Grain marketing commentary
Agriculture Business Specialist
University of Missouri Extension
September 15, 2014
No major surprises in the September 11th USDA supply and demand report. Most of the U.S. and world production and ending stocks estimates were within the trade ranges. The reports confirmed big crops and prices will continue to be under pressure without any production disruptions.
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 September 11, Supply and Demand Report can be found at the following link: http://extension.missouri.edu/scott/USDA-Report.aspx
In the September 11 report, the new crop corn yield estimate came in a little higher than the pre-trade estimate. The trade guess was 170.7 bushels per acre and the USDA’s estimate was 171.7. Many in the trade believe this yield projection is still too low based on the good growing conditions this year, and USDA will increase the yield in future reports into the 173 – 175 bushel range.
The old crop 2013-14 ending stocks were left unchanged, but the new crop ending stocks were bumped up 193 million bushels to 2.002 billion bushels. This was 10 million less than the trade guess. Production was increased 363 million bushels due to the bump in the corn yield. Use went up 170 million bushels with increases of 75 million bushels in feed, 70 million in Food, Seed, & Industry (50 million in ethanol), and 25 million in exports. The season average price was cut 40 cents from $3.90 to $3.50.
Old crop world ending stocks were increased almost 2.0 mmt to 173.08 million metric tons (mmt). Argentina’s production was increased 1.0 mmt to 25.0 mmt, and Brazil’s production was increased 1.3 mmt to 79.3. New crop world ending stocks were increased from last month’s 187.82 mmt to 189.91 mmt. Even with the increase, there were some production cuts including Argentina 3.0 mmt, China 5.0 mmt and Ukraine 1.0 mmt.
Technically, December corn futures continue to move lower with price support at $3.30 and $3.00.
At this time, I do not see anything that will change the direction of the corn market in the near term. FSA is to release some of their acreage numbers on Tuesday, September 16, but I am not sure how much that will help. No major freeze over the weekend, so we have dodged that bullet for now. Some believe USDA will have to adjust corn acreage downward in future reports as much as 2.0 million acres. Using the present USDA projections of yield and Use, ending stocks would fall to 1.84 billion with a 1.0 million acre cut and 1.683 million bushels with a 2.0 million acre cut. Both numbers still imply we have plenty of corn.
For corn that you need to sell at harvest, I would still recommend locking in the basis or a flat price. The historical seasonal trend is for prices to bottom in mid-October. If you want to re-own some previous sales, this could be the time to do it with futures or call options.
Old crop ending stocks were trimmed 10 million bushels to 130 million bushels, with a 5 million bushel increase in crush and exports. For the new crop 2014-15, the yield was increased 1.2 bushels to 46.6 bushels/acre. The trade guess was 46.3. Production was increased 97 million bushels due to the higher yield and demand was increased 42 million bushels. Crush was increased 15 million bushels, F/S/I 3 million, and exports 25 million. Ending stocks were increased 45 million to 475 million bushels.
New crop world ending stocks were increased 4.55 mmt to 90.17 mmt. Argentina’s soybean production is projected to increase 1.0 mmt to 55.0 mmt and Brazil’s production to increase 3.0 mmt to 94.0 mmt. From last month’s estimate.
Technically, November futures continue to trend lower. The next major support level is at $9.00. With growing world ending stocks, it is going to be hard to get much of a rally unless we have production problems in South America this winter or a drought in the United States next summer. For soybeans that you need to sell at harvest, I would still recommend locking in the basis or a flat price.
For the 2014-15 crop, imports were increased 10 million bushels. Exports were cut 25 million bushels and ending stocks were increased 35 million bushels to 698 million. The national average price was lowered 40 cents to $5.90.
World ending stocks for both the old and new crop were increased 2.8 and 3.4 mmt, restrictively. For 2014-15, EU’s production was increased 3.0 mmt and the FSU-12 was increased 2.0 mmt.
Technically, December futures continues to trend lower with the next support level around $4.40. For July 2015, price support is at $5.00 and $4.25. Just like all our commodities, the price outlook is not good, unless we have a major production problem somewhere in the world. Seasonally, October is one of the best months to make new crop sales. New crop wheat can be booked for around $5.20/bushel. Many think wheat acres will be down for this coming year. That may be true, but with larger world stocks it will limit price rallies.
Cotton ending stocks for 2014-15 were cut 400,000 bales to 5.2 million bales. Beginning stocks were cut 150,000 bales to 2.45 million. Planted and harvested acres were both cut 360,000 acres, and production was decreased 1.0 million bales to 16.5. Total demand was decreased 0.7 million. 2014-15 world ending stocks were increased 1.21 million bales to 106.3 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, December cotton futures are in a trading range of 62 and 69 cents. Some of the cotton experts believe we have a shot at 72 cents and that would be their target for more sales.
Both old crop and new crop ending stocks were cut in this report. 2013-14 ending stocks were cut 1.0 million to 31.8. This was based on a 1.9 million increase in domestic Use and 0.8 million cut in exports. For 2014-15, both planted and harvested acres were trimmed 120,000 acres and the yield cut 59 pounds per acre. Total supply was cut 11.5 million with cuts of 3.0 million in domestic use, and 7.0 million in exports. The bottom line, ending stocks were cut 1.5 million to 38.1. 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, November futures has support at $12.20 and resistance at $13.00.
If you are willing to take some risk, I would see if prices can rally over $13.00 before you make any additional sales. I would keep a trailing stop 30 – 40 cents below the futures in case prices turn lower.