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Marketing Commentary
DAVID REINBOTT
BENTON, MO.
On May 10, USDA released their first official projections for the 2019-20 crops. For new crop corn, the report was bearish. The corn yield was projected at 176.0 bu./acre while the trade was expecting a yield closer to 175.0 bushels due to the delayed planting. In the report, USDA said the yield projection is based on a weather-adjusted trend assuming normal mid-May planting progress and summer growing season weather using the 1988 to 2018 time period. In their last planting progress report, corn was 30 percent planted versus the 5 year average of 66 percent. Unless we have a significant advancement in planting, the yield will most likely be lowered in the June report.
The ending corn stocks came in 350 million bushels greater than the trade guess at 2.49 billion bushels. Corn use was increased 165 million bushels from last year, but not as much as the trade expected. World ending stocks for the 2019-20 are projected 11.00 mmt less than last year. However, the corn crop and Brazil in Argentina were both increased for 2018-19 and that will make them an export competitor.
Depending upon weather, the 2.49 billion bushel end stocks could be the high water mark. If we lose 2 million acres due to prevent plant and a switch to soybeans and plug in 170 bushel yield, which is the projection from the University of Illinois based on past delayed plantings, ending stocks would drop down to 1.5 billion bushels or lower. If we could get some improved demand that would also tighten up stocks. However, we must remember that the key will be weather from this point forward. If the corn crop is planted and no major weather problems this summer, ending stocks could easily be over 2.0 billion bushels. I still think we are in a 1.0 billion bushel ending stocks range of 2.5 to 1.5 billion bushels.
The negatives in the market are the African swine fever and its impact on corn use, the large corn crop from South American in 2019, and the trade uncertainty with China.
Technically, futures look bullish on the slow planting progress. July futures gapped higher on Tuesday and is trying to hold support at the 50 day moving average at $3.72. Next resistance is at the 200 day moving average at $3.87 and the next resistance is at the fall/winter high of $4.00. There is a good possibility that prices will test these levels if planting delays and emergence stays below normal. If you still have old crop corn, I will be scaling in some sales.
December futures has rallied up to the 200-day moving average at $3.97. The next resistance level is at $4.05. From the weekly continuation chart, the next resistance is at $4.30. We have some upside price potential, but there is still a lot of uncertainty. The key will be weather. If the weather is unfavorable the funds will go from a seller to a buyer of the futures which will help fuel a rally. It would be prudent to keep a 10 – 15 cent trailing stop under the futures to make some sales if prices do turn lower. You can use futures, cash contracts or buy put options.
Soybeans
The report for soybeans came in neutral to bearish. For the new crop 2019-20, the trend-adjusted yield was 49.5 bu/ ac and the production at 4.15 billion bushels. Both number were slightly below the trade estimate. However, ending stocks were projected at 970 million bushels, 60 million bushels above the trade estimate. Exports for 2018-19 were cut 100 million bushels, which increased the ending stock, by the same amount. World ending stocks for this year is projected to be unchanged from last year at 113.0 mmt. However, the 2018-19 ending stocks were increased 6.0 mmt from April.
For the new crop 2019-20, ending stocks could easily be above 1.0 billion bushels and 1.4 to 1.5 billion bushels cannot be ruled out depending upon acres and yield. As I mentioned in past weeks, it will probably take a yield of 45 bushels/ac or less to drop ending below 500 million bushels.
Technically, July soybean futures has also turned higher. From the candlestick charts, Friday, Monday and Tuesday’s price action is called a bullish morning star signal. Friday was a down day, followed by a gap lower with a doji on Monday and on Tuesday, a gap higher and higher close with the stochastics oversold. While the fundamentals are not very bullish, the technicals in the short term have turned positive. The first resistance is at the 20 day Exponential Moving average at $8.48 followed by the 50 day moving are at $8.86. There is a lot of price resistance from the 200-day moving average at $9.13 to the fall and winter highs at $9.50. Presently, the fundamentals do not support a rally to this level at this time. If you have old crop soybeans, scaling in sales would not be a bad idea.
November futures also put in a bullish morning star signal with the first resistance at $8.70 and then at the 50-day moving average at $9.07 followed by the 200-day moving average at $9.26. Right now, the fundamentals do not favor a big rally in new crop soybeans. At this time, I would use the moving averages I mentioned as price targets to make sales if prices continue to rally. If prices do turn lower, use 15 – 20 cent trailing stop to make cash sales for buy a put option at this time.
Wheat
Wheat ending stocks for 2019-20 are projected at 1.14 billion bushels approximately the same as last year. World ending stocks for 2019-20 are projected at 293 mmt. compared to last year’s 275.0 mmt. There is still a lot of wheat in the U.S. and the World.
Technically, July 2019 futures has also had a nice rally. Price support is at Tuesday’s low at $4.19 and the first resistance is at $4.80. Seasonally, it is not unusual for wheat to rally in the month of May before turning lower into June and harvest. If you need to price some new crop wheat, I would use $4.80 as a price target.
Cotton
New crop cotton ending stocks were projected at 6.4 million bales compare to 4.65 million bales from last year. There is still a lot of uncertainty in new crop cotton. Due to wet conditions, acres could be less and the abandonment acres or unharvested acres could be larger than normal. In addition, exports are being projected at 17.0 million bales compared to 14.75 for last year.
I would suggest reading Texas A&M cotton marketing specialist John Robinson’s cotton outlook for more detailed analysis.
https://cottonmarketing.tamu.edu/
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 2019 futures has light support at 65 cents. There is not much resistance until prices get back to 74 – 78 cents. The 65 to 66 cents is important support that needs to hold. Right now, I see the cotton market like the soybean market. We need help from the corn market and weather problems in planting and growing conditions this summer.
Rice
Rice ending stocks are expected to be 4.0 million cwt greater than last year at 58.8 million cwt. World ending stocks for 2019-20 are projected at 172.2 mmt.
For cash rice quotes, contact your rice buyer to get the most current price quotes and cash price outlook.
Technically, July futures has support at $10.70 then at $10.40. Resistance is at $11.40. September futures has support at $10.90 and resistance at $11.20. ∆
DAVID REINBOTT: Agriculture Business Specialist, University of Missouri
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