakness. The 2017 egg price forecast is raised on strong fourth-quarter demand. The first-quarter 2018 egg price forecast is raised. The milk production forecast for 2017 and 2018 is lowered from the previous month on an expected slower pace of growth in milk per cow and slightly lower cow numbers. For 2017, the fat basis import forecast is lowered on recent trade data and the expectation of slower cheese imports in the fourth quarter; the forecast is raised for 2018 on higher expected shipments of whole milk powder and butter. The 2017 skim-solids basis import forecast is reduced on lower-than-expected imports of milk protein concentrates and a number of other dairy products. This weakness is expected to carry over into 2018, supporting a lower import forecast. Fat basis exports are reduced for both 2017 and 2018 on lower butter and cheese exports. Skim-solids basis export forecasts are also reduced for both 2017 and 2018 on lower expected shipments of skim milk powder and whey products. For 2017, butter, nonfat dry milk (NDM), and whey prices are lowered from the previous month, but the price forecast for cheese is raised. For 2018, all dairy product prices are lowered on large supplies and global competition. The 2017 Class III price is unchanged from last month as the decline in whey is offset by the higher cheese price. The Class IV price forecast is reduced from the previous month on lower forecast butter and NDM prices. For 2018 both the Class III and Class IV prices are lowered due to lower forecast product prices. The 2017 all milk price forecast is reduced to $17.65 to $17.75 per cwt and the 2018 price is lowered to $16.90 to $17.80 per cwt.

COTTON: This month’s 2017/18 U.S. cotton estimates include higher production and ending stocks, as a smaller crop in the West is more than offset by gains in the Southwest and other regions. While the U.S. production forecast is raised 1 percent, to 21.4 million bales, domestic mill use and exports are unchanged. U.S. ending stocks are now estimated 300,000 bales higher at 6.1 million bales and, at 34 percent, are forecast at their highest share of use since 2008/09. The marketing-year average price received by producers is forecast at 63 cents per pound, 3 cents above the October estimate, reflecting prices to date. WASDE-571-5 The 2017/18, world cotton forecasts include lower beginning stocks, higher consumption, and lower ending stocks. World production is raised 596,000 bales, as larger expected crops in China and the United States offset a 200,000-bale decline in the forecast for Australia. But world 2017/18 ending stocks are forecast 1.5 million bales lower this month—a 1.6-percent decline—as revised historical data results in a 900,000-bale decline in estimated beginning stocks. Argentina’s 740,000-bale decline in beginning stocks is accompanied by smaller declines in the estimates for Australia and Uzbekistan. World 2017/18 consumption is forecast 1.2 million bales higher than last month, with increases of 300,000-550,000 bales in the forecasts for Uzbekistan, China, and Bangladesh. World trade is forecast 180,000 bales lower as a 400,000-bale decline in expected exports by Uzbekistan is only partly offset by a 100,000-bale increase for Brazil and smaller increases elsewhere. This month, new government data resulted in upward revisions to consumption going back as much as 10 years in Argentina, Uzbekistan, and Bangladesh. With these historical revisions, world consumption over the past 3 years was raised more than 400,000 bales each year, so a large portion of this month’s increase in expected 2017/18 consumption reflects an upward shift in the historical data. Historical estimates of world trade were also reduced over the past 4 years, largely due to lower estimated Uzbek exports. Details are provided in the November 2017 issue of Cotton: World Markets and Trade https:/

The interpretations and organization of these ideas are the confidential thoughts of Markham Dossett and do not represent the opinions of Berthel Fisher & Co. Financial Services, Inc. Futures trading involves significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.



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