Grain marketing commentary
Agriculture Business Specialist
University of Missouri Extension
March 25, 2015
The March supply and demand tables for corn, soybeans, and wheat can be found at the following link:
Highlights from the March USDA WASDE Report can be found at the following link:
On March 31, USDA will release their quarterly grain stocks and prospective plantings reports. The report that will initially get the most attention will be the prospective plantings. Most planted acre guesses are in the 88 – 89 million acre range. This past year we planted 90.6 million acres. If planted acres are 89 million, trend line yield of 164 bushels/acre, and a modest bump in demand to 13.83 billion bushels, ending stocks would fall 500 million bushels to 1.24 billion. This gives a season average corn price in the $4.00 - $4.50 price range or a little higher. However, if we bump up the yield to 166 bu/ac and drop the demand to unchanged from last year, ending stocks drop only 100 million to 1.61 billion bushels. This would pull the price range down 30 or more cents. This is why corn prices for this coming marketing season has a more bullish outlook compared to soybeans because of the fewer acres, steady to improving demand, and if yields are closer to trend line.
Technically, the 200-day moving average is the next major price resistance on the charts. For May, a close above $3.95 opens the door for a run up to $4.15 and last December’s high of $4.25. Support is at $3.85. For December, prices are bumping up against the 200-day moving average at $4.14 and the next price targets are at $4.20, $4.30 and December’s high of $4.40. However, for prices to rally up to these price levels we need some bullish fundamentals such as planting delays, less acres and/or smaller stocks reported in the March 31 report, or a cut in the South America crop due to adverse weather. Also the weaker dollar the past week or so has given some hope that exports will stay strong. Use the above mentioned price targets for any old crop sales. For new crop sales that need to be made at harvest, I would suggest using the $4.30 and $4.40 price range.
The supply and demand tables are not as friendly to new crop soybeans as they were for corn. There is a wide range of opinions on soybean acres this year from 83.5 million to 88 million acres. This past year planted acres were 83.7 million acres. If planted acres are 86 million, trend line yield of 44.4 bushels/ac, and no change in demand at 3.7 billion bushels, ending stocks would increase 100 million bushels to 488 million bushels. However, if acres are closer to 88 million with no change in yield or demand, ending stocks jump to 576 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. Marketing year price estimates range from a high of $9.75 to a low of $8.00 and probably lower. Recent production estimates have trimmed South America production. However production is still estimated to be 10 million metric tons (mmt) greater than last year at 165 mmt.
Technically, the soybean charts are running into price resistance at $9.90 in the May chart and $9.70 in the November chart. If prices can close above these levels, then the next price targets are $10.40 in the May futures and $10.05 in the November. If November prices do break $10.05, there is quite a bit of price resistance in the $10.20 to $10.50 price range. Because of the negative price outlook going forward, I would use any rallies to finish up old crop sales. For new crop, I would use any rallies close to $10.00 to make some sales.
The big story in wheat is the condition of the winter wheat. It is still dry in the western plains and possible other production problems in Russia and other countries in the region. Total wheat acres are projected to be down 1 to 1.5 million to 55.5 to 55.0 million acres. Ending stocks are to increase 100 million bushels and nation average price in the $5.00 to $5.50 range.
Technically, July futures are pulling back to the 200-day moving average at $5.20. If it can hold this support level, the next price targets are $5.45 and $6.00. Below $5.20, the next support levels are at $5.00 and $4.85. The wheat outlook just does not look too bullish unless we can get some reduction in production from weather problems here and other parts of the world. Rallies back above $5.45 would be a good place to add sales if needed.
Cotton ending stocks for 2015-16 are going to be strongly influenced by the planted acres. Most projections are for cotton acres to be in the 9.3 to 9.7 million acre range down from 11 million acres in 2014. With a trend line yield of 800 pounds/acre and demand at 14.0 million bales, ending stocks will decrease slightly to 4.0 million bales. Season average prices were projected in the 60 – 63 cent range.
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 are rallying off their March lows and look to challenge the February highs around 66 to 67 cents. This would be a good target to make sales if needed.
The University if Missouri FAPRI group are projecting acres to be down 100,000 to 2.82 million. With no change in demand, ending stocks would be down slightly to 39.1 million cwt.
For cash rice quotes, contact your rice buyer to get the most current price quotes and cash price outlook.
Technically, May futures is finding price support at the 50-day moving average at $11.00. If it can hold this level, the first price resistance would be the 50% retracement at $11.70. September futures has support at $11.20 and resistance is at $12.20. With the delayed plantings, new crop rice may try to test the $12.20 and would give a good target to make some new crop sales.