Grain And Commodity Updates
DAVID REINBOTT
BENTON, MISSOURI
July 28, 2023, Commentary.
As I read in one marketing letter this past week, the markets are being influenced by the WWW, Weather, War and Worry. Going into this week, rainfall was very spotty over most of the major corn and soybean growing regions. This helped fuel the price rally from the end of last week into Monday. The extended forecast for this coming week calls for moderating temperatures and more chances for rainfall in the Mid-West. Improving weather forecasts along with the lack of any additional bombing of ports in the Black Sea region contributed to the price declines. The worry is what is going to happen next. Europe is going to allow Ukraine to truck and rail some of their grain through Europe. It does not seem like bombings or other disruptions will keep the grain from being exported.
CORN
On August 11, 2023, USDA will release their monthly WASDE and other monthly reports. The question is will they make any adjustments in the corn yield and if so, how much. The August report will not include the objective field yield survey data. This report will be completed and released in the September report. In July, the yield was cut 4.0 bushels per acre to 177.5 bushels per acre. Most private analysts are projecting the corn yield to be in the 173 to 175 bushels per acre range. At 173 and no other changes in the balance sheet, the corn ending stocks drop from 2.262 billion bushels to 1.87 billion bushels. At 175 bpa, the ending stocks fall to 2.04 billion bushels. However, new crop demand is soft and especially for exports, and if demand is trimmed back 100 to 200 million bushels, then ending stocks are back in the 2.2-to-2.4-billion-bushel range.
Soybeans
In the July USDA report, the soybean yield was left unchanged at 52.0 bpa. The ending stocks were trimmed 50 million bushels to 300 million bushels based on fewer acres planted. Some are estimating the soybean yield could be lowered from 1.0 to 1.5 bushels to 51.0 to 50.5 bushels per acre. At 51.0 bpa with no other changes in the balance sheet, the ending stocks could fall to 220 million bushels and at 50.5 bpa the ending stocks fall to 177 million bushels. The ending stocks for soybeans are much tighter than corn and the prices will be more volatile. However, just as in corn, the new crop demand may be overestimate by at least 100 million bushels, primarily from exports and those bushels can be added back to the ending stocks.
Wheat
The big news is the situation around Ukraine and Russia exports or lack of exports due to the bombing of the ports. As I mentioned earlier, I believe the grain will be exported in some form or fashion. The yield estimates from the spring wheat tours will be watched closely to determine the impact of the dry weather. The wheat crop in the Canadian Prairies continue to be impacted by dry conditions and that could lead to a possible downgrade in yield and production. Also, we need to follow the El Nino weather pattern and see how it will pact the wheat crops in Australia and Argentina. Some dryness is starting to be seen in the wheat growing areas in Australia.
Cotton
Cotton prices were lower on Thursday. The lower prices could be tied to economy in the U.S. and the world and export demand.
Rice
Rice futures have rallied recently on the news of an export ban from India due to soaring domestic rice prices. India is the world’s largest exporter of Rice. This has the possibility of being very bullish for U.S. rice prices in the coming year.
Weather and Crop Conditions
August weather will be key to how we finish up production in all the crops. If we see more rain and less heat this will be bearish on prices. August will bring out the annual crop tours. It will be interesting to see what impact the dry weather beginning of the growing season had on yields and has the recent rainfall helped. I expect in future USDA reports there will be some big surprises on crop yields.
In the Technical Analysis section, I outline some price targets you can use to make for new crop sales if prices rally. For crops you have already priced, you may want to 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.
Technical Analysis – July 28, 2023 for Corn, Soybeans, Wheat, Cotton and Rice.
Corn –
December 2023 futures on Monday rallied up to $5.72 which is the 62% Fibonacci retracement level from the July low at $4.81 and the June high at $6.30. On Tuesday, prices turned lower and were down the rest of the week. Futures retraced back 50% of the rally to $5.27. Price support is at $4.91 followed by $4.81. Each of these price targets matchup closely to a major moving average and/or past price support or resistance levels. For new crop sales and especially for corn you need to market at harvest, I would recommend any rallies back to $5.60 or a close below $5.30.
Soybeans–
November 2023 Soybean futures rallied up to $14.35 this week. The contract high from May of 2022 is $14.48. Price support is at the up-trend line and the 17-day EMA at $13.82. The next support level is at the 200-day moving average at $13.35. Weather remains important for the next 3-4 weeks. For new crop sales, I would recommend sales on rallies over $14.00 or a close below $13.35.
Wheat-
July 2024 wheat futures rallied up to $7.99 but pulled back to the first support level at $7.40. The next support level and the 50-day MA is at $7.10. Price resistance is at $7.99 followed by $8.14.
Cotton-
December 2023 Cotton Futures broke out above the price channel and rallied up to 88 cents. On Thursday futures pulled back to around 84 cents. The next price support level is back to the top of the price channel at 82 cents. Last year’s summer highs are at 98 cents. Stay in close contact with your cotton buyer. I would use any rallies above 88 cents to make some new crop sales.
Rice-
September 2023 Rice futures have been in a sideways trading range since March. Futures broke above the $15.80 resistance for 2 trading day before pulling back. Price resistance is at $15.80 and price support is at $14.60. From a technical standpoint, prices may be putting in an inverted head and shoulder pattern which projects to a price of $17.30 if the fundamentals are supportive. Stay in close contact with your rice buyer. For new crop sales, I would use rallies back above 16.20. ∆
DAVID REINBOTT: Agriculture Business Specialist, University of Missouri