Grain And Commodity Updates
DAVID REINBOTT
BENTON, MISSOURI
On Wednesday November 9, USDA released their monthly WASDE or supply and demand estimates. Overall, the reports were neutral to slightly bearish.
The corn yield was raised 0.4 bushels to 172.3 bu./acre. The trade was expecting no change in the yield. Corn production was increased 35 million bushels and feed and residual was increased 25 million bushels. Ending stocks were bumped up 10 million bushels to 1.182 billion bushels. The biggest surprise in the report was that USDA did not decrease the exports. They could have easily cut exports 100 to 200 million bushels. USDA could make the reduction in the December report or wait until January. In the January report they will have four months of export data to work with. There were only small changes in the World ending stocks.
The December 2022 corn chart is in a down trend and needs some positive fundamental news soon. The first price support level is at $6.50 followed by $6.20. Price resistance is at $6.70.
Soybean yields were also increased in the report. The yield was raised 0.4 bu./acre to 50.2 bu./acre. U.S. production was increased 33 million bushels to 4.346 billion bushels. Crush and residual were increased 12 million bushels total. Ending stocks were bumped up 20 million bushels to 220 million. Argentina’s soybean crop was cut 1.5 mmt from last month to 49.5 mmt. Brazil’s soybean crop was left unchanged. The weather in South American and its impact on their soybean production needs to be watched closely. I have been reporting about the dry weather in Northern Argentina and Southern Brazil for several weeks. However, this region seems to be getting just enough rain to hold off any major drought. World ending were increased 1.65 mmt based on adjustments in the Chinese imports for the 2021-22 marketing year.
The January 2023 soybean chart is trying to hold price support at $14.20. The next price support levels are at $14.10 followed by $13.70. The technical makeup of the chart and the fundamentals are not as bearish as corn. However, exports need to remain strong to support prices. The weather in South America will continue to have a big impact on U.S. prices.
Wheat only had minor adjustments to their balance sheet. Ending stocks were cut 5 million bushels to 571 million. This was based on a 5 million bushel increase in the food category.
The July 2023 wheat chart is technically weak. The trend is down and unless prices can bounce back over $8.60 the next price support level is at $8.20.
Cotton production was increased 220,000 bales based on a 13-pound increase in the yield from 842 to 855 pounds/acre. Ending stocks were increased 200,000 bales to 3.0 million. World ending stocks were trimmed 0.6 million bales.
The December 2022 cotton chart has shown a nice rebound the past two weeks. Prices are in a sideways channel between 90 cents and 85 cents. A break above 90 cents would signal a possible rally to 95 cents.
Rice production was cut 1.1 million cwt based on a 50-pound cut in the national yield. Imports were increased 1.0 million. Domestic use was increased 1.0 million but exports were cut 3.0 million. Bottom line, ending stocks were increased 2.9 million to 36.1 million cwt. World ending stocks were cut 2.18 mmt based on a reduction in the beginning stocks and world production.
The January 2023 rice chart is the most bullish. Prices have rallied from $16.30 to $18.04 over the past two weeks. The high from this summer is at $18.15. Since prices have rallied so far and so fast, a pull back is possible. Work with your cash buyer and consider making some sales at this price level.
As we go into the Holiday season and into the end of the year, there are many factors that need to be watched for price direction. The situation in Ukraine and will they continue to export wheat and corn from their ports needs to be watched closely.
South America is projected to have a big soybean crop and this will negatively impact our ability to be competitive in the export market. Their production will depend upon weather and the La Nina weather pattern’s strength and longevity. While the first crop and early plantings may have missed the adverse weather, the later and second plantings of soybeans and corn could still can be harmed by hot and dry weather.
U.S. corn exports need to pick up and soybean exports need to remain strong to help support prices. The water levels on the Mississippi River are still low but are improving. But additional rainfall will be needed for the rest of 2022 and 2023 for the river levels to get back to a more normal level.
The drought in Argentina has cut their wheat production this year. Also, the quality of Australia’s big wheat crop is been downgraded due to excess rainfall.
The economic growth in the U.S. and the world and its impact on commodities needs to be monitored. Cotton prices are very sensitive to the economic growth in the world and especially in China. China and their on again and off again COVID restrictions need to be monitored.
While inflation is still a big problem, the latest CPI numbers came in at 7.7% down from 8.2% In recent remarks, the Federal Reserve Chairman indicated he has no plans to slow down the interest rate increases any time soon. However, if the CPI numbers continue to fall, he may slow down the big monthly increases going forward. We will just have to see.
Technical Analysis – November 14, 2022 for Corn, Soybeans, Wheat, Cotton and Rice.
Corn –
December 2022 futures broke the price support at $6.80 and $6.70. It needs to hold price support at $6.50 or the next price level is at $6.20. Price resistance is back at $6.70. The 200 day MA is at $6.65. The price trend looks to be down until we can get some positive fundamental news.
Soybeans –
January 2023 soybean futures are trying to hold price support at the 50 day MA at $14.20. The next support level is at $14.10 followed by $13.70. Price resistance is at $14.60 followed by the top of the price channel at $14.90. Prices are in a wedge price pattern and need positive fundamental news to break above $14.60. If not, prices could easily slide back to $14.10 or lower.
Soybean Oil
December 2022 Soybean futures continue to trend higher ever since it broke out to the top side of a three-month trading range at 68 cents in mid-October. The 8 EMA has been price support on this rally and is presently at $75.94. Price resistance is at the summer high at $79.20. The next resistance levels from the weekly chart are at $83.54 and then at $91.40. Price support is at the 8 EMA at $75.94 followed by the uptrend line at $76.00. Some of the price strength is based on the demand for soybean oil for the production of soybean diesel and other alternative fuels. The slow stochastics price momentum indicator is over sold which signals at least a price pull back at any time.
Wheat-
July 2023 wheat futures broke below the price support at $8.60 with the next price support level at $8.20. Price resistance is back at $8.60 followed by $8.80. Just as in corn, there is very little bullish fundamental news especially in the exports to drive prices higher at this time.
Cotton-
December 2022 Cotton futures have rallied 20 cents since the bullish morning star reversal candlestick pattern two weeks ago. Futures have reached the first resistance level 90 cents with the next price resistance levels at 95 cents and at $1.00. Price support is at 85 cents. With some bullish fundamental news, price could rally back to 95 cents or higher.
Rice-
November 2022 Rice futures put in a bullish morning star candlestick pattern a couple of weeks back and have rallied almost back to the top of the price channel at $18.15. Price support is around $17.70. If you need to make some cash sales, this maybe a good time to do it.
U.S. Dollar Index-
December 2022 Dollar futures put in a contract high back in September at $1.14. Since then, prices have been trending lower. Thursday and Friday prices plummeted and presently are sitting at price support at $1.06. Price resistance is back at $1.08. With such a big drop in prices, a rebound in prices is possible. A weaker dollar is positive to commodity prices and something to watch. ∆
David Reinbott : Agriculture Business Specialist, University of Missouri