AgWatch


USDA Crop Progress Report Shows Winter Wheat In Good Condition

DR. AARON SMITH

KNOXVILLE, TENN.
   Corn, cotton, soybeans, and wheat were down for the week. Price declines for corn, soybeans, and wheat moderated this week as markets search for new information. With the USDA March reports out of the way, focus will now shift to planting progress and weather forecasts.
   Since early October, December corn has traded mostly between $3.75 and $4.00 with only occasional moves outside of this range.
November soybeans have decreased over 70 cents since the beginning of March. Fortunately, the projected price for crop insurance was set at $10.19 providing some revenue support at a higher level than current market offerings. 
   Nearby cotton futures abandoned its pursuit of the 80 cent level declining over 3 cents and falling back below 75 cents. Cotton harvest futures are trading below 73 cents after a 1.8 cent decline this week.  
   The first Crop Progress report of 2017 was released this past Monday indicating 51 percent of domestic winter wheat was in good-to-excellent condition. July wheat futures have traded flat the past three weeks, between $4.30 and $4.45.
   Corn
   May 2017 corn futures closed at $3.59 down 5 cents since last Friday. For the week, May 2017 corn futures traded between $3.57 and $3.71. Across Tennessee, average basis (cash price-nearby futures price) weakened or remained unchanged at Memphis, Northwest, and Upper-middle Tennessee and strengthened at Northwest Barge Points and Lower-middle Tennessee. Overall, basis for the week ranged from 6 under to 30 over the May futures contract with an average of 6 over at the end of the week. Corn net sales reported by exporters from March 24-30 were above expectations with net sales of 44.8 million bushels for the 2016/17 marketing year and 1.4 million bushels for the 2017/18 marketing year. Exports for the same time period were up from last week at 62.9 million bushels. Corn export sales and commitments were 86 percent of the USDA estimated total annual exports for the 2016/17 marketing year (September 1 to August 31) compared to a 5-year average of 82 percent. Ethanol production for the week ending March 31 was 1.019 million barrels per day down 35,000 from last week. Ethanol stocks were 23.705 million barrels, up 448,000 barrels. May/Jul and May/Dec future spreads were 8 and 25 cents, respectively. July 2017 corn futures closed at $3.67 down 4 cents since last Friday.
   In Tennessee, the Crop Progress report estimated corn planted at 1 percent compared to 5 percent last year and a 5-year average of 5 percent. In Tennessee, September 2017 cash forward contracts averaged $3.69 with a range of $3.42 to $3.92. December 2017 corn futures closed at $3.84 down 4 cents since last Friday. Downside price protection could be obtained by purchasing a $3.90 December 2017 Put Option costing 31 cents establishing a $3.59 futures floor.
   Soybeans 
   May 2017 soybean futures closed at $9.42 down 4 cents since last Friday. For the week, May 2017 soybean futures traded between $9.36 and $9.49. Average soybean basis weakened or remained unchanged at Memphis, Lower-middle, Upper-middle, and Northwest Tennessee and strengthened at Northwest Barge Points. Basis ranged from 37 under to 4 under the May futures contract at elevators and barge points. Average basis at the end of the week was 16 under the May futures contract. Net sales reported by exporters were above expectations with net sales of 17.7 million bushels for the 2016/17 marketing year and 14.5 million bushels for the 2017/18 marketing year. Exports for the same period were down from last week at 27.7 million bushels. Soybean export sales and commitments were 100 percent of the USDA estimated total annual exports for the 2016/17 marketing year (September 1 to August 31), compared to a 5-year average of 94 percent. May soybean-to-corn futures price ratio was 2.62 at the end of the week. May/Jul and May/Nov future spreads were 11 cents and 7 cents, respectively. July 2017 soybean futures closed at $9.53 down 4 cents since last Friday.
   In Tennessee, October / November 2017 soybean cash contracts average $9.34 with a range of $9.09 to $9.54.  November/December 2017 soybean-to-corn price ratio was 2.47 at the end of the week. November 2017 soybean futures closed at $9.49 down 5 cents since last Friday. Downside price protection could be achieved by purchasing a $9.60 November 2017 Put Option which would cost 58 cents and set a $9.02 futures floor.
   Cotton 
   May 2017 cotton futures closed at 73.46 down 3.87 cents since last Friday. For the week, May 2017 cotton futures traded between 73.38 and 78.07 cents. Delta upland cotton spot price quotes for April 6 were 72.01 cents/lb (41-4-34) and 73.26 cents/lb (31-3-35). Adjusted world price (AWP) decreased 0.62 cents to 67.41 cents per pound. Net sales reported by exporters were down from last week with net sales of 270,000 bales for the 2016/17 marketing year and 121,000 bales for the 2017/18 marketing year. Exports for the same period were up from last week at 447,300 bales. Upland cotton export sales were 103 percent of the USDA estimated total annual exports for the 2016/17 marketing year (August 1 to July 31), compared to a 5-year average of 94 percent. July 2017 cotton futures closed at 75.47 down 3.12 cents since last Friday. May/Jul and May/Dec cotton futures spreads were 2.01 cents and -1.17 cents, respectively.
   The Crop Progress report estimated cotton planted at 4 percent compared to 3 percent last year and a 5-year average of 4 percent. December 2017 cotton futures closed at 72.29 down 1.8 cents since last Friday. Downside price protection could be obtained by purchasing a 73 cent December 2017 Put Option costing 4.27 cents establishing a 68.73 cent futures floor.
   Wheat
   May 2017 wheat futures closed at $4.24 down 2 cents since last Friday. May 2017 wheat futures traded between $4.19 and $4.34 this week. May wheat-to-corn price ratio was 1.18.Wheat net sales reported by exporters were above expectations with net sales of 20.9 million bushels for the 2016/17 marketing year and 3.2 million bushels for the 2017/18 marketing year. Exports for the week were up from last week at 20.8 million bushels. Wheat export sales were 97 percent of the USDA estimated total annual exports for the 2016/17 marketing year (June 1 to May 31), compared to a 5-year average of 99 percent. In Memphis, old crop cash wheat ranged from $4.38 to $4.44. May/Jul and May/Sep future spreads were 12 cents and 25 cents, respectively.
   The Crop Progress report estimated winter wheat condition at 51 percent good-to-excellent and 14 percent poor-to-very-poor. In Tennessee, winter wheat condition was reported at 48 percent good-to-excellent and 18 percent poor-to-very poor and winter wheat jointed at 54 percent compared to 26 percent last year. In Tennessee, June/July 2017 cash wheat ranged from $4.10 to $4.67. July 2017 wheat futures closed at $4.36 down 3 cents from last Friday. Downside price protection could be obtained by purchasing a $4.40 July 2017 Put Option costing 20 cents establishing a $4.20 futures floor. July 2017 wheat-to-corn price ratio was 1.19.  September 2017 wheat futures closed at $4.49 down 4 cents since last Friday. ∆
   DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee

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