Market Advisor: Plentiful Supplies of Most Crops Limit Marketing Opportunities

By George Flaskerud, Crops Economist
NDSU Extension Service

Use any small price rallies to get caught up on wheat sales. I would get up to two-thirds sold during November to early December on spring wheat and durum. Plentiful supplies of wheat are likely to keep a lid on prices. Use the minimum price contract or call options to gamble on weather in the winter wheat states. In the November Supply and Demand Report, the USDA projected a seasonal average farm price in the range of $2.45-$2.75, up 10 cents at the bottom end from a month ago.

Durum was the only class of wheat in the USDA report to show a reduction in ending stocks. This was accomplished by a decrease in production of 6 million bushels and an increase in exports of 5 million bushels.

Exports of white wheat were also increased while they were reduced for the other classes: 15 million for hard red spring, 20 million for hard red winter and 5 million for soft red winter.

Exports of all wheat were reduced by 25 million bushels even though world stocks continue to tighten. But export commitments to date are about the same as a year ago, so USDA reduced exports of all wheat for this marketing year to last year’s level. Enough exportable supplies are apparently available from competitors.

Corn production was reduced 138 million bushels from the October projection, but the current estimate was well within the range of trade expectations. USDA did not reduce projected exports even though export commitments to date (Nov. 2) are about 11 percent below a year ago. The net result was projected ending stocks at 16.6 percent of total use versus 18 percent last month.

The outlook for corn continues to be for higher prices as exports materialize. It is likely that both the futures price and the basis will continue to improve. As price objectives are achieved, sell in the deferred futures. I would pick July. This can be done with a hedge-to-arrive (futures fixed) elevator contract or directly in the futures market. USDA projected a seasonal average farm price in the range of $1.70-$2.10, up 5 cents overall from a month ago.

Soybean production also came in close to trade expectations. But, the trade was not looking for cuts in crush and exports. As a result, ending stocks came in near the high end of the range in trade expectations.

Getting a bump in the soybean price will require a weather scare in South America. Export commitments to date are running about 5 percent ahead of a year ago so any reduction in anticipated South American production will raise expectations for U.S. exports and U.S. prices. USDA projected a seasonal average farm price in the range of $4.40-$5.00, down 20 cents overall from a month ago.

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Source: George Flaskerud, (701) 231-7377
Editor: Tom Jirik, (701) 231-9629