Grain Marketing Commentary

Corn
Last week on June 28, USDA released their third quarter grain stocks and planted acres reports.  The corn stocks came in 130 billion below the trade estimate at 5.2 billion bushels.  This implies either we lost some grain due to the flooding this spring and/or more corn went to livestock feed. 

 

The bearish news was the planted acres.  Acres were projected at 91.7 million compared to the trade estimate of 86.6 million acres.  This was a big shock.  Acres were 1.0 million less from the March estimate and 2.5 million acres more than in 2018.  The question is where did all those acres come from?  The survey was done the last of May and the first two weeks in June.  How I understand it, farmers were asked how many acres are you planning to plant and not how many acres you have planted.  Based on the planting progress during that time, over 15 million acres were not planted based on the 91.7 million acres reported.  This means many of those acres could end up being prevent plant, failed acres, kept but will be low yielding, or switched to soybeans.  We will not know for sure until we get more reporting and the reports from FSA. 

 

NASS in the month of July will be reinterviewing producers in the Corn Belt to get updated acres planted to corn and soybeans.  How I understand it this update will be made available in the August monthly report. 

 

In a webinar, Todd Hubbs and Scott Irwin from the University of Illinois gave an excellent presentation of the June 28 reports.  The recording of this webinar can be found on YouTube by clicking here . 

 

Hobbs and Irwin give two Supply and Demand tables for this year’s corn crop.  In one S/D table they used planted acres at 89.0 million acres or 2.7 million acres less than the June report.  The ending stocks were projected at 1.47 billion bushels down 200 million from last month’s USDA estimate.  The season average price was projected at $4.00.  The second S/D table had corn acres at 87.0 million and the ending stocks were projected at 1.2 billion and the season average price at $4.50.  As they stated in the webinar, there is still much variability in the acres and the final yield to give a very confident projection on what corn ending stocks and price will be. 

 

On July 11, USDA will update their supply and demand estimates using the June 28 planted acres and quarterly stocks.  Because of all the uncertainty, we may not get a good handle on yields and acres until next spring.

 

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 continued trade uncertainty with China.

 

Technically, December futures has found support at the 50-day moving average at $4.21.  The next price support level is at the 200-day moving average at $4.04. Price resistance is at the June 17 high of $4.73.  The next target would be the May 2014 high of $5.17. 

 

With all the uncertainty in acres and weather, we should expect wide swings in prices.  If you are needing to make sales you can buy put options to lock in a price floor in the futures market or use call options to cover any cash sales.  Another strategy is using a trailing stop of 20 – 25 cents to make cash sales or buy put options. 

 

Soybeans

For soybeans, the quarterly stocks were projected at 1.79 million bushels 71 million less the trade estimate.  The acres came in at 80.0 million acres or 4.3 million less than the trade estimate.  This is 4.5 million acres below the March intentions and 9.1 million less than last year’s acres.  Based on the planting progress during the time the survey was taken, 42% of the soybeans were not planted and that projects to over 32 million unplanted soybean acres.  That opens the door for a big swing in acres in future reports.

 

In one of the University of Illinois supply and demand tables, ending stocks were projected at 680 million down 350 million bushels from last month’s USDA report.  It is based on USDA’s 80.0 million acres, however the yield was cut 4.0 bushels to 45.5 bu./acre.  The average farm price was projected at $8.50.  The other S/D table was based on 75.0 million acres and a 45.5 yield.  The ending stocks dropped 600 million bushels to 426 million bushels and the average farm price was projected at $9.30.

 

Technically, November futures has support at the 50-day moving average at $8.88. The next support levels are at $8.80 then $8.50.   First price resistance is at $9.50.  Just as in corn, there is still much uncertainty in acres and yield.  Potential large price swings over the next several months is possible.   If you wanted to do some marketing, I would suggestion buying a put option to set a price floor and keep the upside open for potential price rallies. 

 

Wheat

Wheat only had small changes based on the trade estimates.  All wheat acres were projected at 45.6 million aces and the quarterly stocks were projected at 1.07 billion.    

 

Technically, December 2019 futures has support at the 50-day moving average at $5.08.  There is strong resistance at $5.65

 

Cotton

 

Cotton acres were projected at 13.72 million acres.  This is 60 million acres less than the March estimate and 380 million aces less than 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 remains in the trading range between 64.70 and 69 cents.  In the near term, it will take weather problems to move prices higher.

 

Rice

Rice acres were projected at 2.756 million acres.  The March estimate was 2.87 million acres and last year we planted 2.945 million acres. 

 

For cash rice quotes, contact your rice buyer to get the most current price quotes and cash price outlook.  

 

Technically, the September futures contracts is trying to find support at the 50-day moving average at $11.42.  Price resistance is at $12.00.