By Brenda Boetel – Department of Agricultural Economics, University of Wisconsin-River Falls
Corn
Corn has traded lower this last week in anticipation of the USDA WASDE report. The report was even more bearish than most analysts expected. USDA increased the average yield per harvested acre from 168 to 169.3. Harvested acres remained the same. Production increased to 13.654 billion bushels, up 0.7% from last month’s estimates. In additional to supply changes, the USDA increased the estimated usage for feed and residual 0.5%, but reduced ethanol usage by 1.4% and exports by 2.7%. Carryover increased then by 199 Million bushels, 12.7%, giving a stocks to use ratio of 12.9%.
The weekly progress report showed corn harvest 93% complete vs. 88% on average. Basis remains strong in parts of Wisconsin, but some areas have experienced significant variability. Ethanol margins are finding some support from the firmer energy trade and ethanol production increased last week. While Brazilian corn exports of 5.55 million tonnes were a record in October.
On the December chart support is at the $3.57 contract low. Upside resistance is at the $3.77 20-day moving average. The seasonal trend is for corn prices to continue lower throughout November, and then increase into April 2016. As a producer if you have unpriced corn in storage you will want to monitor basis levels. The stronger than expected basis will provide some pricing opportunities. Remember that storage should be a basis decision, not a price decision, as the market trend is for prices to increase throughout the spring. If basis is strong and you want to take advantage price increases throughout the spring, store on paper. Producers can do this by marketing their corn and buying back March futures to take advantage of the currently weak spread between December and March. Another option would be to consider selling call options. This will limit upside potential, but will provide revenue to add to crop sales later.
Soybean
Soybeans have also traded lower the last few weeks. The USDA WASDE increased the average yield per harvested acre from 47.2 to 48.3 bushels. Harvested acres remained the same. Production increased to 3.981 billion bushels, up 2.3% from last month’s estimates. Analysts anticipated a 0.6%. USDA increased the estimated crushings at 1.890 billion bushels, up 0.5%, and exports at 1.715 billion bushels, up 2.4%. Carryover increased by 465 million bushels, up 1.4%.
The weekly progress report showed harvest 95% complete vs. 93% on average. On the January chart support is down at the $8.57 contract low which we came within a penny of this yesterday. First resistance is at the 10-day at $8.75 then the 20-day at $8.87. The seasonal trend is for price to increase from now into May 2016, but there is very limited long-term upside potential for soybeans based on current supply and demand factors. Remember that when a market has no new news it tends to move lower. It will take significant bullish news to move soybean prices higher. Likely producers have very little unpriced soybeans in storage. If you are storing unpriced beans, look for short-term pricing opportunities.
Source: wisc.edu