Grain And Commodity Updates
DAVID REINBOTT
BENTON, MISSOURI
USDA released their Monthly supply and demand report last week December 9, 2021. Typically, there are no changes in the U.S. production and those changes are left for the January report. Demand changes are usually small. There were no major surprises in this month’s report.
The U.S. corn balance sheets were left unchanged. The world ending stocks for the 2021-22 crop was increased 1.0 mmt. Ukraine’s corn production was increased 2.0 mmt. and their exports were increased 1.0 mmt. or 79 million bushels. This means Ukraine will be a competitor with us the world corn export market.
The U.S. soybean balance sheets were also left unchanged. The world ending stocks for the 2021-22 crop was decreased 1.8 mmt. Paraguay’s soybean production was cut .5 mmt to 10.0 mmt and China’s soybean crop was cut 1.6 mmt 10 16.4 mmt.
The U.S. wheat ending stocks for 2021-22 was increased 15 million bushels to 597 million bushels. The imports were cut 5 million bushels but exports were cut 20 million bushels. The cut in exports was not a surprise. World wheat ending stocks were increased 2.4 mmt.
Australia’s production was increased 2.5 mmt to 34.0. The news from Australia for the past several weeks was all the rain. However, it must not hurt the production but maybe some of the quality. There were small increases in the Canadian and the European Union crops and a 1.0 mmt increase in Russia’s crop. It signals there is a little more wheat in the world to compete with the U.S. in the export market.
For cotton the ending stocks were left unchanged even though there were small changes in the cotton yield and the unaccounted. World ending stocks were cut 1.2 million bales with Pakistan’s production cut 1.0 million bales.
Rice ending stocks were trimmed 600,000 cwt on a combination of a 1.5 million cwt cut in imports and a 1.0 million cwt cut in exports. World ending stocks were cut 1.14 mmt.
A few additional points I want to make that needs to be watched.
1. The corn exports have been picking up and it still possible that we will be able to meet USDA’s projection on 2.5 billion bushels.
However, exports need to continue to be strong because of the increased production from Ukraine and the export competition. Also, South America could have a big corn crop for this marketing year and be competition with us in the export market especially to China. Corn for ethanol continues to be strong and USDA will need to make adjustments to the balance sheets in future reports. Farmers are strong holders of corn, and will not let it lose unless they see stronger futures and/or basis.
Soybean price direction will be very dependent on exports and the weather in South America especially in southern Brazil and northern Argentina. Exports are behind the USDA projection of 2.05 billion bushels and USDA will need to make adjustments in future reports. The La Nina weather pattern is having its impact in South America. How much of impact it will have is still too early to determine. It will need to be monitored for the next several weeks. If it continues to remain dry, prices could be very explosive. However, South America is a big country and while the southern growing areas could have below average yields the rest of the country could have above average yields. This could result in an overall production increase from the Country.
Wheat ending stocks in the U.S. are still tight compered to past years. It is dry in the southern plans and if it persists into spring could have an impact on production. Presently, we need to see improved exports or prices may continue to drift lower.
Other factors that need to be watched that can impact prices include COVID-19 and the Delta and omicron 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. Also, inflation and its impact going into 2022 and beyond.
2. The acreage mix that will be planted in 2022 will be very important especially if ending stocks tighten when we come into spring. The general thought was that due to the high price of fertilizer and other ag inputs and their availability, farmers would plant less corn and more soybeans in 2022. However, the ag economist at the University of Illinois in their analysis are projecting an increase in corn acres and a decrease in soybeans acres in 2022. I will not go into the details now. But you can watch the presentation from November 29, where they outline their outlook for crop acres at the following web link. https://farmdocdaily.illinois.edu/ifes
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 are bumping up against the $5.96 price resistance. There is also an uptrend line pushing prices into the $5.96 resistance and prices are setting up to break one way or another. Price support is at the uptrend line at $5.80 and then at the 34-EMA at $5.76. To move higher we need good exports and corn for ethanol.
December futures are testing the up trendline at $5.50. Price need to hold this level or the next support is at the 50-day MA at $5.43.
March soybean futures are attempting to rally back to the $12.75 resistance price level. If we can get some good exports and some weather worries from South America, the bearish inverted head and shoulder price pattern projects a price target of $13.50. There is also price resistance is at the 200-day MA at $12.95. Price support is back at $12.00.
November 2022 soybean futures remains in a down trend with resistance at $12.60. The market expects more soybeans to be planted in 2022 and that will limit rallies unless there is a weather problem in South America or exports improve. Price support is in the $12.00 to $12.10 price range.
July 2022 wheat futures continue to trend down. Even though U.S. ending stocks are the lowest in several years, production in some of the important exporting countries have increased since last month.
The November high is $8.63 and price support is at $7.50.
March Cotton futures are trying to bounce off $1.04. First key resistance is the 50 day MA at $1.10. The November high is at $1.18.
It will be important to see how cotton prices react to the news on the COVID virus and its impact on world economic growth.
December 2022 futures are trying to rebound off the low at 88 cents.
First resistance is at the 50-day MA at 80 cents. The November high is at 93 cents. There is still a lot of uncertainty in the markets including acres to be planted in 2022 and the world economic growth going forward.
January rice futures are trying to hold $13.83. The 8-EMA is at $13.90 and at the 34-EMA at $14.00. The longer-term resistance is at $14.20.
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