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Friday, December 27, 2013
07:34 AM


Grain Marketing Commentary
David Reinbott
Agriculture Business Specialist
University of Missouri Extension

December 27, 2013

http://extension.missouri.edu/seregion/fmmkt.htm 

 

Corn

Corn prices continued to be under pressure based on a big U.S. and World crop and the outlook that U. S. ending stocks could easily go over 2.0 billion bushels for the 2014-15 crop year.   USDA trimmed ending stocks by 95 million bushels in the December 10 report to 1.79 million bushels; however, world ending stocks are expected to grow to a 13 year high of 162.5 million metric tons (mmt).  Corn demand is coming back and may set a record for this marketing year, but ending stocks will not fall much based on a record production this year in the U.S. 

After a record corn production in South American in 2012-13, corn production this year is expected to be down 12 mmt and ending stocks down 4 mmt.  The drop in production is more of a function of less corn acres in Brazil in favor of more soybean plantings.  What needs to be watched closely is the weather in Argentina and southern Brazil.  This past week this region has received little rainfall and above average temperatures.   If this weather pattern persists for a couple of more weeks, corn production in this region will be reduced. 

Other issues pressuring corn prices are Chinese rejections of U.S. corn and DDG’s due to unapproved GMO traits.  While there is much that can be said about this, I think the bottom line is the Chinese want to buy corn and DDG’s at a lower price. 

Technically, the March and December futures continue to trade below the 50-day moving averages; however, prices have turned to a more sideway trading range the past few weeks.   For March futures, the trading range is $4.40 to $4.20 and for December, $4.70 to $4.50.  

For corn prices to make any significant rally in the next few months, there will need to be a major change in the supply and demand.  On the demand side, it could be smaller than expected first quarter stocks.  The corn stocks as of December 1 will be released by USDA on January 10.  The smaller stocks could be based on greater livestock feeding, better exports, and/or more corn used for ethanol.  On the supply side, a cut in world production is possible if the drought in Argentina persists and expands into Brazil.     At this time I do not expect any bullish surprises from the quarterly stocks report, so any bullish news will need to come from weather problems in South America. 

For corn in storage, I would take advantage of the good basis to make some sales.  For new crop, if prices break $4.50, prices could easily tumble another 20-30 cents; therefore, you make want to make a few sales or buy some put options to establish a price floor. 

Soybeans

Soybean ending stocks are projected to remain tight.  In the December USDA report, ending stocks were cut 20 million bushels to 150 million bushels.  Exports were increased 25 million bushels and crush increased 5 million bushels.  Imports were increased 10 million bushels.  

Record production and ending stocks are projected from South America this marketing year.  Brazil is projected to have a 6 mmt jump in production.  U.S. exports to China remain strong.  Projected U.S. exports may need to be increased in future reports due to the strong export pace to China.  However, with the expectation of the big crop in South America, the Chinese may cancel some of their U.S. purchases and buy cheaper South American soybeans.  Most are projecting U.S. ending stocks next year to be over 200 million bushels and some projections over 300 million bushels.  

Technically, the March futures closed above the 50-day moving average in mid-November and prices have trudged slowly higher.  Near term price resistance is at $13.40 with the next resistance levels at $13.60 to $13.80.   Important price support is at $13.00 and if this broken the next support levels are at $12.60 and then $12.40.  If you have old crop soybeans, I would use the strong basis to make some sales.  The November futures contract is trading between $11.80 and $11.40.  Over the next few months, a breakout from this price range will be a function of exports and the size of the crop from South America.  I would use any rally back into the $11.70 to $11.80 price range to make some new crop sales.

Wheat

In the December USDA report, the only change in wheat balance sheet was a 10 million bushel increase in imports and a corresponding increase in ending stocks to 575 million bushels.   Foreign ending stocks were increased 4.0 mmt.  The Australian wheat crop was bumped up 1.0 mmt and the Canadian crop was increased 4.0 mmt.   Back in November, the trade thought the wheat crops in Argentina and Australia may be down due to weather problems.  However, as harvest has progressed, production estimates have been going up. 

Technically, July futures continue to move lower.  From the continuation charts, prices are getting close to the next major support level at $6.00.  If you do not have much new crop wheat priced, I would wait to see what kind price reaction we get as we get closer to $6.00.   If prices break lower, I would make some sales or buy put options.  If prices hold the $6.00 price level, look to scale in sales on rallies.    

Cotton

No major changes in the U.S. or world supply and demand tables.  The U.S. ending stocks are tight on a historical basis.  However, world ending stocks are very large with China holding 60% of the world stocks and India 10%.

It is important for a cotton producer to remain in close contact with his cotton buyer to get the most current price quotes.

Technically, March 2014 futures have made a nice rally the past 4 – 6 weeks back to the old price support level at 84 cents.  If you need to make sales, I would use a close below 82 cents or rallies over 84 cents.   The next resistance level is 87.5 cents.    For the December contract, prices have rallied up to the 50-day moving average at 77 cents.  The next price targets are 80.5 and 81.5 cents.  If price start to close below 77 cents, the down side target is 75.5 cents. 

Rice

Small changes were made in U.S. and World balance sheets. U.S. imports and ending stocks were increased 1 million cwt.  World ending stocks were cut 2 mmt based on a 2 mmmt cut in the rice crop in India. 

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

Technically, March 2014 futures are in a trading range between $15.20 and $16.20.  Presently prices are at the lower end of the trading range.  A close above $15.40 is needed if prices are going to get any significant bounce.  If you need to make sales, I would use a break below $15.20 or a rally back to $15.70 or higher.    

 

December 10, 2013 USDA Reports
             
2013 - 14 United States Grain Carryout (Billion Bushels)  
  USDA Dec 2013-14 Average Trade Estimate Range of Trade Estimates Actual Minus  Trade Estimate USDA Nov 2013-14  Dec Minus Nov   2013-14
Corn 1.792 1.871 1.737-2.013 -0.079 1.887 -0.095
Soybeans 0.150 0.153 0.118-0.170 -0.003 0.170 -0.020
Wheat 0.575 0.540 0.404-0.570 0.035 0.565 0.010
Cotton 3.000       3.000 0.000
Rice 30.200       31.200 -1.000
             
Brazil Production Estimates (Million Metric Tons)   
  USDA Dec 2013-14 Average Trade Estimate Range of Trade Estimates Actual Minus  Trade Estimate USDA Nov 2013-14  Dec Minus Nov   2013-14
Corn 70.00 70.39 68.5-72.00 -0.39 70.00 0.00
Soybeans 88.00 88.74 88.00-90.40 -0.74 88.00 0.00
Wheat 4.75 4.70 4.5-4.77 0.05 4.75 0.00
Cotton 7.40       7.40 0.00
Rice 8.20       8.20 0.00
             
Argentina Production Estimates (Million Metric Tons)   
  USDA Dec 2013-14 Average Trade Estimate Range of Trade Estimates Actual Minus  Trade Estimate USDA Nov 2013-14  Dec Minus Nov   2013-14
Corn 26.00 25.58 24.0-27.5 0.42 26.00 0.00
Soybeans 54.50 55.33 52.5-59.5 -0.83 53.50 1.00
Wheat 11.00 10.00 9.5-10.5 1.00 11.00 0.00
Cotton           0.00
Rice           0.00
             
2013 - 14 World Ending Stocks (Million Metric Tons)   
  USDA Dec 2013-14 Average Trade Estimate Range of Trade Estimates Actual Minus  Trade Estimate USDA Nov 2013-14  Dec Minus Nov   2013-14
Corn 162.46 163.30 156.95-165.5 -0.84 164.33 -1.87
Soybeans 70.62 71.64 70.0-75.79 -1.02 70.23 0.39
Wheat 182.78 179.11 176.3-182.2 3.67 178.48 4.30
Cotton 96.41       95.71 0.70
Rice 104.27       106.52 -2.25
             
World Grain Production (Million Metric Tons)  
    USDA Dec 2013-14 USDA Nov 2013-14 USDA Dec 2012-13 USDA Nov 2012-13  2013-14 Minus 2012-13
Argentina Corn 26.00 26.00 26.50 26.50 -0.50
Brazil Corn   70.00 70.00 81.00 81.00 -11.00
China Corn   211.00 211.00 205.60 205.60 5.40
South Africa  Corn 13.00 13.00 12.37 12.76 0.63
Argentina Soybeans 54.50 53.50 49.30 49.30 5.20
Brazil Soybeans 88.00 88.00 82.00 82.00 6.00
Argentina Wheat 11.00 11.00 9.50 9.50 1.50
Australia Wheat 26.50 25.50 22.46 22.08 4.04
Canada Wheat 37.50 33.20 27.21 27.21 10.29
China Wheat 121.00 121.00 121.00 121.00 0.00
EU-27 Wheat 143.12 143.34 133.88 133.58 9.24
FSU-12 Wheat 104.06 104.06 77.21 77.21 26.85
Russia Wheat 51.50 51.50 37.72 37.72 13.78
Ukraine Wheat 22.00 22.00 15.76 15.76 6.24
FSU-12 Coarse Grains 87.02 86.02 69.02 69.02 18.00
China Cotton 32.00 32.50 35.00 35.00 -3.00
India Cotton 29.00 29.00 28.50 28.50 0.50
Brazil Cotton 7.40 7.40 6.00 6.00 1.40
China Rice   141.50 141.50 143.00 143.00 -1.50
India Rice   103.00 105.00 104.40 104.40 -1.40
Thailand Rice 20.50 21.10 20.20 20.20 0.30
Vietnam Rice 27.70 27.70 27.70 27.70 0.00

 

 

University Outreach and Extension David Reinbott, reinbottd@missouri.edu
Farm Management Specialist
Last modified: December 27, 2013