Grains market reacts to USDA reports

January 16, 2018 09:40 AM

Corn and oats             
General Comments:  Corn closed a little lower and oats closed slightly higher last week. Corn futures closed a little lower on Friday in response to the USDA reports. The reports did not show anything new but gave no reason to buy. USDA showed a slight yield increase and slightly higher production last year when compared to most trade estimates. U.S. production last year was estimated at 14.604 billion bushels, up from the USDA estimates of 14.578 billion in November, but less than the 15.140 billion produced last year.  

U.S. ending stocks were estimated at 2.477 billion bushels and world stocks were estimated at 206.6 million tons, both higher than previous estimates. Stocks as of December 1 were estimated at 12.514 billion bushels. CONAB in Brazil estimated corn production for the current year at 92.3 million tons, down from 97.8 million tons last year. The higher U.S. production was somewhat of a surprise as many in the trade had expected slightly less production as had been the USDA tendency in the past few years. This year It found a little more corn instead of a little less. 

Overall demand for corn remains good, and demand for other feed grains such as sorghum and oats is strong. Demand in the U.S. has been very strong from the ethanol sector and USDA will still likely need to increase corn consumption from this sector again this month in the supply and demand updates that will be released next month. It made no changes to ethanol demand last week.  

It could easily add another 25 million bushels to the demand side of the data. Questions continue about corn demand from the feed sector, but the animals are out there to feed. The trade is still looking at the dry weather in southern Brazil and Argentina. Forecasts for this week are hot and dry again, with the biggest problems in Argentina.

Chart Analysis:  Trends in corn are mixed to down with objectives of 345 and 341 March.  Support is at 343, 340, and 337 March, and resistance is at 350, 352, and 354 March. Trends in oats are mixed to up with objectives of 255, 260, and 264 March.  Support is at 247, 243, and 239 March, and resistance is at 254, 257, and 260 March.

General Comments:  U.S. markets closed lower on Friday and lower for the week in response to the USDA planted area estimates. USDA showed higher than expected planted area for all three classes of winter wheat.  Minneapolis is spring wheat, but it fell in sympathy with the Chicago markets. Total winter wheat area is still small, but at 32.6 million acres it is not as small as the trade guess of 31.4 million acres.

There are no forecasts for significant precipitation in the Great Plains for now. Less concern was heard about Midwest crops as these crops have had snow cover, although the snow is melting this week. The Midwest is also turning colder again, although no extreme cold is forecast. The weekly charts show that both winter wheat markets and Minneapolis spring wheat markets remain in sideways trends. Futures in winter wheat are at low prices and are backtesting important support areas now. Minneapolis prices are also holding just above important support areas on the weekly charts.

Overnight News: The southern Great Plains should get mostly dry weather. Temperatures should be below normal early in the week and above normal late in the week. Northern areas should see mostly dry weather.  Temperatures should be below normal early in the week and above normal later in the week. The Canadian Prairies should see mostly dry weather. Temperatures should average much below normal early in the week and near normal later in the week. 

Chart Analysis: Trends in Chicago are mixed. Support is at 417, 415, and 411 March, with resistance at 425, 432, and 436 March. Trends in Kansas City are mixed. Support is at 424, 418, and 416 March, with resistance at 431, 437, and 443 March. Trends in Minneapolis are mixed. Support is at 612, 611, and 608 March, and resistance is at 621, 628, and 634 March.

 General Comments:
  Rice closed higher in reaction to the USDA reports. USDA cut production estimates and also current supplies in the data on Friday. The monthly supply and demand updates showed that less export demand should be expected, so ending stocks were lower on a month to month basis, but not as much as the reduced production and current supplies would have implied. It was still a price friendly report as USDA cut current supplies in a big way. 

USDA also cut its average farm prices on Friday, but current futures prices are below the cash market and remain below the average prices expected by USDA. The charts show that futures held to the short-term trading range on Friday, but the sharts still present a weaker appearance. Sideways trading could continue this week.    

Overnight News:  The Delta should get rain and snow late this week. Temperatures should be below normal early in the week and above normal by this weekend. 

Chart Analysis: Trends are mixed to down with objectives of 1160, 1142, and 1135 March. Support is at 1170, 1161, and 1157 March, with resistance at 1185, 1195, and 1200 March.


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About the Author

Jack Scoville is a veteran futures market analyst specializing in grains, softs, rice, oilseeds, and tropical products such as coffee and sugar. His industry contacts in South America, Europe, Asia, and North America provide him with a unique and comprehensive view of these markets. Jack began working in the futures industry over 30 years ago and spent 10 years working on the floor of the Chicago Board of Trade in various roles, starting with The PRICE Futures Group since it was established in 1988.