Grain marketing commentary

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

July 12, 2018

Marketing Resources

USDA Reports and Supply & Demand Tables

Corn

USDA’s supply and demand report on July 12 was neutral to slightly bullish.  2018-19 ending stocks were projected at 1.552 billion bushels.    This was 25 million bushels less than last month’s estimate and 160 million bushels less than the average trade guess.  Beginning stocks were cut 75 million bushels based on a combination of less feed use but increased exports, 100 million bushels, and ethanol use for 2017-18.  For this year, use was increased 140 million bushels which included a 125 bushel increase in exports.  Production was increased 190 million bushels due to a 1.1 million increase in planted and harvested acres that was reported in the June 29 planted acres report.  Yield was unchanged but will probably be increased in the August report when NASS uses their survey data.  World ending stocks were down almost 3.0 mmt from last month based on good world demand. 

 

Trade agreements or lack of it and tariff battles between the U.S. and our trading partners and especially China will have a big impact on all our commodity prices.  How all this will be resolved and when, I am not sure.  Weather will continue to be a big influence on prices in the short term.  With the good crop ratings over most of the Corn Belt, it is going to be hard to rally prices significantly.  With the updated demand numbers, if the yield were increased from 174 to 176 bushels/acre, ending stocks would jump 200 million bushels to 1.7 billion bushels.   If the yield is 180 bushels, the ending stocks would be 2.1 billion. 

 

Technically, December futures continues to trade in a downtrend.   Since the break in prices on May 29, prices have closed above the T-Line or 8 EMA only one time on July 6 but closed below the T-Line the next trading day.  Near term support is at $3.50 and the next support levels are at $3.40 and $3.20.  First resistance is at the T-line at $3.61.  The next resistance level would be in the $3.70 to $3.80 range followed at the 200 day MA at $3.95.  At this time, a significant price rally would take weather problems.   If you need to make new crop sales, use closes below $3.50.  With a potential big crop coming on and an earlier than normal harvest in many parts of the Corn Belt, making sales sooner than later is a good idea. 
 

Soybeans

The report was negative for soybeans.  Ending stocks for 2018-19 were increased 194 million bushels to 580 million bushels.  This was 109 million bushels above the average trade guess.  The biggest surprised was the 250 million bushel cut in exports due to the recent China soybean tariffs.  Beginning stocks were cut 41 million bushels to 465 million due to increases in crush and exports in last year’s crop.  For the new crop, crush was increased 45 million bushels.  Production was increased 30 million bushels based on a 600,000 additional acres.     

 

World ending stocks for 2018-19 were increased 11 mmt to 98.27.  The crops for Argentina and Brazil were increased 3.5 mmt and domestic crush in China was cut 5.5 mmt from last month.  A big question will U.S. exports actually be down 250 million bushels for this marketing year and how much will the higher soybean prices slow down protein meal consumption in China.  Using the July demand numbers, if the U.S. yield is increased 0.5 bu/acre, ending stocks jump from 580 million bushels to 630 million bushels.  If the yield is increase a full bushel per acre to 49.5, ending stocks jump to 675 million bushels.  Weather over the next 6 – 8 weeks will determine if yield will be closer to 50.0 or 48.0     

 

Technically, November futures continues to trade lower and needs a close above the T-Line at $8.60 to indicate a possible reversal in prices.  Fundamentals do not support any significant rally in the short term unless weather turns adverse.  Today’s low at $8.27 needs to hold because the next support level from the weekly charts is $8.00.  If you need to make sales, I would use a close below $8.27.  However, I would not lock in too many cash sales at these low prices in case we get a weather rally or some type of trade resolution. 

 

Wheat

Wheat ending stocks were increased 39 million bushels to 985 million bushels.  World ending stocks were cut 5.28 mmt on an 8.5 mmt cut in production from last month’s estimate.  Major wheat producing Countries  that had reductions in production include Australia 2.0, China, 1.0, EU 3.6, Russia 1.5, and the Ukraine 1.0 mmt.  However, ending stocks will continue to be large in the U.S. and world and will pressure prices.      
 

Technically, July 2019 futures has found some miner support at $5.30.  The next support level is at $5.00.  Resistance is at $5.60 and then at the contract high at $6.09.    

Cotton

Cotton ending stocks were cut 700,000 bales to 4.0 million bales.  Production was cut 1.0 million bales on increased abandonment.  Exports were cut 500,000 bales to 15.0 million bales.  The midpoint of the price range was increased 5 cents to 75 cents per pound.  World ending stocks declined 5.0 million bales.  The reduction is primarily came from historical revisions to China’s consumption back to 2014-15. 

 

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 futures prices have rebounded back over the T-Line and closed on Friday at $87.84.  At this time, it still looks like prices have peaked at the contract high of $94.82 unless there is a change in the fundamentals.  If you need to make sales, I would use rallies back into the $90’s or a close below the T-Line and 50 day MA at $86.00.  The next support level is at the 100 EMA at $82.0 followed by the 200 day MA at $77.0. 
 

Rice

While ending stocks were up 800,000 cwt to 42.2 million, there were some large increases and decreases in both production and use.  The quarterly rice stocks implied significantly higher domestic use and residual for 2017-18.  Domestic use was increased 9.0 million cwt but exports were cut 4.0 million.  It resulted in ending stocks being lowered 5.0 million to 32.2 million cwt.  For 2018-19 production was increased 9.8 million cwt on increased harvest acres.  Domestic Use was increased 5.0 million to 128.0 million.  World ending stocks had small changes. 

 

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

 

Technically, September futures has had a nice rally the past two weeks but has ran into resistance at $12.10.  From this price level to $12.30 would be a good place to make some sales.  In addition, a close below the T-Line at $11.82 would also signal a sale.  The next support level is at the 50 day moving average at $11.40.