Grain marketing commentary

David Reinbott
Agriculture Business Specialist
University of Missouri Extension

August 12, 2014

The biggest surprise in the August USDA supply and demand report was the new crop corn yield.  Most of the other U.S. and world production and ending stocks estimates were within the trade ranges.  However, prices continued to be pressured by good growing weather and anticipation of higher production estimates in future reports. 

Supply and demand tables for corn, soybeans, and wheat can be found at the following link: http://extension.missouri.edu/scott/S&DTables.aspx

Update of the USDA August 12, Supply and Demand Report can be found at the following link:  http://extension.missouri.edu/scott/USDA-Report.aspx

Corn

In the August 12 report, the most anticipated number was USDA’s new crop corn yield estimate.  The trade guess was170.2 bushels per acre a 5 bushel increase from the July report.  However, USDA projected a much smaller increase of 167.4 bushels/acre.  Most in the trade believe this yield projection is too low based on the good growing conditions this year and USDA will increase the yield in future reports into the 170 – 175 bushel range.

In the 2013-14 balance sheet, ending stocks were decreased 65 million bushels from July to 1.181 billion bushels.  Corn used for ethanol was increased again this month by 45 million bushels and exports were increased 20 million bushels.   

For the 2014-15 crop, ending stocks were increased only 7 million bushels to 1.808 billion and the trade estimate was 2.0 billion.  Production was increased 172 million bushels due to the bump in corn yield.  Use went up 100 million bushels with increases of 50 million in feed, 25 million in ethanol, and 25 million in exports. 

Old crop world ending stocks were cut from last month’s 173.4 million metric tons (mmt) to 171.09 mmt.  New crop stocks were cut from 188.05 mmt to 187.82 mmt. 

Technically, December corn futures has initial support at $3.60.  There is a possibility of a minor rally due to the smaller than anticipated corn yield but I do not see a rally much above $3.90 at this time.  If prices break $3.60, a fall to $3.30 is possible.  For corn that you need to sell at harvest I would recommend locking in the basis or a flat price.  Seasonally we often get a rally from the August report into to the first week of September.  One strategy is to lock in the basis now and use any rally to lock in the futures.

Soybeans

USDA made minor changes to imports and Use for the 2012-13 and 2013-14 crops, but the ending stocks remained unchanged.  For the new crop 2014-15, the yield was increased 0.2 bushels to 45.2 bushels/acre.  Production was increased 15 million bushels and with no changes to demand, the ending were raised the same amount to 430 million bushels. World ending stocks had only minor changes. 

Technically, November futures has support at $10.60.  If this price support is broken, the next support levels are at $10.00 and $9.00.   Resistance is at $11.20 with the next resistance at the 200 day moving average at $11.60.  I would use any bounce above $11.00 to make more new crop sales.  Prices will probably continue to move lower unless we get some adverse weather.

Wheat

Wheat production for the 2014-15 was increased 38 million bushels.  Wheat yield was increased 0.8 bushels to 43.9 bushels/acre.   Demand was increased 35 million bushels based on a 10 million bushel increase in feed and 25 million bushel increase in exports.  Ending stocks were up 3 million to 663 million bushels.

World ending stocks for 2014-15 were increased 3.42 million from last month to 192.96 mmt.  China’s production was increased 2 mmt to 126 mmt.  Russia’s production was increased 6 mmt and the Ukraine 1 mmt.

Technically, December futures has support at $5.40 and resistance at $5.90.  Next major support is at $4.50.

Cotton

Cotton ending stocks for 2014-15 were increased 400,000 bales to 5.6 million.  Beginning stocks were cut 100,000 bales to 2.6 million.  Harvested acres were increased 540,000 to 10.24 million due to less abandoned acres. Production was increased 1.0 million.  Total demand was increased 0.5 million and the net result ending stocks were increased 0.4 million to 5.60 million bales.  World ending stocks had only minor changes. 

It is important for a cotton producer to remain in close contact with his cotton buyer to get the most current price quotes.

Technically, December cotton futures are in a trading range of 62 and 69 cents.  Next major support level is at 57 cents.

Rice

Rice ending stocks for 2014-15 were cut 0.2 million cwt to 39.6 cwt.    The yield was increased 91 pounds to 7,560 pound per acre.  Production was increased 2.8 million to 228.8 million cwt.  Total demand was increased 3.0 million cwt to 243.0 million cwt. World ending stocks had only minor changes. 

For cash rice quotes, contact your rice buyer to get the most current price quotes and cash price outlook.  

Technically, September futures continue to trend lower with minor support at $12.65.  The next major support level based on the weekly charts is $10.00.