U.S. 2019 corn, soybean, rice, and cotton price outlook remains highly uncertain due to potentially evolving changes in supply and demand fundamentals.

First, the 2019 planting season was protracted, due to the excessive rainfall and flooding, which has elevated acreage uncertainty; second, a late planting season raises real concerns related to heat stress and potentially an early frost, which heightens production uncertainty; third, trade policy disputes, especially with China have elevated demand uncertainties, which is a major understatement; fourth, U.S. and global fiscal and monetary policies impact on currency, bond, equity, and commodity markets are having real impacts on global growth. 

Awaiting updated acreage numbers

All rice, soybean, corn, and cotton market participants are awaiting USDA’s August 12, 2019 updated 2019 acreage numbers and their revised supply and demand balance sheets.

Beyond the acreage numbers the most likely potential influence on rice, soybean, corn, and cotton prices for the remainder of the 2018/19 and the 2019/20 marketing periods will be expectations and actual U.S. and global production impacts, due to potentially colder winters and hotter summers influence on global growing periods.

One should probably assume an increased probability through the 2019/20 marketing period of one or some combination of global production impacts, due to abnormal freezing and/or excessive heat, contributing to excessive rainfall, flooding and/or drought related weather events, as well as disease and insect impacts.  

Limitations on global grain production related to insect damage is a potential emerging concern, while in the swine sector African Swine Fever remains a major limitation to the global pork supply and demand for U.S. grains.

Waiting for global stimulus

Now we must patiently wait on the next major global stimulus driven economic expansion period, which likely arrives in 2020, signs of building momentum will likely occur in the latter half of 2019.

2019 as we have discussed in the past is a global currency, bond, equity, and commodity market rebalancing period for the purpose of extending the current business cycle both domestically and globally.

Due to U.S. Government and Central Bank intervention, the U.S. has achieved the longest business cycle in U.S. history, over 10-years in length.

My reading of U.S. and global fiscal, monetary, trade, and regulatory policy suggests the U.S. and global economic expansion is likely to last at least several more years without a significant recession - this is not an article about pros and cons related to the current expansions’ longevity, but an article about economic, market, political, and monetary reality.

Global rebalancing likely

This likely means as long as the business cycle is extended, which could actually be a number of years into the future, there will continue to be periods of U.S. and global market rebalancing (mini recessions) or contractions, where currency, bond, equity, and commodity markets are realigned by U.S. and Global Governments and Central Bankers. It will allow an extension or prolonged period of U.S. and global economic activity without a major global contraction.

From an aggregate or big picture perspective, progress is being made related to fiscal, monetary, trade, and regulatory policy regarding US-China and US-global trade and other policy disputes.

Always remember in a dynamic world of diverse economic, social, and political economies with diverse governmental regime’s policy negotiations will remain a journey of ongoing policy negotiations. We must recognize these realities and react accordingly with progressive business and marketing strategies.  

Global weather patterns are dynamic, evolving, they are simply changing, so give consideration to potentially colder winters and hotter summers and the potential impact on final U.S. and global rice, soybean, corn, and cotton yield and production figures for the 2019/20 marketing period.

Market Outlook for the Week Beginning July 29, 2019

Soybeans: Larger price trend remains down. The July 26, 2019 close was $9.01 per bushel, down 18.25-cents on the week or -1.99 percent. Soybean prices likely remain near term in a sideways trading range of $7.95 to $9.39 per bushel. Soybean prices need to close the week of July 29, 2019 above $9.39 per bushel for me to have reason to start considering a more bullish bias, Charts B10 to B13.

Long Grain Rice: Near term price trend remains bullish. July 26, 2019 September close $12.20 per cwt. or $5.49 per bushel. Prices remaining above September’s $11.44 per cwt. or $5.15 per bushel keeps prices trending to the upside. U.S. long grain price action remains bullish, while USDA’s current U.S. and global fundamentals for the 2018/19 and 2019/20 marketing periods have a bearish bias, Charts B18 to B20.

Corn: Larger price trend remains bearish. Corn closed the week of July 22, 2019 at $4.25 per bushel, down 11.25-cents per bushel for the week or down 2.58 percent. Expect more price weakness than strength, until fundamentals are more supportive of higher prices. If corn ends the week of July 26, 2019 above $4.39 per bushel, then I need to consider adjusting my outlook. Charts B14 to B17

Wheat: Primary price trend remains down. Near term wheat price direction remains a key function of corn prices. Wheat closed the week of July 22, 2019 at $4.96 per bushel, down 6.50-cents on the week or 1.29 percent. Wheat prices need to end the week of July 22, 2019 above key resistance of $5.08 per bushel for me to favor additional price strength, Charts B25 to B28.

Cotton: Price weakness remains problematic. The July 26, 2019 close 64.54-cents per pound, up 1.47-cents on the week or 2.33 percent. Cotton prices need to end the week of July 29, 2019 holding above 64-cents per pound or serious price weakness could emerge, Charts B21 to B24.

$WTIC Light Crude Oil: Prices slowly losing momentum. July 26, 2019 close $56.20 per barrel, up $0.44 per barrel or 0.79 percent for the week. Present trading range $53.53 to $59.00 per barrel, Charts B6 to B9. Geopolitical dynamics coupled with possible supply disruptions make this market challenging for the world’s most talented analysts, so be highly respectful of price action.

$CRB Index: Showing serious weakness. July 26, 2019 close 176.99, down 1.43 on the week or 0.80 percent. This index needs to close above 183 the week of July 29, 2019 for a bullish bias to be considered, otherwise the index is likely to retest its previous low at 168. The index still has a bearish bias. 

With global deflationary forces, remaining problematic; with many of the world’s commodities still surplus burdened; with the ongoing global realignment of the world’s currency, bond, equity, and commodity markets; and with a number of key global policy disputes, there simply remain limitations to this index’s near term upside, unless oil prices regain their upward advance, Charts B1 to B5.

Interest Rates: 10-Year U.S. Treasury Yield: July 26, 2019 close 2.08, up .03 on the week or 1.46 percent with support at 1.98 and 1.87, Charts A1 to A4. Global governments and central banks are very focused on minimizing any global economic weakness and will remain accommodative in the second half of 2019, which will likely limit any significant upside.

Given time the potential to revisit the July 2016 low of 1.43 is likely. The November 2018 high was 3.24.

U.S. Dollar Index: The U.S. Dollar Index gained 0.96 percent the week of July 22, 2019, up 0.93 to close at 97.75. There are dollar bulls and bears each with strong well-thought-out convictions. The dollar is likely to move sideways with a near term upside bias, Charts A5 to A8.

A lower dollar would be supportive of current U.S. economic activity and global economies in general but may also be supportive of a number of building global asset bubbles.

No Crystal Ball

Since no one has a crystal ball or knows the future always consult an investment professional or professionals before making investment decisions. The world’s most talented speculators, investors and money managers are challenged by today’s global business environment.  

Robert Coats, Ph.D., Economist, Arkansas Department of Agriculture, 1 Natural Resources Drive, Little Rock, Arkansas [email protected] | Farm Press Publications

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