Grain marketing commentary
Agriculture Business Specialist
University of Missouri Extension
July 11, 2016
On Tuesday July 12, USDA will release their monthly supply and demand report. In the report, USDA will incorporate the June 30 acreage and quarterly stocks numbers. In the June 30 report, USDA increased corn acres 500,000 to 94.2 million aces while the acreage trade guess was 92.9 million a decrease of 800,000 acres. The quarterly stocks were estimated 4.7 billion bushels while the average trade guess at 4.5 billion bushels. The larger stocks are either due to larger corn crop from last year and/or smaller feeding and residual. While these numbers will go through revisions as the marketing year progresses, new crop stocks will be adequate even with a modest cut in yield.
The trade guess for Tuesday’s report are projecting new crop corn yield at 168.0 bu./ac unchanged from the June report and ending stocks 2.2 billion bushels up 200 million bushels due to more production from increased acreage and smaller feed and residual.
My projections indicate that at 162.5 bu./ac. yield ending stocks will still be large at 1.8 billion bushels. To get corn ending stocks to drop to 1.3 billion bushels, it would take a yield of 158 bu./acre. With the present forecast of rainfall for much of the mid-west for the next 7 – 10 days, we are probably looking at average to above average corn yields. However, there are some forecasts that indicate the last half of July could turn dryer and hotter. If this is correct and it persists into August, this will trim off some yield and will cause prices to retrace some of the $1.00 price decline since June 17. Weather will still dominate prices for the next several weeks.
Technically, December futures has price support at $3.46 - $3.50. If this could hold, and it will take some forecasts of hotter and dryer weather, prices will need to close above the 8 exponential moving average (EMA) at $3.68 to open the possibility of a rebound to the 200 moving average (MA) at $3.94. If we cannot hold these support levels, then another 20 – 30 decline in prices cannot be ruled out. If you have not sold as much corn as you like, I would suggest to see if we can get a rebound in prices and focus on making some additional sales in the $3.68 to $3.94 range. For sales you have already made, buying September or December call option a few strike prices out of the money may be a way to add value to your present sales on a potential rally.
In the report on Tuesday, USDA will be updating the balance sheet with the June 30 report numbers. New crop soybean acres will be increased 1.4 million to 83.7 million acres and beginning stocks will be up 20 million bushels or so due to slightly larger quarterly stocks. The average yield is projected to be unchanged at 46.7 bu./ac. and ending stocks up 30 million to 290 million bushels.
While corn, wheat, cotton, and rice are looking at potential increases in the ending stocks simply due to more planted acres, soybean ending stocks could still go down depending on weather for the next several weeks. Even with the increased acres, if the yield is trimmed 1.0 bu./acre to 45.5 ending stocks fall to 200 million bushels. This is one reason soybean prices have not fallen as far as corn prices just due to the potential tight ending stocks if we have adverse weather the second half of the growing season. If we receive good growing weather and it adds 1.0 bushel per acre to 47.5 bu./ac, ending stocks jump to 370 million bushels.
Technically, November futures has support at $10.20 and if it holds then we could see a rally back into the $10.75 to $11.25 level. However, if it does not hold the next support level is at $9.75.
Just as in corn, I want to see if we can get a rebound in prices and then add to your new crop sales. But having a safety stop below $10.20 to add some sales is not a bad idea if prices due to turn lower. The key to prices will be weather, and I would highly recommend to reevaluate your cash flow and budgets and implement a marketing plan to take advantage of any rallies going forward.
Wheat prices continue to be pressured by big stocks in the U.S. and world. In the June 30 report, all wheat acres were increased 1.3 million acres to 50.8 million acres. With good yields, new crop ending stocks can easily approach 1.0 billion bushels or more.
Technically, December wheat futures has support at $4.40 with strong resistance at $4.90.
2016 cotton acres were increased 460,000 acres to 10.02 million acres. Depending upon the USDA demand numbers, ending stocks could jump to 5.4 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 is in a trading range of 63.0 to 67.0 cents. The next resistance levels are in the 70 to 72 cent price range. With the large ending stocks, it is hard to see prices rallying to this level at this time without weather problems.
New crop rice acres were also increased in the June 30 report to 3.2 million acres an increase of 148,000 acres. New crop ending stocks could increase from 50.9 million cwt. in June to over 60.0 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 has support at $10.60 and resistance at $11.20 and $12.20.