Market Signals

CS Oct 10 CoverMissouri agriculture business specialist David Reinbott discusses supply and demand, technicals and a marketing plan.

In the Sept. 10, 2010 USDA supply and demand report, old crop and new crop ending stocks were lowered from the August report. The 2009-10 ending stocks were cut 40 million bushels to 1.386 billion bushels and the 2010-11 ending stocks were cut 196 million bushels to 1.116 billion bushels from the August report. Corn acres for 2010 were left unchanged, and the yield was cut 2.5 bushels to 162.5 bushels per acre. Exports were increased 50 million bushels, and feed use was lowered 100 million bushels. In general, most of the numbers came in line with what most were expecting.

Because of the extreme weather we have experienced this summer, getting a good handle on this year’s corn yield will be a challenge. Many believe the August yield projection of 165 bushels per acre will be highest for the year, and USDA continues to ratchet the yield lower in the fall reports. Some are projecting a corn yield below 160 bushels per acre. At 160 bushels per acre, ending stocks would be around 900 million bushels, and at 158 bushels per acre, ending stocks would be approximately 750 million bushels. This assumes no cut in demand, which may not be the case.

The driving force behind the higher corn prices is a combination of a corn crop in the United States that is getting smaller and good demand. Due to the reduction in the grain crops this summer in Europe, Russia and its former providences and a short corn crop in China in 2009, United States exports have the potential to increase significantly.

Technicals Corn

Support for the December corn futures is at the 10-day moving average at $4.82. The next support level will be at the 25-day moving average at $4.52. Since we have taken out last winter’s highs, the next resistance levels would be in the $5.25 to $6.00 price range.

The daily and weekly slow stochastics (momentum indicators) are extremely overbought and the daily 14-day Relative Strength Index (RSI) is at 83 and the weekly is at 74. With all four price momentum indicators being overbought, a price correction could come at any time.

The unknown is at what price and when.

Marketing Plan For Corn

With the prices being offered at this time, it may not be a bad idea to make some sales. If you want to use a technical signal, I would recommend a close below the 10-day moving average. Because of the uncertainty of production and the strong demand from exports, prices should continue to move higher into the end of the year and possibly into spring.

David Reinbott, Agriculture Business Specialist, University of Missouri Extension Service provided this grain marketing commentary.

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