Grain And Commodity Updates
DAVID REINBOTT
BENTON, MO.
The commodities tried to finish the month on a positive price note.
Since the May 12 USDA report, prices have tumbled lower. The report did not offer any real bullish news. Most of the bullish news concerning the drought in Brazil’s second crop corn region and exports to China were probably already built into the market prices.
Planting progress was above average and many in the trade believe that USDA will raise the corn and soybean acreage in the June 30 report.
Also, the dry regions of the western and northern wheat states received rains. As we move into the summer months, price direction for all our crops will be summer weather and demand and especially from China.
Several points I want to make that needs to be watched.
1. Corn ending stocks for 2021-22 were projected at 1.507 billion bushels. Many believe the corn acres will be up 2-4 million from the USDA March estimate. If planted acres are up 2.0 million and exports are increased 100 million bushels, ending stocks would jump to 1.7 billion bushels with trendline yields. This projects corn prices closer to $4.00 and not $5.00 or $6.00. USDA will update planted acres in the June 30 report.
2. New crop Soybean ending stocks were projected at 140 million bushels. While many believe corn acres will be up at least 2.0 million acres or more, it is uncertain the change in soybean acres. If planted acres are up 1.0 million with trendline yields, ending stocks would increase from the 140 million bushels to 164 million. Ending stocks would still be tight but would not justify $13.00 soybeans. In addition, if the yield is increased 1.0 bushel/acre, the ending stocks would jump to 252 million bushels. The national average soybean price would be back into the $10.50 range.
3. Brazil’s second crop safrinha corn production region was hurt by drought. How much is still uncertain and for many it has become old news. This reminds me of the drought in the U.S. in 2012. Once the drought became old news and the corn crop reached a point in crop development and maturity that a rain would not help production much if any, prices stopped going up and started to working their way lower.
The Brazilian production is projected at 107 mmt and many think the final production number could be in the 90 – 95 mmt range.
4. China is one of the major drivers in the demand for commodities.
The question is will they continue to buy as prices go higher or will they stop or delay until after our harvest with the goal of buying at a lower price. How has African Swine Fever impacted their overall hog production. We know they have rebuilt their herd’s but the outlook going forward is still uncertain.
5. Weather overall has been favorable for U.S. plantings and the growing season. However, summer weather will determine if we have record yields, which will be needed to keep ending stocks from falling. Continue to monitor the weather forecasts because it will give price direction.
6. Technically, prices need to rebound off many of the major moving averages to prevent further price declines. The technical indicator of closing above the 8 EMA as a signal prices are beginning an uptrend or closing below the 8 EMA to signal to make sales has worked well since prices began the rally last August. The 8 EMA is the red line on the charts.
Technical Analysis – May 28, 2021 for Corn, Soybeans, Wheat, Cotton and Rice.
Corn
July futures on Wednesday traded below the Green 50-day MA at $6.11 before rallying higher for the day. Also on Wednesday, prices traded to the 62 percent retracement from the May 12 USDA S&D report at $6.01. Rain in the dry areas, good planting progress, and more planted acres are all negative to prices. Positives are good exports to China and smaller Brazilian corn crop. From the monthly chart, major resistance at $8.00 and the contract high is $8.24 from July 2012. On the Weekly chart, a close below the 8 EMA at $6.40 is a sell signal.
Weather will be the major driver of prices for the next several weeks. If weather is favorable, prices will continue to trend lower with $6.01 as key support and $5.19 the next support level. To retest $7.35 there must be weather problems or forecast of hot and dry weather in the corn belt.
December futures were trading lower on positive weather, good planting progress, and the anticipation that corn acres may be up 2 – 4 million. Prices closed below the green 50-day MA and made a low at $5.00 before rebounding. Positive are exports to China and a smaller Brazilian corn crop.
From the monthly chart, major resistance at $7.50 to $8.00 and the contract high is $8.49 from August 2012.
On the Weekly chart, a close below the 8 EMA at $5.43 is a sell signal. Friday’s close was $5.45.
Weather will be the key to price direction with $5.00 as key support and $4.50 the next major support. $5.69 is the 50 percent retracement of the past price decline and $5.86 is 62 percent. These are targets to make catch up sales.
Soybeans
July Soybean futures pulled back close to the green 50-day MA at $14.81. The 50% retracement from the May high to the March 31 low was $15.12. Percentage wise, Soybean prices did not fall as much as corn due to tighter stocks and the key weather month is August. More acres and soybeans being imported from Brazil are all negative to prices.
From the monthly chart, the contract high is $16.79 from July 2012.
Prices rallied to $16.68 only 11 cents from the high.
Technically, the chart is trying to form a negative head and shoulders top. Left shoulder is at $15.75, head $16.68, and the neck line is at $15.00. The right shoulder is still in the process of being made with the 50 percent retracement of this present move at $15.79 and 62 percent at $16.00. If fundamentals turn negative, the price target down would be $13.32. The March low is $13.55.
November futures pulled back to the purple 34 EMA at $13.50 and is trying to hold support. Friday it closed above the Red 8 EMA at $13.69. Weather will determine price direction as we enter into the summer months. Stocks are tight and we will need a record yield and more acres to stabilize ending stocks. Prices need to hold the support at the 50 day MA at $13.17.
From the monthly chart, next resistance is at $15.00 and the contract high is $17.89 from September 2012.
Technically, the potential head and shoulders price top is not as pronounced as in the old crop July chart, but it still needs to be watched closely. The Left shoulder is at $13.84, head $14.32, and the neck line is at $13.50. The right shoulder is still in the process of being made with the 50 percent and 62 percent retracements from the May high at around $13.85 and the downside price target would be $12.18. The March low is $11.84.
Wheat
July futures tumbled lower along with corn and soybeans on good weather. Some of the dryer areas in the western and norther plains received beneficial rains while other areas may have received too much rain. It maybe after harvest until we know how much the rain helped or hurt. Prices are trying to close above the green 50 day MA at $6.71.
Prices are in a down trend with resistance at $6.85 where the 17 and 34 EMA moving averages are converging. Support is at the 200 day MA at $6.22. If corn and soybeans rally on weather problems, it will spill over to wheat prices.
Cotton
July futures are trying to hold support at $82.00. The next support is $78.00. Prices need to close above the Red 8 EMA at $82.82 and the next resistance is at the Green 50 day MA at $84.60.
December futures is in a wedge pattern. If it breaks out above $84.00, it opens the door for a rally to $87.43. If it breakouts below $83.00, the price target is $81.00. Stocks are still tight and weather going forward will have a big impact on production and prices.
Rice
July futures are trying to hold price support at $13.10. If it can break above the down trending resistance line at $13.30, the next price target is at $13.50 where the green 50-day MA and Purple 34 EMA are converging.
September futures have retraced back to the green 50 day MA at $13.40. Prices on Friday closed above the Red 8 EMA at $13.51 and must remain above this moving average to keep the rally going. The Blue 17 EMA at $13.56 is the next resistance level. The longer-term support is at $12.80.
From the monthly chart, $14.50 is the next resistance level followed by $16.00. ∆
DAVID REINBOTT: Agriculture Business Specialist, University of Missouri Extension