Grain marketing commentary
Agriculture Business Specialist
University of Missouri Extension
November 23, 2016
University of Missouri Extension Upcoming Meetings
Corn Meeting - December 7, 2016 at the Miner Convention Center
Soybean Meeting – January 18, 2017 at the Miner Convention Center
USDA Reports and Supply & Demand Tables
As we move past the election and the November 10 USDA report, I will be watching exports, South America weather and growing conditions, U.S. weather and planted acres for 2017. Exports should be strong for the next several months. The short South American corn crop from the past growing season should give us some good export opportunities. From December 1 to March 1 is our normal seasonal pattern for positive returns on storage from basis improvement. I would expect it to be the same this season.
The South America weather is a mixed bag so far this year. Many areas are on the dry side which has slowed planting. However, most longer term forecasts are indicating the weather should be OK for a normal production year. A rebound in production will put pressure on new crop prices.
Looking ahead to 2017, many are expecting a 2 – 4 million acre drop in corn plantings. This past year we planted 94.1 and harvested 86.6 million acres. If acres are down 2 million with steady demand and a trend line yield at 168, ending stocks would fall 400 million bushels to 2.0 billion bushels. That projects to a season average price in the $3.58 to $4.12 range. A 4.0 million drop in acres with trend line yields and steady demand drops ending stocks to 1.7 billion bushels and a season average price in the $3.69 to $4.23 range. This gives a little bit of optimism if yields come back closer to trend line and the opportunity to forward price new crop corn over $4.00.
Technically, March futures has support at $3.43 and resistance at $3.70 and for the new crop December futures, the trading range is $3.75 to $3.95. Prices could easily move 10 cents above or below these price ranges on export news, South American production and planted acres for 2017.
Soybean production and yield for 2016 will be a record at 4.36 billion bushels and 52.5 bushels/acre. Ending stocks are projected at 480 million bushels, the third largest since 1979.
For the 2017 crop, acres are projected to increase 2 – 4 million acres. A 2 million acre increase to 85.7 million with a trend line yield of 48.0 bushels per acre and steady demand will still increase ending stocks by more than 60 million bushels to 545 million bushels. This projects to a season average price range of $8.89 to $10.93 per bushel. If acres are increased 4 million to 87.7 million, ending stocks jump to 640 million and a season price range of $8.80 to $10.84. To get ending stocks below 300 million bushels, the average yield will need to drop 5% to 44.0 bushels/acre.
Unless we have production problems in South America, it is going to be difficult to sustain any significant price rallies. A farmer needs to be aggressive in selling both old crop and new crop soybeans. The ending stocks for the 2016 crop may get trimmed some due to the good exports, but still will be large.
Technically, January futures is back to the top of the price range of $10.34. The next price target is at the 50% retracement at $10.60. Price support is at $9.80. For the November futures, prices are getting close to the summer high of $10.22. Price support is at $9.80. As I just mentioned earlier, with the big ending stocks for this year’s and next year’s crops, a farmer needs to be aggressive in making some sales.
Wheat prices will continue to be under pressure due to the large ending stocks in the United States and the World. For the 2016-17 crop, wheat ending stocks are projected to be 1.1 billion bushels. FAPRI’s projection for the 2017-18 crop is for ending stocks to remain over 1.0 billion bushels. The key in all our commodities will be production and specifically the impact of weather.
Technically, July 2017 futures continues to trade in a $4.40 and $4.70 price range. Prices will continue to trade in a sideways trading range until there is a major change in the supply and/or demand outlook.
Cotton stocks in the U.S. continue to trend higher, however world ending are coming down some. The smaller ending stocks has help support prices.
It is important for a cotton producer to remain in close contact with his cotton buyer to get the most current price quotes.
Technically, March 2017 cotton futures are at the top of trading range at 73 cents with the next resistance level at 78 cents. Support is at 68 cents. If you are looking to make some old crop sales, this may not be a bad place to make some sales. For the December 2017 futures, is close to the top of the trading range at 71 cents and support is at 68 cents.
Rice prices are under pressure like most of our commodities based on big ending stocks in the U.S. and the World.
For cash rice quotes, contact your rice buyer to get the most current price quotes and cash price outlook.
Technically, January rice futures has miner support at $9.40 and resistance at $10.20. If you go back over the past 10 years, $9.20 is a key price support level that needs to hold.