Grain marketing commentary
Agriculture Business Specialist
University of Missouri Extension
April 20, 2015
Highlights from the April 9, 2015 USDA supply and demand report are at the following link: http://extension.missouri.edu/scott/USDA-Report.aspx
2015-16 Supply and Demand Projections: http://extension.missouri.edu/scott/S&DTables.aspx
No major surprises in the April 9, 2015 USDA supply and demand report. The feed and residual was cut 50 million bushels to 5.250 billion bushels and ending stocks were increased the same amount to 1.827 billion bushels. Due to increased animal numbers, USDA may add back feed bushels in future reports.
USDA will release their first new crop supply and demand estimates in the May 12 report. At 89.2 million planted acres, trend line yield of 164 bushels/acre, and a modest bump in demand to 13.74 billion bushels, ending stocks fall to 1.50 billion bushels. This should give a season average corn price in the $4.25 - $4.50 price range. However, if the yield is closer to 166 bu/ac ending stocks drop only 200 million bushels to 1.67 billion bushels. Based on USDA’s history of projecting trend line yields, I would expect the May 12 estimate in the 166 – 168 bu/ac range. Planted acres could slip 500,000 to 1 million acres depending upon rainfall over the next few weeks. Click here for new crop supply and demand tables.
Technically, futures may have moved into a sideways trading range until we get a better idea on acres and yield. For May, price support is at $3.70 with resistance at the 200-day moving average line at $3.89. The top of the trading range is at $3.98. For December futures, support is at $3.95 with resistance at the 200-day moving average at $4.10 and the top of the trading range at $4.20. For old crop sales, use rallies back to $3.89 or higher. For new crop sales that need to be made at harvest, I would suggest using the price target of $4.20.
In the report, ending stocks were projected at 370 million bushels. This was based on a 20 million bushel increase in seed and residual. With planted acres projected at 84.6 million, trend line yield of 44.6 bushels/ac, and no change in demand at 3.7 billion bushels, ending stocks would increase 30 million bushels to 398 million bushels. However, if acres are increased 1 million to 85.6 million with no change in yield, and a modest bump in demand, ending stocks jump to 416 million bushels. To get ending stocks below 300 million bushels, national average yield needs to be under 42 bushels/acre compared to this past year’s yield of 47.8. However, depending up on rainfall and planting progress of corn over the next few weeks, soybean acres could still go up additional 1 – 2 million acres. At 86.6 million acres, ending stocks are over 450 million bushels.
Technically, soybean futures are in a sideways trading range. The May futures has support at $9.48 and resistance at the 50-day moving average at $9.83. For November futures, support is at $9.36 and resistance is at the 50-day moving average line at $9.65 and then at the top of the range at $9.80. At this time, rallies will be shorted lived due to the prospects of more acres and increasing ending stocks. Because of the negative price outlook going forward, I would use any rallies to finish up old crop sales. If you are needing to make new crop sales, I would use any rallies above $9.70.
Wheat ending stocks were down slightly to 684 million bushels. Exports and imports were cut 10 and 15 million bushels, respectively and feed was increased 10 million bushels to 160 million. For this year’s wheat crop, using trend line yields and a modest increase in demand, ending stocks will increase to 760 million bushels. This would put the national average price in the $5.00 to $5.50 range.
Technically, July futures are trying to find support at $4.85. Prices are over sold and due for at least a small bounce. Resistance is at $5.15 to $5.20 where many of the moving averages are converging and the next resistance is at $5.40. The rains in the southern plains have put pressure on prices. If you need to make new crop sales, use rallies back above $5.20.
In the USDA report, cotton yields were increased 11 pounds to 806 pounds/acre. This resulted in ending stocks increasing 0.2 million bales to 4.4 million.
For the new crop, using the March 31 estimate of 9.549 million acres, a trend line yield of 800 pounds/acre, and demand at 14.3 million bales, ending stocks would decrease to 3.63 million bales. Back in February the National Cotton Council projected planted acres at 9.43 million acres and the USDA Ag Forum 9.7 million.
It is important for a cotton producer to remain in close contact with his cotton buyer to get the most current price quotes.
Technically, May and December futures peaked in the 66 – 67 price range and have pulled back into the 63 cent level. I would wait for rallies back into the 66 to 67 cents price range before I would make additional sales.
Rice ending stocks were increased 1.5 million cwt to 42.5. This was based on imports increased 0.5, domestic use cut 2.0, and exports were increased 1.0 million cwt.
Using University of Missouri FAPRI projections of 2.92 million planted acres, trend line yield, and modest increase in demand, ending stocks would be down slightly to 40.0 million cwt.
For cash rice quotes, contact your rice buyer to get the most current price quotes and cash price outlook.
Technically, May and September futures are broke nearby support levels after the March 31 report. May is trying to find support at $9.83 and September at $10.27. Unless you need to make sales, I would wait and see if we can get a rebound off these lows. It is still possible we can get a rally if there are extended planting delays or fewer acres from the excessive rainfall.