Grain marketing commentary

David Reinbott
Agriculture Business Specialist
University of Missouri Extension

July 14, 2014

Last Friday’s USDA supply and demand report did not have any major surprises.  Most U.S. and world production and ending stocks estimates were within the trade ranges.  However, prices continued to be pressured by good growing weather and anticipation of higher production estimates in future reports. 

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 July 11, Supply and Demand Report can be found at the following link:  http://extension.missouri.edu/scott/USDA-Report.aspx

Wheat post-harvest marketing strategies can be found at the following link: http://extension.missouri.edu/scott/Wheat-Marketing.aspx

Corn

In the July 11 report, USDA made their biggest changes in the old crop 2013-14 balance sheet.  Ending stocks were increased 100 million bushels from June to 1.246 billion bushels.  This was not a surprise, since the June 30 corn stocks were greater than the trade estimate.   Feed and residual were cut 125 million bushels and corn for ethanol was increased 25 million. 

From the June 30 acreage report, new crop 2014-15 planted acres were cut 100,000 to 91.6 million and harvested acres were cut 500,000. USDA left the yield unchanged from the June report at 165.3 bushels/acre.  The trade was looking for a 1-2 bushel increase due to the good growing conditions and record crop ratings.  With the 100 million bushel increase in beginning stocks and 75 million bushel cut in production, total supply was increased 25 million bushels.  Feed use was cut 50 million bushels, and ending stocks are projected at 1.801 billion bushels, up 75 million from last month.

Old crop world ending stocks were raised from last month’s 169 million metric tons (mmt) to 173.4 mmt.  New crop stocks were also increased from month to month from 182.6 to 188 mmt.  China’s corn production was increased 2 mmt to 222.

Technically, both old and new crop futures are seeking a price bottom.  The next major price support levels using the monthly continuation chart is $3.50 and the 200 period moving average is at $3.60.   While these are prices targets, I would not rule out at least a bounce in prices from the $3.70 to $3.80 price level.  It is difficult to determine the magnitude of any price bounce, since it will be directly based on weather.  For corn you will need to sell at harvest and cannot store, you could use put options to set price floors and use rallies to make sales.  At this time, there are no real good marketing opportunities in any of our commodities unless the weather makes a major change.   

Soybeans

Using the quarterly stocks from the June 30 report, old crop ending stocks were increased 15 million bushels to 140 million bushels. USDA raised crush 25 million bushels and exports 20 million.  Seed/residual was cut 65 million to 30 million and imports were cut 5 million.  The cut in seed/residual was most likely the result of a larger soybean crop in 2013.  The September 30 stocks report should give us a better estimate of last year’s production and demand. 

New crop production jumped 165 million bushels from the June report to 3.80 billion bushels.  From the June acreage report, planted acres were increased 3.3 million and harvested acres 3.6 million.  The yield was left unchanged.  Crush was increased 40 million and exports 50 million.   The net result, ending stocks were increased 90 million bushels to a whopping 415 million bushels.  The average season average price was cut 25 cents to $10.50. 

World ending stocks for 2013 -14 were increased slightly to 67.24 mmt.  New crop ending stocks were increased from 82.88 mmt to 85.31 mmt with all the increased coming from the U.S.

Technically, just like corn futures, soybean prices are looking for a bottom.  On the November futures contract, there is support at $10.60.  From the continuation charts, the next price support is not until you reach $9.00.  Because there is still a lot of time left for adverse weather to cut soybean yields, I would not be as aggressive in making new crop sales.  Using put options to establish price floors would be prudent and if prices do bounce then sales could be made. 

Wheat

Old crop wheat ending stocks were cut 3 million bushels to 590 million.  The biggest surprise was the 86 million bushel jump in new crop wheat stocks to 660 million.  The trade estimate was 591 million.  Based on the June acreage report, planted and harvested acres were increased and the yield was bumped higher to 43.1 bushels/acre.  Use was lowered 40 million with a 25 million bushel cut in exports and 15 million bushel cut in feed.  World new crop ending stocks were raised from 188.6 to 189.5 mmt. 

Technically, there is no major price support until you reach $4.50.

Wheat post-harvest marketing strategies can be found at the following link: http://extension.missouri.edu/scott/Wheat-Marketing.aspx

Cotton

Cotton ending stocks for 2014-15 were increased 900,000 bales to 5.2 million.  Based on the June 30 acreage report, planted acres were increased 270,000 to 11.37 million acres.  Harvested acres were increased 950,000 to 9.7 million due to less abandoned acres due to drought.  Supply was increased 1.5 million bales to 19.21 million and demand was increased 600,000 bales. 

World ending stocks for 2013-14 were increased 1.5 million to 100.5 million and new crop 2014-15 were increased almost 3 million to105.7 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, just like the other commodities, cotton is looking for a bottom.  From the continuation charts, 65 cents would be the next price support level.  We are due for a bounce.  For cotton you need to price before harvest, put options would set a price floor and then use rallies to make sales.

Rice

Rice ending stocks for 2013-14 were increased 0.5 million cwt to 32.8 cwt.    Exports were increased 1.5 million cwt to 93.5 million cwt. but imports were increased 1.0 and domestic use cut 1.0 million cwt.  For 2014-15, ending stocks were increased 2.5 million cwt to 39.8 million cwt.  World ending stocks for 2014-15 were cut from 110.67 million cwt.to 108.55. 

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

Technically, for the fifth commodity in a row, rice is looking for a bottom.  If $13.00 does not hold, the next price support would be at $12.00.