Grain marketing commentary

David Reinbott
Agriculture Business Specialist
University of Missouri Extension
573-545-3516
reinbottd@missouri.edu
 

May 30, 2016

 

Estimated PLC and ARC-County payments
http://extension.missouri.edu/scott/PLC-Payments.aspx
 

Monthly USDA Key Statistics

http://extension.missouri.edu/scott/USDA-Report.aspx 

Supply and Demand Tables

http://extension.missouri.edu/scott/USDA-BS.aspx 

2016-17 Ending Stocks Projections

http://extension.missouri.edu/scott/SDTables.aspx 

Corn

Corn prices have rallied on a smaller South American corn crop, good exports, good demand projections for the 2016-17 crop, and the heighten risk of summer weather not being favorable to trend line yields.  

In USDA’s 2016-17 supply and demand estimates on May 10, ending stocks were projected at 2.15 billion bushels and a season average price of $3.35.  This was based on their calculated trend line yield of 168 bushels per acre and 93.6 million planted acres. If acres are trimmed 1.0 million with a linear trend line yield of 166.2 bu/ac., ending stocks would be in the 1.8 -1.9 billion bushel range.    

If yields are trimmed 5% off trend line to 160 bushels/acre, ending stocks would fall to 1.3 billion bushels and a stocks to use ratio of 9.2%.  This would project a season average price above $4.00.  It would also mean corn prices could easily spike back to last summer’s higher of $4.46 based on the December 2016 futures contract.  On the under hand if we get summer weather that produces trend line yields or if the hotter and drier weather comes in August and September as some weather experts are forecasting, season average prices will be in the $3.35 - $3.75 price range.  Weather the next 6 – 8 weeks will determine if corn prices average $4.50 or $3.50. 

Technically, December futures has near term resistance at $4.20 and $4.46.  From the continuation chart, the next resistance is in the $4.60 - $4.90 price range.  The first major support is at the 200 day moving average at $3.93 and then at $3.75.  

For several months I have been recommending focusing the majority of the new crop sales into the summer months because of the heighten weather risk this summer.  However, with harvest cash prices around $4.10 and $4.30 in November and December, a farmer needs to determine his risk tolerance and cash flow needs.  A plan is needed to take advantage of possible price spikes this summer but also establish a price floor if and when prices move lower. 

Soybeans 

Soybeans have rallied on good exports, a smaller crop out of South America which has fueled the rally in soybean meal, and a very bullish demand outlook for the 2016-17 crop.  In USDA’s first official supply and demand projections for 2016-17, ending stocks were projected at 305 million bushels and a mid-point season average price of $9.10.  If planted acres come in 1.0 million more at 83.2 million and with a modest drop in yield to 45 bu./ac, ending stocks fall to a very snug 200 million bushels and season average price over $11.00.    

Technically, November futures has modest support at $10.20 and resistance at $10.80.  The next resistance level is at $12.00 and support level at $9.60.  Just as in corn, summer weather will determine price direction.  Going forward, I still like the idea of focusing the majority of sales in the summer months on potential weather allies.  However, with fall and winter cash prices in the $10.60 to $10.80 range, a farmer needs to determine his risk tolerance and cash flow needs to have a plan to take advantage of possible price spikes this summer but also establish a price floor if and when prices move lower.  

 Wheat 

Wheat prices continue to be pressured by big stocks in the U.S. and world.  Wheat prices have rallied on questions of the hard red winter yields due to disease and the unwinding of spreads. 

Technically, July wheat futures are in a trading range of $4.55 to $4.85.  The 200 day moving average is at $4.90 and will be strong resistant.  If the opportunity to make some cash sales $4.95 or greater, a farmer should take advantage of it.  

Cotton

New crop ending stocks are projected at 4.7 million bales compared to 4.0 million last year.  However, world ending stocks are projected to be lower for the second year in a row at 96.5 million bales. 

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 futures has near term support at 60 cents and resistance at 63.5 cents.  The next resistance levels are in the 65 to 66 cent price range.  As I recommended for the other commodities, I would focus the majority of sales more in the growing season as we get a better idea on acres and yields.

Rice 

New crop ending stocks are projected at 50.4 million cwt. compared to 43.3 million last year.  World ending stocks are projected to be unchanged from last year at 106.6 million cwt. 

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

Technically, November rice futures have tumbled from their recent highs of $12.50.  Support is in the $10.80 to $11.00 range.    The next resistance levels are at $13.00 to $13.50 range.