The U.S. rice production estimate was cut by 700,000 cwt. to a total 187.9 million cwt. in the November report. The national average yield was reduced to 7,587 pounds per acre harvested from 2.477 million acres. The Arkansas totals were unchanged from the October report, leaving production in the state at 84.45 million cwt. The supply/demand balance sheet was otherwise unchanged, so the cut in the production estimate carried through to an equal reduction in ending stocks. The average on-farm price held steady as well at $13.00. January will need to close above resistance at the October 30 high of $12.20 ½ in order to suggest further gains are possible. Strong weekly exports gave the market a boost late this week, with net sales of 96,300 metric tons and shipments of 51,500 metric tons.
Cotton futures have been moving mostly sideways but holding steady above trendline support until this week. The breakout to the downside could signal a move toward support in between 60 and 61 cents for March. Strong export demand has been supportive, with weekly net sales of 345,100 bales last week a marketing-year high. This week’s sales of 227,600 bales was a solid number as well. Shipments this week were a bit disappointing at 137,900 bales. The tenuousness of the situation with China has traders worried. In the November report, the crop production estimate was reduced from the previous month, but is still 13% larger than a year ago. The average on-farm price is pegged at 61 cents.
Corn futures have been drifting lower. Bullishness in the market due to the harvest delays is generally being overridden by the fact that there is still a lot of old crop corn hitting the market. The weather forecast for the next couple of weeks is not favorable for farmers, but a slow harvest is built into prices at this point. Weekly exports of 788,000 metric tons was within trade expectations, but USDA also reported another sale of 106,000 metric tons to an unknown destination on Thursday, giving the market a bit of a boost. USDA’s November crop estimate was a little higher than expected, and usage was cut sharply. Ethanol usage was cut by 25 million bushels, exports were cut 50 million bushels, and feed usage was cut 25 million. The net result is that 19/20 corn carryout is now pegged at 1.910 billion bushels. The average on-farm price is now pegged at $3.85.
Soybean futures are trending lower as harvest pressure and trade woes weight on the market. The November production and supply/demand reports disappointed those who were expecting a drop in the yield estimate. In fact, very little was changed; only a 15 million bushel cut to the domestic crush estimate. The net result was an increase in carryout to 475 million bushels. The average on farm price is pegged at $9. There is little optimism regarding a deal with China at the moment. The January contract looks to be headed for a retest of support at $8.95 while November 2020 could retest support at $9.40.
Livestock and Poultry
The rally in cattle futures has run out of steam and the market has been moving mostly sideways in recent weeks. December live cattle have resistance at the recent high of $120.32 ½, and support at $117.35. Relatively strong wholesale beef prices and firm cash cattle prices remain supportive, however, recent weakness in pork values and hog futures could pressure the market. Futures are also technically oversold, so a correction is not out of the question.
Hog future are trending lower and the selloff accelerated on Wednesday in reaction to sharp declines in cutout values. Record large hog supplies and weak cash fundamentals, coupled with continued uncertainty about a trade deal with China, will continue to limit the upside. Technically, the February contract has support at $65.45.
In the November supply/demand report, USDA raised the forecast for 2019 red meat and poultry production. The broiler production forecast was higher as hatchery data suggests a larger supply of birds will be available in the fourth quarter. For 2020, the total red meat and poultry forecast was increased last month as an increase in broiler and turkey production more than offsets a lower beef production forecast.
In the latest Supply/Demand report, USDA increased their projections for 2019 and 2020 milk production on strong growth in milk per cow estimates. The 2019 all milk price forecast was raised to $18.60/cwt and 2020 was unchanged at $18.85.
The largest milk processor in the U.S. filed for bankruptcy in early November. Dean Foods filed for Chapter 11 bankruptcy, citing the per capita decline in consumption of 39% in 40 years as a reason for the filing. Competition from store brand milk was likely also a factor, as Walmart opened their own milk processing plant in 2018.