Corn Production For This Year Is Projected Down 600 Million Bushels From Last Year
DAVID REINBOTT
BENTON, MISSOURI
USDA released their monthly supply and demand report last Thursday, May 12. The big surprise for corn was the 2022-23 corn yield of 177.0 bushels per acre. This was 4.0 bushels under the trend line yield of 181.0 bu./acre. USDA made the adjustment based on the slow planting progress and the likelihood the planting progress will remain behind through mid-May. Corn production for this year is projected at 14.46 billion bushels, which is down 600 million bushels from last year. Ending stocks were projected at 1.36 billion bushels down from 1.44 billion in 2021.
Another big surprise to me was the reduction in total use for the 2022 crop compared to the 2021 crop. USDA cut total use by 370 billion bushels to 14.565 billion. Feed use was reduced 275 million bushels and exports 100 million bushels. With more animals on feed based on the last cattle of feed report and the uncertainty of Ukraine’s corn production and exports, I would not be surprised to see these numbers to be increased in future reports. Also, there is still questions about the South American corn crop especially the second crop safrinha corn crop in Brazil which is experiencing drought.
World ending stocks for 2021-22 were increased 4.0 mmt. from last month. I am not sure of all the reasons for the increase. The Ukraine corn production estimate for 2022 was projected at 19.5 mmt down from 42.1 mmt in 2021. The exports for 2022 were projected at 9.0 mmt down from 23.0 mmt in 2021.
Weather will continue to give price direction as we try to get the corn crop planted and growing. The strong prices will continue to be a positive incentive to get corn acres planted. However, Minnesota and South and North Dakota are still wet and they may not get as many acres planted as expected. I still question if we will get the 370 billion bushels in reduction of total demand compared to last year. It will require a good corn crop from South America, Ukrainian corn not entering the export market, and weaker demand from China.
Soybeans
In the report, old crop soybean ending stocks were cut 25 million bushels to 235 million based on a 25 million bushel increase in exports. For the 2022 new crop, ending stocks were projected at 310 million bushels. Total use was increased 108 million bushels from 2021. The Argentina’s soybean crop was cut 1.5 mmt to 42.0 mmt and Brazil’s soybean production was left unchanged at 125 mmt. World ending stocks for the 2021-22 crop was cut 4.7 mmt to 85.2 The question is still how many soybean acres will be planted. Prices are still giving corn a $200 - $300 net return advantage over soybeans. However, with planting delays, high input costs, and general uncertainty, soybean acres could easily go up 1.0 to 1.5 million acres. If acres do increase this much and with good yields, ending stocks could still jump into the 400 – 500 million bushel range.
Wheat
Wheat ending stocks came in a little lower than the trade estimate. For the 2021-2022 crop, the exports were increased 20 million bushels and ending stocks were cut by the same amount to 655 million bushels. The new crop 2022 -23 wheat crop, ending stocks are projected at 619 million bushels. The world numbers for 2021-22 came in close to what was projected but the 2022-23 crop ending stocks were 5.0 mmt less than the trade estimate at 267.0 mmt. The biggest surprise was the reduction in the winter wheat production from the trade estimate. Hard red winter was projected at 590 million bushels which was almost 100 million less than the trade guess and 159 million less from last month.
The wheat in the western growing regions continue to battle drought and its impact on both harvested acres and yields. The wheat crop in India has been cut due to a drought and there is a report they will ban exports. In the USDA report, production was projected at 108.5 mmt down 1.0 from last month but there are reports that it may be closer to 105.0 mmt. Ukraine’s wheat crop is projected at 21.5 mmt down from 33.0 mmt from 2021. Exports were projected at 10.0 mmt compared to 19.0 mmt for 2021.
Cotton
For the 2021-22 balance sheet, ending stocks were cut 100,000 bales to 3.4 million. Harvested acres were cut 300,000 along with the yield reduced 30 pounds to 819 pounds/acre. For the 2022-23 crop, ending stocks were projected at 2.9 million bales. Harvested acres were trimmed back more than expected due to the continued drought in the Southwest.
Rice
The ending stocks for the 2021-22 crop was increased 3.0 million cwt. to 37.5 million. This was based on a 4.0 million cwt increase in imports and 1.0 million reduction in exports. Domestic use was increased 2.0 million. For the new crop, the ending stocks are projected at 33.2 million cwt. While total use is projected to be down 7.5 million cwt from last year, the total supply will be down 11.2 million with production to be down 9.1 million. World ending stocks for 2022-23 are projected at 186 mmt down from 190.0 from last year. China’s ending stocks are projected to fall from 113.0 mmt to 109.0 mmt. Government Polices, Ukraine/Russia, Inflation, weather, etc.
In Ukraine, it will be important to see how many acres of the spring crops get planted. There are reports that spring crops are getting planted but the question is will they make it to harvest and is so will there be an infrastructure to transport the crops to market and into the export channels.
There is talk about changes in the biofuel polices to fight inflation. I am not sure how all this will work out but it will have impact if implemented. Inflation and its impact on consumer spending and business spending will have a big impact on economic growth.
Recession is mentioned more and more due to the inverted bond market with the short-term bonds offering a higher return than the longer- term bonds. History indicates that when this occurs it signals a recession within 12 months. We will have to see if history repeats itself.
Weather in the U.S. growing season will have a huge impact on production, ending stocks, and prices. We always need to continue to watch China. There are concerns about a slowing economy due to COVID and problems in their livestock industry and their demand for feed.
This week we should get an update from the National Weather Service on their summer weather forecast. Presently, they are forecasting above normal temperatures and below normal precipitation for the western growing regions. However, this forecast is moving the hot and dry weather further west than earlier forecasts. This may not negatively impact states like North Dakota and Iowa as much as earlier forecasts.
For the eastern regions the temperatures are forecasted to be normal and the precipitation to be normal to above normal. We could have a season much like last year where the west suffers through a drought and the east had good growing conditions. It is important for the U.S. to get trendline or above average yields to meet the U.S. and world demand.
Pricing opportunities
Because of all the unknows, it makes marketing the old crop and new crop very challenging. The historical seasonal price trend is for prices to peak as we enter the spring planting season (March – May). Therefore, taking advantage of the good prices being offered by scaling in sales is still a wise choice. A farmer could also use a close below an important moving average or price support level to make some sales. For the new crop, scaling in a few sales is not a bad idea either but have price floors under the market if prices do turn lower.
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 and pricing opportunities. For buys and sell signals, 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.
Technical Analysis – May 15, 2022 for Corn, Soybeans, Wheat, Cotton and Rice.
Corn –
July 2022 futures are gapping higher Sunday night. Prices bounced off the 34 day EMA at $7.69 and rallied higher off the USDA report from Thursday. Prices on Thursday closed above the down trend line drawn from the high on April 29 at $8.25. However, on Friday prices turned lower. Prices need to stay above the down trend line or the next major support is at $7.69 and then the 50 day MA at $7.59. Price resistance is at $8.25 and $8.44 from the high that was set in August during the drought of 2012. If you still have old crop corn, scaling in sales would not be a bad idea. Another strategy is to make sales if prices close below a major moving average or support level and especially if prices close below $7.69.
December 2022 futures are gapping higher Sunday night. Prices rallied off the support line at $7.17 and made a new high at $7.59 on Friday. Price support is at $7.17 and the 50 MA is at $7.00. Price resistance above $7.59 is at $8.49 from August 2012. Prices will remain volatile with the uncertainty of the planted acres in the Ukraine and the U.S., corn production from South America, and the summer weather in the U.S. For new crop sales, I would use a close below the $7.17 support level or a major moving average like the 34 day EMA which is at $7.20.
Soybeans –
July 2022 futures are gapping higher as I write this commentary Sunday night. Prices found support at $15.60 and look to challenge the resistance at $17.34 and $17.41. The next price targets are $17.95 from September 2012. The USDA report last week tightened up the ending stocks of soybeans and there is still uncertainly in the South American crop and the U.S. crop. For old crop soybeans, scaling in sales or a close below $15.60 or a close below a major moving average like the 34 day EMA at $16.35.
November 2022 soybean futures are gapping higher Sunday night. Prices found support at $14.40 and may challenge the top of the price range at $15.40 and the high from March at $15.55. Price support is at $14.40 and $14.05. The next price targets would be $17.89 from September 2012. With projections of more soybean acres planted this year, uncertainty in Ukraine, and planting and summer weather, prices will remain very volatile. A close below $14.40 would be a signal to make some new crop sales or if price cannot break above $15.40.
Wheat-
July 2022 wheat futures are gapping up Sunday night and look to take out the high of $12.78 from March. The old price resistance level at $11.43 is now the new support level and a close below it would signal sales. A report of a smaller wheat crop from India and an export ban and continued drought conditions in the West have supported wheat prices. Seasonally, winter wheat prices put in a high in early May and trend lower into harvest. Therefore, making some sales in the $12.78 to $11.43 price range may be a good idea.
Cotton-
July Cotton futures put in a bearish key reversal last week and were down hard until prices found price support at $1.44 and the 17 day EMA. The next support levels would be at the support line at $1.35. Price resistance is at the contract high at $1.56 and the life time high is at $2.27 from March 2011. In the near term, if old crop sales need to be made, I would use a close below $1.44 or the 34 day EMA at $1.39.
December Cotton futures continue to trend up and found support last week at the uptrend line at $1.25 and the 17 day EMA at $1.24. The next price support is at the 34 day EMA at $1.20. Price resistance is at $1.30. There is still a lot of uncertainty in the markets including acres to be planted and harvested in 2022 and the world economic growth going forward. For new crop sales, I would recommend making some sales on a close below the trend line or closes below the 34 day EMA.
Rice-
July rice futures like many of the other commodifies, are also gapping higher Sunday night. Prices are trading above the $17.50 price resistance level. Price support is at the 8 day EMA at $17.20, 17 day EMA at $17.04, and the 34 day EMA at $16.77. From the weekly charts the next resistance level is at $17.85. If you need to make old crop sales, I would use a close below $17.50 or the 17 day EMA at $17.04.
September rice futures continue to gap and climb higher. On Sunday night prices are trading above $17.52. The next price target from the monthly chart is $18.25. There is price support at $16.83 and the 17 day EMA at $17.11. If you need to make new crop sales, I would use a close below the support line and up trend line at $16.83. ∆
DAVID REINBOTT: Agriculture Business Specialist, University of Missouri Extension