Grain marketing commentary
Agriculture Business Specialist
University of Missouri Extension
October 18, 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
Last week FSA released the ACR-CO payments for 2015 and the county yields. I have a web page just on the ACR-CO and PLC payments at the following link. I also have tables on the PLC projected and final payments and the ARC-CO final and projected payments for Southeast Missouri Counties.
Price Loss Coverage (PLC) & Agriculture Risk Coverage (ARC) Payments
Final 2014 and 2015 ARC-CO payments for SEMO counties (PDF)
USDA Monthly Report Highlights and Supply and Demand Tables
Last Wednesday USDA released their monthly supply and demand report. I would call the report neutral as many of the numbers came close to the pre-report estimates. The number everyone was watching was the corn yield and it was cut 1.0 bushel/acre to 173.4 bushels/acre just 0.1 below the trade estimate. Some believe the yield may come down another bushel or two in future reports, but past history does not support it. Harvested acres were watched carefully. The pre-report estimate was a 200,000 acre increase to 86.75 million acres and the actual was very close at 87.8 million acres. Ending stocks were cut 65 million bushels from last month to 2.32 billion bushels. Exports were increased 50 million bushels and total supply was cut 15 million bushels.
For right now, we are looking at a big crop with plenty of supply to meet the demand. In South America there does not seem to be any major problems with their corn crop. There are areas that are too wet or too dry, but nothing yet to impact production.
Technically, December futures have broken out of the $3.28 - $3.42 trading range with the technical price target at $3.70. The 200 day moving average is presently at $3.72. Also, since futures prices have moved above the major moving averages, except the 200 day, we may have put in our seasonal fall low and prices could trade sideways to higher for the rest of the year. From a fundamental standpoint, it is difficult to make a strong case of December futures trading above $3.70 to $3.80 with our lager ending stocks. I would recommend using rallies to lock in the futures and target cash sales in the December to February time frame to pick up the seasonal bounce in basis.
Just as in corn, there were no major surprises in the USDA supply and demand report. The most watched number was the soybean yield at it came in at 51.4 bushels/acre up 0.9 bushels from last month but in line with the trade estimate. Ending stocks were increased 30 million bushels to 396 million but it was 18 million less that the trade guess. Exports were increased 40 million bushels and total supply was increased 70 million bushels.
With ending stocks approaching 400 million bushels, this will continue to keep a lid on prices. Just as in corn, there are no major production problems in South American at this time. It is still very early and December through February is the major production period for the early planted crops.
We did get a nice bounce after the report but I think it came more from relief that the soybean yield was not increased more and strength from the soybean oil market which reflects smaller palm oil production. We need to keep watch on the soybean oil market and it how it can help soybean prices. Exports continue to be strong and that will also help keep good price support under the market.
Technically, November futures are in a trading range between $9.35 and $9.95. Several of the moving averages I follow are converging at $9.75 to $9.77 and a breakout at this price will open the door to $9.95 and possibly $10.20. From a fundamental supply and demand standpoint it is difficult to see prices going significantly higher without South American production problems. Just as in corn, I would use storage to take advantage of better basis in December to February.
No major surprises in the wheat supply and demand report. Ending stocks were increased 38 million bushels to 1.138 billion bushes. The increase in ending stocks came from a 70 million bushel cut in wheat feeding and 25 million bushel increase in exports. Growing wheat stocks will continue to pressure prices.
Technically, July 2017 wheat futures have broken out of the $4.33 to $4.50 trading range and is presently at $4.64. Also futures prices have broken above the major moving averages I follow except the 200 day moving average at $5.05. If prices can hold their present price strength and especially at the 50 day moving average at $4.57, that would open the technical upside target of $4.80 to $4.85.
It is looking more and more that corn, soybeans, rice and now wheat are putting in a technical price bottom. Prices have not been able to break below the old lows and prices are beginning to move above the major moving averages which have been price resistance for many months. It is still going to take some positive fundamental news for a significant rally, but it does give some indications we have put in a fall low and may lead to some better prices for next few months.
In the USDA report last week, new crop cotton exports were increased 0.5 million bales and ending stocks were cut 0.60 million bales to 4.3 million. World ending stocks were cut for the 2016-17 marketing year 2.5 million bales to 87.25.
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 between 67 and 72 cents. Just as in the other commodities, cotton is trying to close and stay above the major moving averages. The next key resistance level is 76 cents.
In the USDA report, rice ending stock were increased 1.9 million cwt. Exports were cut 3.0 million and imports were cut 1.1 million. World ending stocks for 2016-17 were increased 5.1 million metric tons to 120.7.
For cash rice quotes, contact your rice buyer to get the most current price quotes and cash price outlook.
Technically, November rice futures have rallied even with the negative fundamentals. Price support is at $10.00 and resistance at $10.60. As I have mentioned in all our commodities, it will be important for prices to stay above the major moving averages to maintain the price rally.