Grain marketing commentary

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

March 19, 2019

Marketing Resources

USDA Reports and Supply & Demand Tables

Corn

As I mentioned last week, weather will play a very important role for all crop prices.  Flooding from heavy snow melt and rains in the upper mid-west and plains, could lead to less corn acres.  While it is still early, we need to be mindful that corn acres could be down from a combination of increased prevented planted acres and corn acres being switched to soybeans if the spring rains continue.

In 2018, U.S. planted 89.1 million acres.  From the USDA AG Forum in February and private firm estimates, corn acres for 2019 are projected from 90 to 92 million acres.    Ending stocks are projected in the 1.6 to 1.8 billion bushel range compared to 1.7 billion in 2018.  The national average corn price is estimated in the $3.60 -$3.75 range compared to $3.60 last year. 

I am not hoping or saying this will happen, but if the flooding continues into April and May, corn acres may not increase but remain unchanged from last year at 89.1 million.  In addition, if planting is delayed and add a couple of weeks of hot and dry weather in late June, a modest drop in the corn yield from a trend line of 176 bu/ac to 172 is possible.   Add an addition 100 million bushels of corn demand from trade with China, increased exports, more feed use, and corn for ethanol, ending stocks drop to a very tight 800 million bushels.  This is 1.0 billion bushels less than projected today.   Using the University of Illinois formula of demand and ending stocks to use ratio, the national average corn price is $4.57. 

I am not saying this will happen.  However, I wanted to point out how tight corn stocks can be with a cut in acres and yield due to weather.  It is something to watch and to keep an eye on.  If you have sold corn, buying a call option to cover those sales may not be a bad idea to the keep the upside open.  However, on the negative side, the African swine fever could have a big impact on grain demand and a big corn crop from Brazil is still possible. 

Technically, on March 12 the May futures put in a bullish candlestick harami with low at $3.62.  Some are saying we may have put in a seasonal low.  However, we will have to see.  Price resistance is in the $3.76 to $3.94 price range with the 200-day moving average at $3.87.  If you still have old crop inventory, I would recommend scaling in some sales.    December futures has initial support at $3.86.  Resistance is in the $3.96 to $4.06 price range.  The 200-day moving average is at $3.99.  At this time, I would recommend locking in some cash sales above $4.00 when it comes available.  

Soybeans

With ending stocks over 900 million bushels, it is difficult to build a bullish scenario for soybeans as you can for corn.  The acreage estimates for 2019 is in the 85.0 to 84.0 million-acre range compared to 89.2 million acres planted in 2018.

I am not sure if acres will fall that low.  No matter if the acres are down 4 million or 2 million and with no change in demand, it will take a yield below 45 bushels/ac to drop ending below 500 million.  

Technically, May soybean futures are trying to put in a low at $8.90 with a bullish candlestick harami.  However, there is a lot of resistance from $9.10 to $9.60.  The 200-day moving average is at $9.15.  I would recommend finishing any old crop sales. 

Wheat

Wheat ending stocks are still large and in the U.S. and world.  The ending stocks are estimated to be in the 900 million to 1.0 billion range for 2019.  However, spring wheat acres could be down depending upon weather.

Technically, July 2019 futures put in a bullish engulfing reversal last Tuesday.  Price resistance is in the $5.17 to $5.50 range. 

Cotton

I would suggest reading Texas A&M cotton marketing specialist John Robinson’s cotton outlook for more detailed analysis.
https://cottonmarketing.tamu.edu/

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 2019 futures have moved back to the top of the 72 to 75 cents trading range.  With the anticipation of more acres and increased ending stocks, prices rallies may be limited without weather problems.  With prices back at the top of the trading range, a cotton farmer may want to consider buying a put option to set a floor or make some new crop sales and replace the sales with a call option if prices rally on production concerns.  

Rice

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

Technically, May futures is in a very narrow trading range between the 100-day exponential moving average at $10.80 and the 50 day moving average at $10.70.  If you need to make old crop sales, check with your rice buyer and consider making some sales if the basis is favorable.