January USDA Report & Market Highlights

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1 January 2015 USDA Report & Market Highlights Corn Summary When the dust cleared, slightly friendly corn report with the USDA taking 2.4 bpa/191 mbu off its yield/production estimate. C/O 121 lower at bbu, some 63 mbu below the trade average. SON feed/residual use 190 mbu below implied trade estimate. Implied BOY feed/residual # according to the USDA is about 450 mbu ABOVE LY. Soybean Summary USDA production estimate very near the trade average; c/o holds steady at 410; WASDE more or less embraces CONAB s bean figure (95.5 versus 95.9); world stocks to build by over 910 mbu this year if S Am production and global use estimates hold. Wheat Summary Mixed bag as Dec. 1 stocks were above expectations but new-crop winter wheat acreage was lower than expected. Dec. 1 stocks of Bbu implied lower-than-expected feed/residual use during Sept-November, primarily HRW. No change to exports, although sales and shipments continue to lag. Carry-out for all wheat up 33 mbu, with most of that increase seen in HRW (+26 million). Newcrop winter wheat seedings were light of expectations. At 29.5 million acres, HRW seedings are forecast to be down 3% or about 1.0 million acres vs. last year. The USDA also projected a 1.0 million acre decline in SRW; 7.5 vs. 8.5, or 12%. Choppy with a focus gradually shifting to new-crop prospects both here and in other Northern Hemisphere production regions (e.g. FSU and EU). Next USDA report on February 10, 2015

2 Corn Update Ontario basis has been weakening. There was a large amount of corn trade through the Holidays which means lots of coverage out there. Some Ontario markets have pulled bids out to summer. Premium markets for high quality corn still exist but are limited. Currency has been a big deal. CDN$ has been steadily dropping which is supporting posted Ontario basis. If oil were to stop its slide and Canadian dollar leveled out or increased, we would see posted Ontario basis fall pretty quickly. As far as domestic supply and demand, there is not much news to see Ontario basis head higher. Currency is the big support today. That could change if we see domestic end users come back into the market. There seems to be lots of available corn and demand is finding what it needs. Soybean Update Old Crop The fall export programs have concluded with lakes closing but basis has not weakened as many would have expected. Despite renewed producer selling amidst the board rally in the first week of the New Year, strong crush margins continue to provide crushers the incentive to remain aggressive buyers. The weakening Canadian dollar has also lent strong support to Canadian basis levels. What today is a $1.35 house basis level would have been $0.80 on December 1 st, 2014 all else being equal with the exception of the dollar. Today s dollar is approximately 0.84 compared to 0.88 on December 1 st. The market is providing some very good selling opportunities ahead of what is expected to be another record South American crop. New Crop It seems the flip of the calendar has also sparked interest in new crop activity. New crop basis levels have firmed in the New Year as exporters turn their attention more to next year s programs. Some early overseas buying activity has a few looking to cover in some of their early sales and lock away early profits. Like old crop, it seems the market is providing some good opportunities to lock in some strong values ahead of South America harvest. Wheat Update Soft red basis has remained firm over the past month. End users are basically covered into JFM and are getting coverage into AM. There was quite a bit of farm wheat that came out of the woodwork during the last Chicago rally so end users were able to get some wheat bought. Soft white remains very strong and will continue to be strong into new crop. We ve seen a bit of farmer selling off farm but there doesn t seem to be much left in the province to merchandise. Some PNW (Pacific North West) wheat has been bought by the Michigan mills but the preference is still eastern. With the drop in Chicago over the past week wheat has been very quiet.

3 Corn Trade was leaning the wrong way on yield this morning, expecting the USDA to boost its number by 1/10; instead, the government went the other way and trimmed 2.4 bpa for its November estimate, to Makes the early fall yield euphoria somewhat suspect; With no measurable change in harvested acreage, production declined by 191 mbu to ; Carry-out, on the other hand, dropped by only 121 million to bbu; On the demand side; o The USDA took feed/residual down 100 mbu, consistent with the lower production figure and the perhaps unnoticed was the fact that SON use WAS down about 200 mbu from a year ago and BELOW the implied trade estimate by a like amount; o Strong 1 st quarter ethanol grind led to a 50 mbu boost in the annual estimate; now at bbu; o No change in the export forecast, despite some rather disappointing weekly inspections of late; Carry-out reduced 121 mbu as above; USDA upped its forecast for expected producer prices, from $3.20-$3.80 LM, to $3.35-$3.95 this month Producers held 63.3% of the Dec 1 stx total TY, against 61% LY. The WCB had a 10.3% stx increase, accounting for 2/3rds of the year to year gain. Sorghum Fairly substantial changes here (opinion) Harvested area up 200,000 acres; Yield increased 1.5 bpa to 67.6; Production, 25 million greater at 433 mbu; Demand o Feed/residual up 25, the residual element; o FSI, down 35 and now 25 below 13/14; o Exports, up 40 to 270, not unexpected given the pace of sales; Carry-out 5 lower at 32 mbu Note the USDA acknowledged milo s premium to corn, boosting its average farm price range by 30 cents, to $3.50- $4.10 per bushel Soybeans Harvested acres reduced 300,000; planted area down ½ million to 83.7; A larger offset was a 3/10 s of a bushel boost to yields, now at 47.8 bpa; Production up 11 million; Dec 1 stocks at 2.524, 84 mbu below the average trade estimate; Exports raised by 10, to bbu; Crush unchanged at 1.78 bbu; Carry-out unchanged at 410; trade was thinking 402; Price range: $9.45-$10.95, up 45 cents on the low end; nickel lower on the high side; No change in domestic meal use forecast; No change in crush as noted but meal production up 15 K ST on higher yield o Meal exports continue at 12.8 MST (11.55 LY); o Domestic use increased 100 K ST to 30.2 (24.95 LY); o Meal price range continues in the $340-$380 range ($ LY); Oil yield reduced, estimated production falls 125 million pounds;

4 Domestic use revised 100 mil lbs lower to million, all due to lower biodiesel use; Ending stocks reduced by 25 million, to 1.43 billion (1.165 LY); Expected Decatur crude SBO price was reduced a penny, $.31-$.35 and versus $.3823 in 13/14. Producers have proportionately more beans to move off the farm 48.3% of this year s Dec 1 stocks against 44.3% LY WHEAT No changes to 2014 production estimates with total supply steady compared to December at Bbu; Feed/residual usage reduced 30 mbu due to lower-than-expected disappearance in Sept-Nov; Seed use lowered 2 mbu reflecting lower-than-expected 2015 winter wheat acreage; Carryout for 14/15 of all wheat increased 33 mbu to 687 million, which was 24 million above the average trade guess of 663 but within the range of ; Avg. farm price forecast range increased a dime: $5.90-$6.30 vs. $5.80-$6.20 in December; stocks-to-use at 32.6% compared to 30.5% in Dec. and 24.3% last year U.S. Supply/Demand by Class 14/15 Hard Red Winter o Domestic use declines 25 mbu with the majority of fueled by a reduction in feed/residual use to lowerthan-expected Sept-Nov disappearance; o Exports steady at 305 million, which is down 32% vs. 13/14; o Carryout for 14/15 increased 26 million to 253 mbu vs /14; o Stocks-to-use for 14/15 pegged at 34.5% vs. 27.2% for 13/14 Soft Red Winter o Domestic use reduced 8 mbu due to a combination of lower-than-expected feed/residual usage and a small reduction in seed; o Export forecast is unchanged at 155 mbu (vs. 283 last year); o Ending stocks for 14/15 up 8 mbu to 170 million vs. 113 for 13/14; o Stocks-to-use for 14/15 pegged at 41.2% vs. 18.8% for 13/14 Hard Red Spring o Domestic use up 2 mbu compared to December; o No change to exports--285 mbu vs. 246 last year; o Carryout for 14/15 down 2 million to 210 mbu vs. 169 a year ago; o Stocks-to-use for 14/15 pegged at 35.3% vs. 30.0% for 13/14 U.S. December 1 Grain Stocks o Pending final totals for food/seed use and exports, implied feed/residual usage during Sept-Nov was approximately -101 mbu vs last year U.S. Winter Wheat Seedings Hard Red Winter o 29.5 myn acres, which is 3% lower vs. a year ago. o Comparisons to 2014: KS, -200; OK, -200; TX, -100; MT, -200; NE, +150; S Dakota, +270; and CO, Soft Red Winter o 7.5 myn acres, which is down 12% vs. last year. o Comparisons to 2014: MO, -230; OH, -80; IL, -190; IN, -30; MS, -80; and AR, -75.

5 World Coarse Grains/Corn Ending world coarse grain stocks revised 3.3 MMT lower to (LY, down.7 to 208.8); U.S. accounting for nearly 3.0 MMT of the above reduction; Corn stx 3 MMT lower at (172.2 LY); USDA accounting for all of the reduction; Other than a 370 K MT increase in EU corn production, really no overseas adjustments this month; EU crop now 9.7 MMT above LY; imports raised 1 MMT TM to 7.0 (15.9 LY); No change in the USDA s S Am production estimates with Argentina remaining at 22.0 and Brazil, Exports likewise unchanged at 12.0 (16.0 LY) and 19.5 (21.5 LY). Note Ukraine s production/export forecast remains at 27.0and 16.5 (30.9/20.0 LY); USDA adds another 1 MMT to its 14/15 foreign wheat feeding estimate: now up 11.2 MMT at 135.3; FWIW: foreign corn exports steady at 68.9 MMT, or 13.0 MMT (510 mbu LESS than in 13/14). Soybeans/Meal Brazil sb production forecast raised 1 ½ MMT to 95.5 (86.7 LY); Argentina stays at 55.0 (54.0); Paraguay also steady at 8.5 (8.2 LY); Only minor changes WRT foreign exports, basically unchanged a 68.3 (68.0 LY); China import estimate continues at 74.0; Note USDA raises foreign SBM use 450 K MT to 168.2, now up nearly 9.3 MMT (5.8% increase over LY) Ending stx rise 900 K MT to 90.8; that s a 24.6 MMT/905 mbu/37% increase from 13/14!! WHEAT World production for 14/15 pegged at a record MMT, up 1.2 vs. Dec. No change in Australia production at 24.0 with exports also steady at 17.5; EU production increased 110,000 MT to MMT but exports were boosted 1.0 MMT to 30.0 (31.9 LY); FSU-12 production steady at MMT, but exports lowered 1.1 MMT to The updated forecast is still almost 2% above last year; No change to Canada s production estimate (29.3 MMT) but exports increased 500,000 MT to 23.0 (vs a year ago); Argentina crop size also unchanged at 12.0 MMT with exports steady at 6.0; World ending stocks for 14/15 increased 1.1 MMT to Ending stock-to-use ratio for 14/15 is projected at 27.5% vs. 27.4% in December and 26.4% last year.

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