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Concern Over Wet Fields Supports Prices
DR. AARON SMITH
KNOXVILLE, TENN.
Corn, soybeans, and wheat were up; cotton was mixed for the week. In the past three weeks, December corn futures have rallied nearly 70 cents and are currently higher than last year at $4.37. During the same time, November soybean futures are up $1.30 closing on Thursday at $10.30. Concerns over wet fields and flooding started the rally and have continued to be supportive of prices. This past week the USDA’s Acreage and Quarterly Stocks reports added further fuel to the rally. Overall both reports were supportive to corn and soybean futures however the Acreage report was the primary catalyst for corn while the Quarterly Stocks report provided the ammunition for soybeans. Domestic corn planted acreage was estimated down 2 percent from last year, at 88.897 million acres, the lowest since 2010. Soybean stocks as at June 1 were estimated at 625 million bushels, below the average trade estimate of 670 million bushels. The lower soybean stocks indicate that the USDA will likely have to revise their estimated carryover into the 2015/16 marketing year, down from the current estimate of 330 million bushels. December cotton futures broke out of their 9 month trading range posting highs not seen since September 19, 2014. Domestic cotton planted acreage was estimated at 8.998 million acres down 18 percent from 2014 and the lowest since 1983. Similar to corn and soybeans, wheat futures have rallied significantly the past three weeks. Heavy and persistent rainfall across much of the Mid-south and Corn Belt have delayed harvest and created quality concerns in many areas. Wheat stocks and domestic acreage from the June 30th reports were higher than trade estimates at 753 million bushels and 56.079 million acres, respectively. A summary of both the Quarterly Stocks and Acreage reports can be found on our Crop Economics page.
Corn
September 2015 corn futures closed at $4.28 up 36 cents from last week. This week September 2015 corn futures prices traded between $3.90 and $4.30. Across Tennessee average basis (cash price- nearby future price) strengthened at Northwest, Northwest Barge Points, and Lower-middle Tennessee and weakened at Memphis and Upper-middle Tennessee. Overall, average basis for the week ranged from 15 under to 48 over the July futures contract with an average of 12 over at the end of the week. July corn futures closed at $4.19. Ethanol production for the week ending June 26th was 968,000 barrels per day down 26,000 barrels per day from last week. Ending ethanol stocks were 19.532 million barrels down 308,000 barrels from last week. Corn net sales reported by exporters from June 19th to 25th were within expectations with net sales of 23.4 million bushels for the 2014/15 marketing year and 9.4 million bushels for the 2015/16 marketing year. Exports for the same time period were down from last week at 40.3 million bushels. Corn export sales and commitments were 99 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. Sep/Dec and Sep/Mar future spreads were 9 cents and 18 cents, respectively.
December 2015 corn futures closed at $4.37 up 35 cents since last week. September 2015 cash forward contracts averaged $4.04 with a range of $3.56 to $4.42. Nationally, this week’s Crop Progress report estimated corn condition at 68 percent good to excellent and 8 percent poor to very poor; and corn silking at 4 percent compared to 4 percent last year and a 5-year average of 8 percent. In Tennessee, corn condition was estimated at 79 percent good to excellent and 5 percent poor to very poor; and corn silking at 24 percent compared to 6 percent last week, 23 percent last year, and a 5-year average of 47 percent. Downside price protection could be obtained by purchasing a $4.30 September 2015 Put Option costing 23 cents establishing a $4.07 futures floor.
Soybeans
August 2015 soybean futures closed at $10.38 up 41 cents since last week. This week August 2015 soybean futures traded between $9.85 and $10.54. Aug/Sep soybean to corn price ratio was 2.43 at the end of the week. For the week, average soybean basis strengthened at Upper-middle Tennessee and weakened at Northwest Barge Points, Memphis, Northwest, and Lower-middle Tennessee. Basis ranged from 10 under to 40 over the July futures contract at elevators and barge points. Average basis at the end of the week was 11 over the July futures contract. July soybean futures closed at $10.45. Net sales reported by exporters were below expectations with net sales reductions of 0.3 million bushels for the 2014/15 marketing year and net sales of 4.7 million bushels for the 2015/16 marketing year. Exports for the same period were up from last week at 10.6 million bushels. Soybean export sales and commitments were 103 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 102 percent. September 2015 soybean futures closed at $10.31 up 42 cents since last week. Aug/Sep and Aug/Nov future spreads were -7 cents and -8 cents, respectively.
November 2015 soybean futures closed at $10.30 up 44 cents from last week. Nov/Dec 2015 soybean to corn price ratio was 2.36. October/November 2015 cash forward contracts averaged $10.05 with a range of $9.36 to $10.47 at elevators and barge points. Nationally, this week’s Crop Progress report estimated soybean condition at 63 percent good to excellent and 9 percent poor to very poor; soybeans planted at 94 percent compared to 90 percent last week, 95 percent last year, and a 5-year average of 97 percent; soybeans emerged at 89 percent compared to 84 percent last week, 93 percent last year, and a 5-year average of 94 percent; and soybeans blooming at 8 percent compared to 9 percent last year and a 5-year average of 9 percent. In Tennessee, soybean condition was estimated at 70 percent good to excellent and 6 percent poor to very poor; soybeans planted were estimated at 91 percent compared to 82 percent last week, 87 percent last year, and a 5-year average of 92 percent; soybeans emerged at 74 percent compared to 64 percent last week, 70 percent last year, and a 5-year average of 79 percent; and soybeans blooming at 5 percent compared to 8 percent last year and a 5-year average of 11 percent. Downside price protection could be achieved by purchasing a $10.40 November 2015 Put Option which would cost 53 cents and set a $9.87 futures floor.
Cotton
December 2015 cotton futures closed at 67.39 down 0.12 cents since last week. December 2015 cotton futures traded between 65.05 and 68.11 cents this week. Adjusted world price (AWP) increased 2.14 cents to 52.36 cents per pound. Delta upland cotton spot price quotes for July 2 were 65.32 to 68.07 cents/lb. Net sales reported by exporters were up from last week with net sales of 80,500 bales for the 2014/15 marketing year and 51,600 bales for the 2015/16 marketing year. Exports for the same period were up from last week at 230,400 bales. Upland cotton export sales were 108 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 108 percent. Nationally, this week’s Crop Progress report estimated cotton condition at 56 percent good to excellent and 8 percent poor to very poor; cotton planted at 98 percent compared to 94 percent last week, 100 percent last year, and a 5-year average of 100 percent; cotton squaring at 35 percent compared to 22 percent last week, 34 percent last year, and a 5-year average of 40 percent; cotton setting bolls at 5 percent compared to 6 percent last year and 5-year average of 8 percent. In Tennessee, cotton condition was estimated at 53 percent good to excellent and 9 percent poor to very poor; cotton planted at 100 percent compared to 100 percent last week, 100 percent last year, and a 5-year average of 100 percent; cotton squaring at 33 percent compared to 20 percent last week, 48 percent last year, and a 5-year average of 44 percent; and cotton setting bolls at 0 percent compared to 4 percent last year and a 5-year average of 1 percent. Downside price protection could be obtained by purchasing a 68 cent December 2015 Put Option costing 3.57 cents establishing a 64.43 cent futures floor.
Dec/Mar and Dec/Dec cotton futures spreads were 0.03 cents and -1.49 cents, respectively. December 2016 cotton futures closed at 65.90 down 0.27 cents since last week.
Wheat
September 2015 wheat futures closed at $5.90 up 22 cents since last week. September wheat futures traded between $5.62 and $6.17 this week. September wheat to corn price ratio was 1.38. Net sales reported by exporters were within expectations with net sales of 13.4 million bushels for the 2015/16 marketing year. Exports for the same period were down from last week at 13.3 million bushels. Wheat export sales were 23 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 28 percent. Nationally, this week’s Crop Progress report estimated winter wheat condition at 41 percent good to excellent and 23 percent poor to very poor; winter wheat harvested at 38 percent compared to 19 percent last week, 42 percent last year, and a 5-year average of 46 percent; spring wheat condition at 72 percent good to excellent and 5 percent poor to very poor; and spring wheat headed at 49 percent compared to 23 percent last week 24 percent last year and a 5-year average of 29 percent. In Tennessee, winter wheat condition was estimated at 80 percent good to excellent and 3 percent poor to very poor; winter wheat mature at 97 percent compared to 89 percent last week, 96 percent last year, and a 5-year average of 98 percent; and winter wheat harvested at 83 percent compared to 57 percent last week, 54 percent last year, and a 5-year average of 81 percent. July 2015 cash forward contracts averaged $5.76 with a range of $5.23 to $6.15 at elevators and barge points.
December 2015 wheat futures closed at $5.99 up 23 cents since last week. Sep/Dec and Sep/Jul future spreads were 9 cents and 18 cents, respectively. July 2016 wheat futures closed at $6.08 up 19 cents since last week. Downside price protection could be obtained by purchasing a $6.10 July 2016 Put Option costing 66 cents establishing a $5.44 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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