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Wheat Prices Bounce Around In Weather Tug-Of War
DR. AARON SMITH
KNOXVILLE, TENN.
Soybeans were up; cotton and wheat were down; and corn was mixed for the week. November soybean futures closed the week up 35 cents from last Friday, closing at $9.39. The rally was partially driven by concerns over wet conditions on the western edge of the Corn Belt. Soybean planting progress in Kansas and Missouri were estimated at 57 percent and 42 percent, well behind their 5-year average paces of 85 percent and 79 percent, respectively. At this point there is still time to get the remaining crop planted/replanted in these two states however drier conditions in the next two weeks will be required. This rally represents an excellent opportunity for producers that have not priced 2015 production to begin their pricing. Looking at the November soybean futures chart there is significant resistance above $9.60 so pricing some production above $9.40 should be strongly considered. In Tennessee, October/November cash forward contract prices increased 35 to 45 cents per bushel this week to $9.12 -$9.54. Since late April, December corn futures have traded between $3.60 and $3.90. Given the growing conditions year-to-date and favorable forecasts for much of the Corn Belt, it is likely that we will see prices continue in this range at least until the end of the month when the USDA releases their acreage estimates. December cotton futures have been bound in 6 cent trading range from 61-67 cents per pound since October. Cotton fundamentals are moving in the correct direction for prices to rebound however it will likely take some additional time to reevaluate global stocks and Chinese policy before we see a significant change in futures prices. Wheat futures continue to bounce up and down as weather and quality concerns play tug-of-war with large global stocks. As usual, local cash markets for wheat will be primarily driven by quality.
The 2014 and 2015 enrollment period for ARC and PLC is from June 17th, 2015to September 30th, 2015. As a reminder, producers cannot change their program elections this is simply the period where they must sign their contracts at FSA. The USDA also released program signup numbers for ARC and PLC. In Tennessee, 98 percent of corn base acres, 99 percent of soybean base acres, and 75 percent of wheat base acres were enrolled in ARC-CO. Less than 0.2 percent of the base acres for those three commodities were enrolled in ARC-I with the remaining acreage electing the PLC program. Additional signup details will be posted to the crop economics webpage in the coming weeks.
Corn
July 2015 corn futures closed at $3.53 the same as last week. This week July 2015 corn futures prices traded between $3.46 and $3.61. Across Tennessee average basis (cash price- nearby future price) remained unchanged or strengthened at Memphis, Northwest Barge Points, Lower-middle, and Upper-middle Tennessee and weakened in Northwest Tennessee. Overall, average basis for the week ranged from 2 over to 40 over the July futures contract with an average of 16 over at the end of the week. Ethanol production for the week ending June 12th was 980,000 barrels per day down 12,000 barrels per day from last week. Ending ethanol stocks were 20.718 million barrels up 472,000 barrels from last week. Corn net sales reported by exporters from June 5th to 11th were above expectations with net sales of 24.7 million bushels for the 2014/15 marketing year and 7.9 million bushels for the 2015/16 marketing year. Exports for the same time period were up from last week at 41.1 million bushels. Corn export sales and commitments were 92 percent of the USDA estimated total annual exports for the 2014/15 marketing year (September 1 to August 31) compared to a 5-year average of 99 percent. Jul/Sep and Jul/Dec future spreads were 5 cents and 15 cents, respectively.
September 2015 corn futures closed at $3.58 the same as last week. September 2015 cash forward contracts averaged $3.54 with a range of $3.32 to $3.85. Nationally, this week’s Crop Progress report estimated corn condition at 73 percent good to excellent and 5 percent poor to very poor; and corn emerged at 97 percent compared to 91 percent last week, 96 percent last year, and a 5-year average of 95 percent. In Tennessee, corn condition was estimated at 78 percent good to excellent and 5 percent poor to very poor; and corn emerged at 98 percent compared to 97 percent last week, 99 percent last year, and a 5-year average of 98 percent. Downside price protection could be obtained by purchasing a $3.60 September 2015 Put Option costing 17 cents establishing a $3.43 futures floor.
Soybeans
July 2015 soybean futures closed at $9.71 up 31 cents since last week. This week July 2015 soybean futures traded between $9.30 and $9.81. July soybean to corn price ratio was 2.75 at the end of the week. For the week, average soybean basis strengthened or remained unchanged at Northwest Barge Points and Memphis and weakened in Northwest, Upper-middle, and Lower-middle Tennessee. Basis ranged from 10 under to 45 over the July futures contract at elevators and barge points. Average basis at the end of the week was 19 over the July futures contract. Net sales reported by exporters were above expectations with net sales of 4.9 million bushels for the 2014/15 marketing year and net sales of 19.5 million bushels for the 2015/16 marketing year. Exports for the same period were up from last week at 13.0 million bushels. Soybean export sales and commitments were 104 percent of the USDA estimated total annual exports for the 2014/15 marketing year (September 1 to August 31), compared to a 5-year average of 101 percent. August 2015 soybean futures closed at $9.55 up 34 cents since last week. Jul/Aug and Jul/Nov future spreads were -16 cents and -32 cents, respectively.
November 2015 futures closed at $9.39 up 35 cents from last week. Nov/Sep 2015 soybean to corn price ratio was 2.62. October/November 2015 cash forward contracts averaged $9.24 with a range of $8.74 to $9.54 at elevators and barge points. Nationally, this week’s Crop Progress report estimated soybean condition at 67 percent good to excellent and 6 percent poor to very poor; soybeans planted at 87 percent compared to 79 percent last week, 91 percent last year, and a 5-year average of 90 percent; and soybeans emerged at 75 percent compared to 64 percent last week, 81 percent last year, and a 5-year average of 77 percent. In Tennessee, soybean condition was estimated at 68 percent good to excellent and 6 percent poor to very poor; soybeans planted were estimated at 72 percent compared to 60 percent last week, 69 percent last year, and a 5-year average of 76 percent; and soybeans emerged at 55 percent compared to 45 percent last week, 51 percent last year, and a 5-year average of 56 percent. Downside price protection could be achieved by purchasing a $9.40 November 2015 Put Option which would cost 45 cents and set an $8.95 futures floor.
Cotton
July 2015 cotton futures closed at 63.32 down 0.75 cents since last week. July 2015 cotton futures traded between 62.60 and 65.01 cents this week. Adjusted world price (AWP) decreased 0.72 cents to 50.51 cents per pound. Delta upland cotton spot price quotes for June 18 were 63.63 to 66.38 cents/lb. Net sales reported by exporters were down from last week with net sales of 52,600 bales for the 2014/15 marketing year and 70,500 bales for the 2015/16 marketing year. Exports for the same period were down from last week at 209,000 bales. Upland cotton export sales were 106 percent of the USDA estimated total annual exports for the 2014/15 marketing year (August 1 to July 31), compared to a 5-year average of 109 percent. October 2015 cotton futures closed at 65.06 down 0.72 cents since last week. Jul/Oct and Jul/Dec futures spreads were 1.74 cents and 0.58 cents, respectively.
December 2015 cotton futures closed at 63.9 down 0.76 cents since last week. Nationally, this week’s Crop Progress report estimated cotton condition at 55 percent good to excellent and 7 percent poor to very poor; cotton planted at 91 percent compared to 81 percent last week, 94 percent last year, and a 5-year average of 96 percent; and cotton squaring at 13 percent compared to 7 percent last week, 13 percent last year, and a 5-year average of 16 percent. In Tennessee, cotton condition was estimated at 48 percent good to excellent and 14 percent poor to very poor; cotton planted at 99 percent compared to 93 percent last week, 97 percent last year, and a 5-year average of 98 percent; and cotton squaring at 9 percent compared to 3 percent last week, 20 percent last year, and a 5-year average of 12 percent. Downside price protection could be obtained by purchasing a 64 cent December 2015 Put Option costing 3.25 cents establishing a 60.75 cent futures floor.
Wheat
July 2015 wheat futures closed at $4.88 down 15 cents since last week. July wheat futures traded between $4.83 and $5.03 this week. July wheat to corn price ratio was 1.38. Net sales reported by exporters were within expectations with net sales of 11.6 million bushels for the 2015/16 marketing year. Exports for the same period were down from last week at 10.5 million bushels. Wheat export sales were 20 percent of the USDA estimated total annual exports for the 2015/16 marketing year (June 1 to May 31), compared to a 5-year average of 24 percent. Nationally, this week’s Crop Progress report estimated winter wheat condition at 43 percent good to excellent and 22 percent poor to very poor; winter wheat headed at 96 percent compared to 91 percent last week, 91 percent last year, and a 5-year average of 89 percent; winter wheat harvested at 11 percent compared to 4 percent last week, 15 percent last year, and a 5-year average of 20 percent; and spring wheat condition at 70 percent good to excellent and 4 percent poor to very poor. In Tennessee, winter wheat condition was estimated at 79 percent good to excellent and 3 percent poor to very poor; winter wheat coloring at 96 percent compared to 86 percent last week, 91 percent last year, and a 5-year average of 97 percent; winter wheat mature at 61 percent compared to 38 percent last year and a 5-year average of 70 percent; and winter wheat harvested at 10 percent compared to 4 percent last year and a 5-year average of 33 percent. June/July 2015 cash forward contracts averaged $4.69 with a range of $4.24 to $4.92 at elevators and barge points.
September 2015 wheat futures closed at $4.92 down 18 cents since last week. Jul/Sept and Jul/Jul future spreads were 4 cents and 48 cents, respectively. July 2016 wheat futures closed at $5.36 down 14 cents since last week. Downside price protection could be obtained by purchasing a $5.40 July 2016 Put Option costing 56 cents establishing a $4.84 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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