Grain marketing commentary

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

October 15, 2018

Marketing Resources

USDA Reports and Supply & Demand Tables

Corn
The USDA’s supply and demand report on October 11 was friendly for corn.   The corn yield was decreased 0.6 bushels to 180.7.bu./acre.  Trade was expecting a yield increase to 181.8.  Production was decreased 49 million bushels from last month to 14.78 billion bushels.  Ending stocks were increased 38 million bushels to 1.812 billion bushels; however, the trade was projecting a 100 million bushel increase.  The stocks carried into this year were increased 137 million bushels.  The increase was based on a cut in use in 2017-18 including a 148 million bushel reduction in feed.   For 2018-19 exports were increased again this month by 75 million bushels to 2.475 billion.  Feed for this year was reduced 25 million from last month.

World ending stocks for 2017-18 were increased 4.0 million metric tons (mmt) to 198.2 based on a decrease in feed and increase in imports.  The ending stocks for 2018-19 were increased 2.3 mmt from last month to 159.35 mmt  based on the increase in beginning stocks.  World ending stocks are going down from year to year and are at the lowest level since 2012.   This is good news and should give us pricing opportunities of over $4.00 for next year’s corn and maybe this year.   

Technically, December 2018 futures continues to trade higher.  Prices are staying above the T-Line or 8 Exponential Moving average (EMA) and the next price target is at the 200 day moving average at $3.88.  To continue the rally we need to see continued good exports and another cut in yield in the November report.  I think the 200-day moving average will be tough price resistance to break.  Support is in the $3.55 to $3.60 price range.  It looks like we have put in our fall/winter low back on September 18. 

For the December 2019 contract, prices are trading above the 200 day moving average and the next price target is $4.14 and the May 29 high $4.24. 

I would recommend monitoring the basis and take advantage of this rally to price old crop and next year’s new crop.  I would keep a trailing stop of 10-15 cents below the market to make sales when prices do break.  Do not let these pricing opportunities get away from you.

Soybeans

The USDA’s supply and demand report on October 11 was also friendly for soybeans.  The yield was increased 0.3 bushels/acres to 53.1 but was 0.2 bushels less than the trade estimate.  Soybean ending stocks were increased 41 million bushels from last month to 887 million but it was slightly less than the trade guess.  Demand was left unchanged for 2018-19 and beginning stocks were increased 44 million bushels based on reduction in use from last year.  World ending stocks for 2018-19 were increased 1.78 mmt based on an increase in supply from last year. 

Bottom line, most were expecting a big increase in supply and a cut in exports but we did not get it and prices have rally accordingly.  In addition, wintery weather has brought harvest delays in the Dakotas and may lead to some yield loss.   However, we need to keep in mind we are still looking at ending stocks close to 900 million bushels.  To get ending stocks of soybeans for 2019-20 below 300 million bushels, it will take a yield of 42 bu/acre or less with all other things being kept equal.  In the drought year 2012, soybeans average 40 bushels/acre.    

Technically, January soybean futures continues to rally and is presently trying to break above the 100 EMA at $9.02.  The next price resistance is at $9.33 and then the 200-day moving average at $9.63.  Support is at $8.60.  As I mentioned above, there is a lot of soybeans in the United States and the world and rallies will be limited, so do not let these rallies get away from you.  With the wide basis, take advantage of storage to capture the carry in the market and better basis. 

Wheat
There were no major changes in the U. S. wheat supply and demand for the 2017 or 2018.  World ending stocks were decreased 1.11 mmt from last month to 260.18 mmt. The reduction was primarily based on production cuts of 1.5 mmt in Australia and 1.0 mmt cut in the Russian crop.

Technically, July 2019 futures is in a tight triangle or wedge price pattern between $5.60 and $5.35.  A break out of this price pattern could move prices 30 or 40 cents.  Presently, there are some dry weather problems in Australia and if this intensifies or other production problems around the globe, prices could easily move higher. 

Cotton
Cotton saw small changes in the USDA report.  Ending stocks were increased 300,000 bales to 5.0 million bales.   However, production could be coming down due to the hurricane damage to the cotton crop in the Southeast. 

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 may have put in a low around 75 cents.  Prices are trading above the T-line and the next price resistance is at 81 cents.  This is where the 200 and 50-day moving average along with the 100 day EMA are all converging.  This sets up an interesting situation.  If prices break above these levels, this will open up the next price target at 84 cents and then back to 90 cents.  Keep an eye on exports and the production from the Southeast.   If you are willing to take the risk, see how prices develop over the next few weeks and target 81 cents as a price target.

Rice 
Rice ending stocks were cut 700,000 cwt to 44.1 million cwt.  World ending stocks were increased less than 1.0 million cwt from last month to 145.21.

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

Technically, January futures has found some miner support at $10.60 and the next price resistance is at $11.20 and then $12.00.  If you need to make sales, I would put a stop under $11.60 in case of a price break.  On the top side, I would use $11.20 and $12.00 as price targets.