AgWatch


Markets Will Focus On Harvest Weather/Crop Quality And Projected Yields

DR. AARON SMITH

KNOXVILLE, TENN.
   For the month of August, December corn opened at $3.83 and closed at $3.57 ¾, down 25 ¼ cents with a high of $3.89 and a low of $3.44 ¼; November soybeans opened at $9.96 ¾ and closed at $9.45 ¼, down 51 ½ cents with a high of $10.00 ¼ and a low of $9.21; December cotton opened at 68.86 and closed at 70.93, up 2.07 cents with a high of 71.20 and a low of 66.64; and July wheat opened at $5.37 and closed at $4.83 ½ down 53 ½ cents with a high of $5.43 ½ and a low of $4.74 ¼.
   As September begins, markets will focus on harvest weather/crop quality and projected yields. Currently, USDA projects national average yields (survey based data) at 169.5 bu/acre, 49.4 bu/acre, and 892 lbs/acre, for corn, soybeans, and upland cotton, respectively. In Tennessee yields are projected to be 166 bu/acre, 45 bu/acre, and 1,036 lbs/acre, for corn, soybeans, and upland cotton, respectively.
   Projected yields for all three crops in Tennessee are above the 1980-2016 projected trend-line yields for 2017. The USDA survey based projected yields (above) for corn, soybeans, and cotton are above the trend-line by 16.4 bu/acre, 2.6 bu/acre, and 69.9 lbs/acre (2017 trend-line projected yields are 149.6 bu/acre, 42.5 bu/acre, and 966.1 lbs/acre, for corn, soybeans, and cotton, respectively, in Tennessee). National average yields are also projected above trend-line at 167.6 bu/acre (1.9 bu/acre above), 47.3 bu/acre (2.1 bu/acre above), and 857.9 lbs/acre (20.1 lbs/acre above).
   National yields will not be the record setting result of 2016 for corn and soybeans, but they will still be on the high side of the long term trend-line. However, Tennessee average yields will be very close to records for corn (168 bu/acre – 2014), cotton (1,104 lbs/acre – 2016), and soybeans (46.5 bu/acre – 2013). If projected yields in Tennessee are realized, Tennessee producers can anticipate a weaker basis than in recent years.
   Corn
   September 2017 corn futures closed at $3.40 up 2 cents since last Friday. For the week, September 2017 corn futures traded between $3.28 and $3.45. Across Tennessee, average basis (cash price-nearby futures price) strengthened or remained unchanged at Upper-middle, Northwest, and Lower-Middle Tennessee and weakened at Memphis and Northwest Barge Points. Overall, basis for the week ranged from 20 under to 16 over the September futures contract with an average of 6 under the September futures contract at the end of the week. Corn net sales reported by exporters from August 18-24 were above expectations with net sales of 7.4 million bushels for the 2016/17 marketing year and 31.7 million bushels for the 2017/18 marketing year. Exports for the same time period were up from last week at 38.7 million bushels. Corn 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 105 percent. Ethanol production for the week ending August 25 was 1.042 million barrels per day down 10,000 from the previous week. Ethanol stocks were 21.303 million barrels, down 206,000 barrels. Sep/Dec and Sep/Mar future spreads were 15 and 27 cents, respectively.
   Nationally, the Crop Progress report estimated corn dough or beyond at 86 percent compared to 76 percent last week, 91 percent last year, and a 5-year average of 87 percent; corn dented at 44 percent compared to 29 percent last week, 57 percent last year, and a 5-year average of 51 percent; corn mature at 6 percent compared to 8 percent last year and a 5-year average of 10 percent; and corn condition at 62 percent good-to-excellent and 12 percent poor-to-very poor. In Tennessee, the Crop Progress report estimated corn condition at 86 percent good-to-excellent and 4 percent poor-to-very poor; corn dough or beyond at 97 percent compared to 96 percent last week, 99 percent last year, and a 5-year average of 98 percent; corn dented at 85 percent compared to 72 percent last week, 89 percent last year, and a 5-year average of 84 percent; corn mature at 38 percent compared to 20 percent last week, 39 percent last year, and a 5-year average of 32 percent and corn harvested at 4 percent compared to 2 percent last year and a 5-year average of 8 percent. In Tennessee, September 2017 cash forward contracts averaged $3.25 with a range of $3.12 to $3.58. December 2017 corn futures closed at $3.55 up 2 cents since last Friday. Downside price protection could be obtained by purchasing a $3.60 December 2017 Put Option costing 15 cents establishing a $3.45 futures floor. March 2018 corn futures closed at $3.67 up 1 cent since last Friday.
   Soybeans
   September 2017 soybean futures closed at $9.42 up 3 cents since last Friday. For the week, September 2017 soybean futures traded between $9.21 and $9.44. Average soybean basis strengthened at Lower-middle, Upper-middle, and Northwest Tennessee and weakened at Memphis and North West Barge Points. Basis ranged from 36 under to 32 over the September futures contract at elevators and barge points. Average basis at the end of the week was even the September futures contract. Net sales reported by exporters were within expectations with net sales of 4.5 million bushels for the 2016/17 marketing year and 57.3 million bushels for the 2017/18 marketing year. Exports for the same period were down from last week at 25.2 million bushels. Soybean export sales and commitments were 104 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 103 percent. September soybean-to-corn futures price ratio was 2.77 at the end of the week. Sep/Nov and Sep/Jan future spreads were 7 cents and 17 cents, respectively.
   Nationally, the Crop Progress report estimated soybeans setting pods at 93 percent compared to 87 percent last week, 93 percent last year, and a 5-year average of 92 percent; soybeans dropping leaves at 6 percent compared to 5 percent last year and a 5-year average of 5 percent; and soybean condition at 61 percent good-to-excellent and 11 percent poor-to-very poor. In Tennessee, the Crop Progress report estimated soybean condition at 80 percent good-to-excellent and 6 percent poor-to-very poor; soybeans blooming at 97 percent compared to 94 percent last week, 99 percent last year, and a 5-year average of 98 percent; soybeans setting pods at 90 percent compared to 84 percent last week, 90 percent last year, and a 5-year average of 88 percent; and soybeans dropping leaves at 3 percent compared to 3 percent last year and a 5-year average of 3 percent. In Tennessee, October/November 2017 soybean cash contracts average $9.28 with a range of $8.93 to $9.56. November/December 2017 soybean-to-corn price ratio was 2.67 at the end of the week. November 2017 soybean futures closed at $9.49 up 5 cents since last Friday. Downside price protection could be achieved by purchasing a $9.50 November 2017 Put Option which would cost 22 cents and set a $9.28 futures floor. January 2018 soybean futures closed at $9.59 up 6 cents since last Friday.
   Cotton
   Delta upland cotton spot price quotes for August 31 were 70.73 cents/lb (41-4-34) and 71.98 cents/lb (31-3-35). Adjusted world price (AWP) increased 2.2 cents to 61.85 cents per pound. Net sales reported by exporters were down from last week with net sales of 230,700 bales for the 2017/18 marketing year and 26,400 for the 2018/19 marketing year. Exports for the same period were down from last week at 156,300 bales. Upland cotton export sales were 53 percent of the USDA estimated total annual exports for the 2017/18 marketing year (August 1 to July 31), compared to a 5-year average of 36 percent. October 2017 cotton futures closed at 72.55 up 3.94 cents since last Friday. Oct/Dec and Dec/Mar cotton futures spreads were -0.67 cents and -0.88 cents, respectively.
   Nationally, the Crop Progress report estimated cotton setting bolls at 93 percent compared to 88 percent last week, 95 percent last year, and a 5-year average 93 percent; cotton bolls opening at 18 percent compared to 12 percent last week, 22 percent last year, and a 5-year average of 20 percent; and cotton condition at 65 percent good-to-excellent and 11 percent poor-to-very poor. In Tennessee, cotton condition was estimated at 88 percent good-to-excellent and 4 percent poor-to-very poor; cotton setting bolls at 97 percent compared to 97 percent last week, 100 percent last year, and a 5-year average of 95 percent; and cotton bolls opening at 9 percent compared to 7 percent last week, 16 percent last year, and a 5-year average of 17 percent. December 2017 cotton futures closed at 71.88 cents up 3.73 cents since last Friday. For the week, December 2017 cotton futures traded between 68.56 and 71.95 cents. Down-side price protection could be obtained by purchasing a 72 cent December 2017 Put Option costing 2.85 cents establishing a 69.15 cent futures floor. March 2018 cotton futures closed at 71 up 3.07 cents since last Friday.
   Wheat
   In Tennessee this week, cash wheat ranged from $3.60 to $4.17. Wheat net sales reported by exporters were within expectations with net sales of 19.7 million bushels for the 2017/18 marketing year. Exports for the week were up from last week at 26.4 million bushels. Wheat export sales were 46 percent of the USDA estimated total annual exports for the 2017/18 marketing year (June 1 to May 31), compared to a 5-year average of 47 percent. Sep/Dec and Sep/Jul future spreads were 18 cents and 65 cents, respectively.
   September 2017 wheat futures closed at $4.20 up 11 cents since last Friday. September 2017 wheat futures traded between $3.94 and $4.21 this week. September wheat-to-corn price ratio was 1.24. Nationally, the Crop Progress report estimated spring wheat harvested at 76 percent compared to 58 percent last week, 79 percent last year, and a 5-year average of 66 percent. December 2017 wheat futures closed at $4.38 up 3 cents from last Friday. In Memphis, July 2018 cash forward contracts ranged from $4.73 to $4.89 for the week. July 2018 wheat futures closed at $4.85 the same as last Friday. Downside price protection could be obtained by purchasing a $4.90 July 2018 Put Option costing 34 cents establishing a $4.56 futures floor. ∆
   DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee

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