Despite Stocks-To-Use Levels, Stocks At Lowest Since 2012-13


   The USDA’s supply and demand report on November 8 was mixed for corn.  The good news was the corn yield was cut 1.8 bushels from last month to 178.9 bu./acre. The trade estimate was 180.1. Production was decreased 152 million bushels from last month to 14.626 billion bushels.  Ending stocks were cut 77 million bushels to 1.736 billion bushels. On the demand side, feed and residual were cut 50 million bushels and exports 25 million. USDA will not make another change in the supply or yield until the January report. 
   Now the bad news. The Chinese in a 10 year census update found an additional 297 mmt or 11.6 billion bushels of corn production. Wow! That is a lot of corn. Feed and domestic use was increased 141 mmt or 5.6 billion bushels and ending stocks were increased 149 mmt or 5.97 billion bushels.  Therefore, China produced more corn and consumed about 50 percent of it. Unless world corn prices go significantly higher, the corn stocks should be consumed internally. In addition, USDA is projecting their stocks to fall from 222 to 207 mmt for 2018-19.  There is always the question on the quality condition of their corn stocks.
   When you subtract Chinese and U.S. ending stocks from world ending stocks, the stocks are not as burdensome as you may think. At 55.0 mmt, the stocks and stocks to use are at the lowest level since 2012-13. 
   Technically, December 2018 futures is trading between the 100 EMA at $3.72 and the 50-day moving average at $3.65. The 200-day moving average is at $3.86. With the report behind us, the market will focus on demand, trade agreements, value of the dollar, and other demand influences. 
   For the December 2019 contract, prices are trading just below the 200-day moving average at $4.05.  The next price targets are at $4.08, $4.14 and the May 29 high $4.24. I would recommend monitoring the basis and take advantage of rallies 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 if prices do break. Do not let these pricing opportunities get away from you.
   The USDA’s supply and demand report on November 8 was also mixed. The yield was trimmed 1.0 bushel/acre to 52.1. Production was cut 90 million bushels to 4.60 billion bushels. The negative news came on the demand side. While crush was increased 10 million bushels, exports were cut 160 million bushels from last month.  Bottom line, ending stocks are projected at 955 million bushels up 70 million from last month. World ending stocks continue to climb. They were increased 2.0 mmt to 155.4 mmt. 
   Technically, January soybean futures rallied right up to the 100 day EMA and failed and pulled back. Just as in corn, prices are trading between the 100 EMA at $8.93 and the 50-day MA at $8.67. The next price resistance is at $9.33 and then the 200-day moving average at $9.51. Support is at $8.45. With ending stocks approaching 1.0 billion bushels, price rallies will be limited unless we get some bullish demand news and/or a positive trade agreement with China. Do not let price these rallies get away from you. Take advantage of the narrowing of the basis and the carry to capture storage returns.  
   There were no major changes in the U. S. wheat supply and demand for the 2017 or 2018. The ending stocks for the 2018-19 crop was cut 7 million bushels to 949 million on a 7 million bushel increase in seed use. World ending stocks were increased 6.5 mmt to 266.7 mmt on increases in beginning stocks, production and a cut in exports. 
   Technically, July 2019 futures continues to drift lower and is trying to find support at $5.25. At this time, prices are trapped in a trading range between $5.60 and $5.25. 
   Cotton saw several updates in the USDA report.  Ending stocks were increased 700,000 bales to 4.3 million bales. Harvested acres were cut 160,000 acres and the yield was reduced 49 pounds to 852 pounds/acre. However, use was lowered 600,000 bales on a 100,000 bale reduction in domestic use and 500,000 bale reduction of exports.
   I would suggest reading Texas A&M cotton marketing specialist John Robinson’s cotton outlook for more detailed analysis.
   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 have not taken off as I thought and is presently at the bottom of the 75 to 80 cent trading range. Prices are still trading below the 50-day MA, 100 EMA and the 200-day moving averages. In the March contract, the trading range is between 78 and 82 cents. The next support level is at 76.50. 
   Since the old crop daily futures contracts cannot break above the moving acreages, it makes the next major support level at 71 cents based on the weekly nearby futures chart. 
   The December 2019 futures has found support and is trading above the major moving averages at 77 cents.  First major resistance is at 81 cents. 
   Rice ending stocks were increased 2.5 million cwt to 46.6. Total supply was increased 500,000 cwt but exports were cut 2.0 million cwt. World ending stocks were increased to 17.8 million cwt on production revisions in China.
   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 $10.40 and price resistance is at $11.20. If you need to make sales, I would use $11.20 and $12.00 as price targets. ∆
   DAVID REINBOTT: Agriculture Business Specialist, University of Missouri 

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