Rice futures have trended sharply lower over the past couple of weeks. USDA’s data dump Feb. 8 didn’t do the rice market any favors. The annual crop production report showed an increase in harvested acres and yield. For 2018 U.S. production is now estimated at 224.2 million cwt, which is up nearly 6 million cwt from the previous estimate and 26 percent from last year. The average yield is estimated at 7,692 lbs. per acre, which is 170 lbs. higher than the prior estimate and the second highest average yield on record. The increase is only partially offset by a 2 million cwt. increase in domestic use and a 1 million cwt. increase in exports. The net result is an estimate of 47.1 million cwt in ending stocks for the 2018-19 marketing year, which is up 60 percent over the previous market year. USDA left the average farm price estimate unchanged at $11.60-$12.60.
Taking a look at the charts, March rice has broken through several layers of resistance, including the September 2018 low of $10. The market is showing technical signs of bottoming, though. Export sales and shipment reports are still behind, but have been uninspiring. Positive developments are needed on the trade front to get this market moving in a different direction.
Cotton futures have been under pressure in recent weeks, breaking through up trending support. The National Cotton Council released the results of their annual grower survey Feb. 9. According to the survey, U.S. farmers intend to plant 14.5 million acres of cotton this spring. Upland cotton acres are expected to rise 2.8 percent to 14.2 million, while ELS acres are expected to be up 6.3 percent to 264,000 acres.
The market is showing some signs of bottoming thanks to positive news coming out of trade talks with China. So far, December has held above support at the January low of 72.24 cents and is chopping along mostly sideways just above that level.
New crop soybeans continue to trend higher, but recent chart action is worrisome. This market desperately needs to see some positive movement in the trade talks between the U.S. and China.
The USDA reports released Feb. 8 didn’t provide much for the market to chew on, and the market reaction was pretty muted. The expected carryover for the 2018-19 crop was lowered to 910 million bushels, down from 955 million, but that is still a lot of beans. The average yield was lowered to 51.6 bu/ac from 52.1 bu/ac, but that was offset by a decrease in export expectations of 25 million bushels. Global 2018-19 ending stocks were lowered to 106.7 million tons, which is still 8.6 million tons larger than 2017-18 ending stocks. USDA has the average on-farm price for 2018-19 pegged at $8.10 to $9.10, and the November contract is currently trading in the $9.50 area. That means there could be a lot of downward potential for this market, depending on the size of the crop this year.
The USDA reports were a mixed bag for corn. On the one hand, production was cut more than expected, resulting in total production 14.4 billion bushels, usage was cut nearly as much. Feed usage was cut by 125 million bushels and ethanol use by 25 million bushels. Total domestic usage was down 165 million bushels. The net result of the report was only a slight decline in ending stocks to 1.735 billion bushels. While 2019 planting estimates haven’t been released at this point, the trade is expecting to see a large jump in acreage, which, when combined with these carryover stocks, could result in a bearish situation for corn prices. USDA currently has the average on-farm price pegged at $3.35-$3.85, and December prices are trading above that range.
Lean hog futures have been hit with a new wave of selling, and markets were down the daily limit in all nearby contracts on Thursday. April set a new contract low of $56.525. Weaker wholesale pork prices and soft cash hog fundamentals are pressuring the market from a fundamental perspective, while technical selling was also a factor. This is also a market that would benefit from a positive outcome from the U.S.-China trade talks.
Live cattle futures are trending sharply higher, with April challenging resistance at the contract high of $129.47. Good cash trade and another winter storm delaying marketings are supportive, however packer margins are narrowing and could become a concern.