Grain and Commodity Updates
DAVID REINBOTT
BENTON, MISSOURI
You can find more detailed and frequent commodity updates including charts and tables on the University of Missouri Extension – Scott County and David Reinbott’ s Facebook pages.
Corn and soybeans have rebounded the past week on the bullish USDA Report on October 12. In the report, the corn yield was projected at 173 bushels/acre down 0.8 bushels from the September report. The pre-report estimate was 173.5 bushels. Many in the trade including myself were concerned that USDA may increase corn yields. Also, based on the smaller quarterly grain stocks on September 29, USDA adjusted down the beginning stocks for the new crop 2023-24 by 91 million bushels to 1.36 billion bushels. For this year, feed and exports were both cut 25 million bushels each. The ending stocks are projected at 2.111 billion bushels, down 110 million from last month.
The soybean yield was projected at 49.6 bu./acre down from 50.1 bushels last month. This was also less than the trade guess. Just as in corn, many including myself were concerned than USDA may increase the soybean yield. The beginning stocks of soybeans were adjusted up slightly due to the September 29, grain stocks. Domestic use was increased 12 million bushels, but exports were cut 35 million. Bottom line, ending stocks were left unchanged at 220 million bushels.
The wheat yield was increased 2.8 bu./acre to 48.6 bushels/acre. Feed use was increased 30 million. The bottom line, ending stocks were increased from 615 to 670 million bushels.
CORN
Corn futures and basis have rebounded since the October report based on the cut in the ending stocks and some better demand numbers from exports and ethanol. Going forward, exports need to continue to improve. In the upcoming November 9 USDA report, we need to see another cut in corn yields if we expect corn prices to rally for the remainder of 2023.
If we assume no changes in demand and the yield is cut 1.0 bushel to 172.0 bu./acre, the ending stocks fall from 2.111 billion bushels to 2.027 billion. If the yield would be cut from 173 to 170, the ending stocks would drop to 1.853 billion bushels. I expect the trade guess will be in the 171-to-172-bushel range.
Weather in South America needs to be watched. Presently, southern Brazil is wet, and the northern areas are on the dry side. This will impact corn production and impact the soybean plantings and the double crop corn plantings.
Corn Marketing
December futures closed above $5.00 for the first time since August. If demand news can turn positive and some reports of lower-than-expected yields, then the next price target is $5.30.
Soybeans
The ending stock of soybeans remain tight at 220 million bushels. If the yield is cut just 0.5 bushels to 49.1 bushels with no changes in the demand, the ending stocks fall to 183 million bushels. Just as in corn, it is important to get another cut in the yield in the November USDA report if we want to see soybean prices continue to rally for the remainder of the year.
Weather in South America needs to be watched. Presently, southern Brazil is wet, and the northern areas are on the dry side.
Soybean Marketing
Soybeans have put in a nice rally since the October report. Futures have rallied up to the 200- and 50-day moving averages at $12.20. If the rally continues the next price target is at $13.60.
Wheat
While wheat ending stocks did increased to 670 million bushels in the October report, it is still low when compared to the 2016-2019 marketing years when the ending stocks were over 1.0 billion bushels.
While there has been bombings and the escalation of hostilities and confrontations in the Black Sea region, it has not had a positive impact on wheat prices. Continue to monitor the El Nino weather pattern and how it will pact the wheat crops in Australia and Argentina.
Wheat Marketing
Since the invasion of Russia into Ukraine in February of 2022, prices peaked over $14.00 in March and have been in a down trend ever since. For the July 2024 futures contract, the next major support is only a few cents away at $6.00. However, with the uncertainty with the corn and soybean crops in the U.S., the El Nino weather pattern and its impact on the southern hemisphere wheat production, and the uncertainty with the Black Sea region, there are still the possibility of significant price rallies.
Cotton
Cotton endings stocks were cut 200,00 bales to 2.8 million bales. Production was cut 300,000 bales on a cut in the yield from 786 to 767 pounds per acre. The exports were cut 100,000 bales. World ending stocks were cut 10 million bales based on a permanent accounting change in the balance sheet for Brazill going back to 2000. Read John Robinson’s marketing commentary for more details. The link is below.
With the lower world ending stocks and the cut in the U.S., you would think that cotton prices would go up. However, global, and domestic demand for cotton is still impacted significantly on the world economies and especially in China.
John Robinson, Texas A&M marketing specialist has a good summary on what is going on with the world supply and demand situation with cotton. You can read his latest article by clicking here.
Cotton Marketing
Stay in close contact with your cotton buyer. If you need to make sales, look at re-owning with a call option or use rallies back above 85 cents to make sales.
Rice Marketing
Rice ending stocks were cut 1.4 million cwt to 41.8 million. The yield was decreased 14 pounds to 7,737 pounds per acre and the exports were increased 1.0 million cwt.
Stay in close contact with your rice buyer. Currently $15.60 is a major price support and resistance is at $16.00 on the November futures contract. If you need to make sales, use rallies back to $16.20 or above.
Marketing Plans
In the Technical Analysis section, I outlined some price targets you can use to make for new crop sales if prices continue to rally. For crops you have already priced, you could buy call options to take advantage of any price appreciation. A put option can be used to lock in price floors to protect and minimize the downside risk.
Demand
The uncertain demand in both the U.S. and world is also keeping a lid on price rallies. We need to see some good economic data that indicates that consumers in the U.S. and world are positive on the future. In the U.S. economy, we need to find that balance between economic growth without an increase in inflation to keep the Federal Reserve from increasing interest rates.
Technical Analysis – October 23, 2023, for Corn, Soybeans, Wheat, Cotton and Rice.
Corn –
December 2023 futures have been in a rounding bottom with a potential breakout at $5.00. If you double the width of the trading range of 30 cents, the first price goal would be $5.30, which is also close to the 200-day moving average. The July high is at $5.72, and the June high is at $6.30. For corn in storage or on a basis contact, use $5.30 as a price goal.
Soybeans –
November 2023 Soybean futures may have found a fall low at $12.55 on the October 12, WASDE report. Futures have rallied to the 200 and 50 day moving averages at $13.20. The next price target is at $13.60 followed by the August high at $14.10 and then the July High is at $14.35. To reach these targets another drop in yield will be needed and better demand and exports. If you need to make cash sales use the $13.20 price target followed by $13.60.
Wheat-
July 2024 wheat futures may have put in a fall low at $6.10. The first resistance level is at $6.82 followed by the 50% retracement price level at $7.05. The 200-day moving average is at $7.08. Presently, any rallies above $7.00 will be selling opportunities for the new crop. With the uncertainty with the corn and soybean crops in the U.S., the El Nino weather pattern and its impact on the southern hemisphere wheat production, and the uncertainty with the Black Sea region, there are still the possibility of significant price rallies.
Cotton-
December 2023 Cotton Futures broke below the up-trend line at 87 cents and have slid back to 82 cents. The next support level is at 79 cents. In the October WASDE report, the world ending stocks dropped on the adjustment in Brazil’s cotton crop and the U.S. ending stocks also tighten. However, there is still a lot of questions about the strength of the US and World economics and the concerns in the Middle East with the war in Israel. Stay in close contact with your cotton buyer. If you need to make sales, look at re-owning with a call option or use rallies back above 85 cents to make sales.
Rice-
November 2023 Rice futures are in a wedge trading range with resistance at $16.00 and support at $15.60. A break above $16.00 and the next resistance levels are at $16.20, $16.40 and the highs at $16.80. A close below $15.60 and the next support level is at $15.40. Stay in close contact with your rice buyer. For new crop sales, I would use rallies back above $16.20. ∆
DAVID REINBOTT: University of Missouri