Grain And Commodity Updates
DAVID REINBOTT
BENTON, MISSOURI
Corn, soybeans, wheat, rice and cotton prices were all up this past week. On November 9, USDA released their monthly supply and demand report. The report was neutral to bullish and that helped to fuel some of the rebound in prices last week.
The corn yield was increased 0.5 bushel from last month to 177.0 bushels/acre which is a record and 6.6 bushels greater than the 2020 yield. USDA will release their final yield numbers in the January report. Production was increased 43 million bushels and corn for ethanal was increased 50 million bushels which resulted in a 7-million- bushel reduction in the ending stocks to 1.493 billion bushels. The good news is corn ending did not increase and with some good demand going forward ending stocks may come down further.
World corn stocks were increased 2.7 mmt based on increases in world corn production. There were no changes in Brazil’s corn production either from last year or this coming year’s crop. Argentina’s 2020 corn crop was increased slightly and the new crop was increased 1.5 mmt. However, there are concerns from some metrologists about the weather in Argentina and the impact of La Nina on their crop production.
The USDA report was bullish for soybeans. The trade was expecting a 0.4 bushel increase in the yield to 51.9, but USDA cut the yield from last month by 0.3 bushels to 51.2 bushels per acre. The trade was expecting ending stocks to be up 42 million bushels but USDA only increased the ending stocks 20 million bushels to 340 million bushels. Production was cut 23 million bushels due to the cut in the yield but exports were cut 40 million bushels. Overall, a positive report that could have been very negative.
World soybean stocks were basically unchanged from October. There were no changes in the Argentina soybean production. Brazil’s soybean production for 2020 was increased 1.0 mmt while the 2021-22 crop was left unchanged.
The wheat balance sheet had only minor changes with the ending stocks for 2021-22 were increased 3 million bushels to 582 million. This is the tightest ending stocks since 2007 at 306 million bushels. World wheat ending stocks were cut 1.4 mmt.
Just like in wheat, only minor changes in the cotton balance sheet.
The ending stocks were increased 0.21 million bales to 3.4 million based on an increase in the yield. World ending stocks were unchanged.
The ending stocks of rice were increased 1.8 million cwt to 35.0. The yield was increased from last month to 7,756 pounds and production was increased 3.3 million cwt. Domestic use was increased 1 .5 and exports were cut 1.0 million cwt. World ending stocks were increased 4.3 mmt.
Corn and soybean exports need to pick up in both sales and shipments to strengthen the demand side of the balance sheets. Corn for ethanol continues to be positive and USDA increased the use 50 million bushels to 5.250 billion. If ethanal use continues to be positive that number could be increased another 100 – 200 million bushels in future reports.
The U.S. and Chinese Presidents will be meeting soon and will be discussing trade. There are expectations that it will be positive for U.S. commodities. Also, inflation is gathering much of the economic headlines. The question is how will this impact exports of U.S. agricultural products.
A few additional points I want to make that needs to be watched.
1. The positive rebound in prices may indicate some positive underlying demand for commodities. Hopefully this will give the market some momentum as we finish out 2021. It is very important for positive demand to enter the market for all the crops but especially for corn and soybeans. While soybean ending stocks are projected at 340 million bushels, the ending stocks could climb to 400 million bushels if exports do not improve.
Corn ending stocks will depend upon exports, ethanol, and the final yields from this year’s harvest. China has a large number of bushels booked that has not been shipped yet. We need China to take delivery of these bushels and buy more.
One of the key factors we always need to watch is weather. We are in a La Nina weather pattern and right now it is predicted to get stronger and possibly last into the spring. There is a fairly high correlation between the La Nina weather pattern and lower corn and soybean yields in southern Brazil, Uruguay, Paraguay and northern Argentina. Right now, in general, South America is off to a good start in their crop plantings and crop development. There are some signs that the Argentina’s crops maybe facing some adverse weather that will negatively impact yields. Keep a watch on South American weather.
Other factors that need to be watched that can impact prices include COVID-19 and the Delta variant and its impact on U.S. and world economic growth, the container crisis and will it be resolved and the delivery of agricultural inputs, the uncertainty of government policies for renewable fuels and biofuels, debt ceiling, and the stimulus package just to name a few.
2. The acreage mix that will be planted in 2022 will be very important especially if ending stocks tighten when we come into spring. Due to the high price of fertilizer and other ag inputs and their availability, this will have a direct impact if farmers plant less corn and more soybeans. Also, with wheat prices being up, that will also take away acres from corn and maybe some cotton acres but also will increase double crop soybean acres. All this and plus more will impact crop prices as we enter 2022.
3. Technically, March corn futures continue to rally and has reached the first major resistance level at $5.90. The next price targets are $6.00, $6.17, and then $6.33. These price targets are not that far off if we can get some good export news and good ethanol use. Support is at the 8-EMA at $5.74 and at the uptrend line at $5.60. With prices above $5.80, sales could be made if basis is favorable using the price targets at $6.00, $6.17, and then $6.33. However, if prices do turn lower, look to make sales with closes below $5.74 and $5.60.
Historically the best time to make post-harvest sales is in the December through early March time period. Watch the weather development in South America and your local basis.
January soybean futures rallied up all week off the bullish USDA report. The chart left a bullish engulfing candlestick pattern from the bullish report on November 9. Prices have rallied back to the down trend line at $12.50. Next resistance is at $12.75 and the 200-day MA at $13.00. Price support is back at $12.05 and $11.80.
July 2022 wheat futures continue to rally and every pull back has been a buying opportunity. The momentum price indicators slow stochastics and RSI are getting over bought so a big pull back is possible. The 17 EMA has been a good support line on this rally and is at $7.83 and a close below this moving average would be a sell signal. Prices are above $8.00 and at this price level a farmer should consider making some scale in new crop sales. Another strategy is to use a 15 to 25 cent trailing stop under the market if prices do falter.
March Cotton futures have stalled out around $1.16. Price support is at the 8-EMA at $1.14 and at the 17 EMA at $1.12. Above $1.16 the next resistance is at $1.31 and then over $2.00. Prices look toppy in the short term and a pull back is not out of the question. Using a close below $1.12 to make sales may not be a bad idea. Another strategy is to keep a 3 – 5 cent trailing stop under the market to make sales.
January rice futures remain strong and look to get back to the top of the price range at $14.20. Prices continue to trade in a range of $13.00 and $14.20 for several months.
Since July 2020, rice prices have traded in a sideways trading range from $12.00 to $14.00. The range has narrowed to $13.00 to $14.00 the past year. Therefore, any time prices get close to $13.00 it has found good price support and has rallied back to the resistance level around $14.00. At around $14.00, prices have failed to go higher and trended back to the support level at $13.00.
Keep in close contact with your rice merchandiser and with prices getting close to $14.20 you may want to make some sales if basis is favorable. Your merchandizer may have other marketing opportunities you can take advantage of.
Technically, I like to use trend lines to determine price support and resistance levels. From there, I use the moving averages for more intermediate to short term price support levels. To signal buys and sales I use candlestick patterns and signals. I have found that closes below the 8 and 17 EMA are good signals to make sales when used in conjunction with the other technical indicators and make buys when prices close above 8 and 17 EMA. ∆
DAVID REINBOTT: Agriculture Business Specialist, University of Missouri Extension