Grain marketing commentary

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

December 12, 2017

http://extension.missouri.edu/scott/marketing-resources.aspx

USDA Reports and Supply & Demand Tables

University of Missouri Extension Meetings in Southeast Missouri
Soybean Meeting - January 17, 2018 at the Miner Convention Center, Miner, MO
Cotton Meeting – February 6, 2018 at the Fisher Delta Research Center, Portageville
Rice Meeting – February 8, 2018 at the Malden Community Center

Corn

No major changes came from last week’s USDA report.  USDA waits until January to make any supply updates.   Ethanol bushels were increased 50 million and ending stocks were cut accordingly to 2.438 billion bushels. World ending stocks were increased slightly to 204 million metric tons (mmt).  

 

The bottom line is we have plenty of corn in the U.S. and world.  While world ending stocks are down from last year, it still plentiful unless we have some production problem from South America.  Overall, South American production outlook looks Ok at this time, but there is still a lot of growing season ahead of us.  The La Nina weather pattern could bring some production problems as we move into 2018.    
 

Technically, March futures continue to drift lower with support at $3.45 and then off the weekly charts $3.28 and $3.00.   Resistance is at $3.60 and $3.70.  However, at this time it will be hard to get back to $3.70 level unless we have some very positive fundamental news such as production problems in South America.  Historically, the December to March period gives the best returns to storage with a rebound in basis.  Use strength in basis and futures to make sales.


 

Soybeans

In the report soybean ending stocks were increased 20 million bushels to 445 million based on a 5 million bushel increase in feed, seed, and industrial and a 25 million bushel cut in exports.  World ending stocks were increase 1.2 mmt to 98.3.

 

With the large stocks in the U.S. and world, prices will remain under pressure.  Just as in corn, the key will be the South American production.   Many are talking about the La Nina weather pattern, which could bring some production problems this growing season.  This is just another factor that needs to be watched closely. 

 

Technically, January futures continues to slide lower with support $9.60 and then support every 10 cents lower until you reach $9.20.   Just as in corn, the December to March period gives the best returns to storage.  Watch basis and futures to make sales.  

 

Wheat

Wheat exports were cut 25 million bushels and ending stocks were increased the same amount to 961 million bushels.  World ending stocks were up about 1.0 mmt to 268.4 mmt. 

 

Technically, July 2018 wheat futures is trying to bounce off the low at $4.37.  First major resistance is at $4.70.   It is interesting to note that on the weekly nearby futures, a potential key reversal low was established on last week’s trading.  We have to be careful since it was based on the December contract expiring and the March contract becomes the lead contract, but it is worth watching.    Just as in corn and soybeans, it will take some weather news in the U.S. and world to give a significant price rally at this time.

 

Cotton

Cotton ending stocks were cut 300,000 bales to 5.8 million on an equal increase in exports.  World ending stocks were cut almost 3.0 million bales to 88.0 million. 

 

John Robinson, Texas A&M cotton marketing specialist, had the following comments in his weekly newsletter.  He made some excellent observations on exports and speculative buying.  You can find all of John’s articles at the following web address:    https://cottonmarketing.tamu.edu/

 

 

          This market is being supported by expectations of improving demand fundamentals, and a lot of speculative buying.  The former would be supported by continuing strong pace of U.S. export commitments and the eventual influence of large mill fixations.  But there is also a risk to see futures weaken back into the 60s if the hedge funds get spooked by some risk-off event, and/or if seasonally high U.S. exports turn out to be just a front-loaded pattern of what USDA has already been expecting.  Remember, the current fundamental picture painted by USDA implies price weakness by virtue of a large year-over-year increase in ending stocks.  In the short run, the potential for a price reversal is also there because of the fickle fuel of speculative buying that underlies the rally since November.

 

Given all these uncertainties, growers should consider taking advantage of the present (or future) rallies, and protect themselves from sudden sell-offs. Forward contracting, immediate post-harvest contracting, and/or various options strategies can be used to limit downside risk while retaining upside potential.  In particular, contracted 2017 bales could also be combined with call options on the deferred futures contracts.  It is also not too early to be evaluating the worth of put spread strategies to hedge the 2018 crop (or, really, to hedge the insurance base price).

 

 

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 futures has ran up just above its contract high at $76.45.  The next resistance level is in the 80 to 84 cents range.  I would advise keeping a nearby safety stop at 74 cents if prices do make a quick reversal.   

 

Rice

Rice ending stocks were increased 1.0 million cwt to 30.9 million cwt on an equal cut in exports.  U.S. rice ending stocks continue to be tight.  World ending stocks were increased 1.8 from last month to 140.7.    

 

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

 

Technically, January futures prices continues to drop.  Support is at $11.30.