AgWatch


Soybeans, Wheat Prices Down, Cotton Mixed, Corn Slides

DR. AARON SMITH

KNOXVILLE, TENN.
   The USDA released its monthly WASDE report on Thursday. The largest surprise in the report was increasing 2017 projected national average yield to 175.4 bu/acre, up 3.6 bu/acre from last month’s estimate and 0.8 bu/acre over last year’s all-time record. A small increase was anticipated due to favorable conditions the last two months of the growing season, but not the 3.6 bu/acre indicated in the report. Weekly Crop Progress reports indicated corn condition at 66 percent good-to-excellent for the week of October 29, 2017 compared to 74 percent good-to-excellent in 2016 (11 percent poor-to-very poor in 2017 compared to 7 percent last year), so markets were caught a little off guard by such a large increase and as a result corn futures prices decreased 6-7 cents immediately following the report release.
   In Tennessee, corn and soybean yields were projected at 171 bu/acre and 51 bu/acre, respectively. Both estimates were up 1 bu/acre and would be all-time record average yields in Tennessee. Cotton yields were increased 14 lbs/acre to 1,059 lbs/acre, just short of last year’s state average record yield of 1,104 lbs/acre.
   Harvested acres of soybean and cotton are estimated to be up 30,000 and 90,000 acres, respectively, compared to 2016 (1.66 mil-lion and 350,000 acres in 2017). This results in increased state production of 11.31 million bushels of soybeans and 175,000 bales of cotton compared to 2016. Although corn yields are estimated to be a record in Tennessee, production is estimated down 4.775 million bushels compared to last year due to 125,000 fewer acres (705,000 acres in 2017).
   Large national and local supplies for row-crops are likely to keep seasonal price appreciation lower than typical seasonal trends.
   Corn
   December 2017 corn futures closed at $3.43 down 5 cents since last Friday. For the week, December 2017 corn futures traded between $3.40 and $3.50. Across Tennessee, average basis (cash price-nearby futures price) strengthened or remained unchanged at Memphis, Northwest Barge Points, Northwest, Lower-middle, and Upper-middle Tennessee. Overall, basis for the week ranged from 40 under to 15 over the December futures contract with an average of 11 under at the end of the week. Nationally, the Crop Progress report estimated corn harvested at 70 percent compared to 54 percent last week, 84 percent last year, and a 5-year average of 83 percent. In Tennessee, the Crop Progress report estimated corn harvested at 98 percent compared to 97 percent last week, 100 percent last year, and a 5-year average of 97 percent. Dec/Mar and Dec/Dec future spreads were 13 and 46 cents, respectively.
   Corn net sales reported by exporters from October 27 to November 2 were above expectations with net sales of 93.1 million bushels for the 2017/18 marketing year and 22.6 million bushels for the 2018/19 marketing year. Exports for the same time period were down from last week at 19.3 million bushels. Corn export sales and commitments were 41 percent of the USDA estimated total annual exports for the 2017/18 marketing year (September 1 to August 31) compared to a 5-year average of 43 percent. Ethanol production for the week ending November 3 was 1.057 million barrels per day up 1,000 from the previous week. Ethanol stocks were 21.345 million barrels, down 129,000 barrels. In Tennessee, January 2018 cash forward contracts averaged $3.57 with a range of $3.39 to $3.72. March 2018 corn futures closed at $3.56 down 6 cents since last Friday. December 2018 corn futures closed at $3.89 down 4 cents since last Friday. Downside price protection could be obtained by purchasing a $3.90 December 2018 Put Option costing 26 cents establishing a $3.64 futures floor.
   Soybeans
   January 2018 soybean futures closed at $9.87 up 1 cent since last Friday. For the week, January 2018 soybean futures traded between $9.83 and $10.08. Average soybean basis strengthened or remained unchanged at Memphis, Northwest Barge Points, Upper-middle, and Northwest Tennessee and weakened at Lower-middle Tennessee. Basis ranged from 60 under to 8 under the January futures contract at elevators and barge points. Average basis at the end of the week was 29 under the November futures contract. Nationally, the Crop Progress report estimated soybeans harvested at 90 percent compared to 83 percent last week, 92 percent last year, and a 5-year average of 91 percent. In Tennessee, the Crop Progress report estimated soybeans harvested at 68 percent compared to 63 percent last week, 90 percent last year, and a 5-year average of 73 percent.   November/December 2017 soybean-to-corn price ratio was 2.88 at the end of the week.
   Jan/Mar and Jan/Nov future spreads were 11 and 11 cents, respectively. In Tennessee, January 2018 soybean cash contracts average $9.84 with a range of $9.50 to $10.05. Net sales reported by exporters were below expectations with net sales of 42.6 million bushels for the 2017/18 marketing year and 0.01 million bushels for the 2018/19 marketing year. Exports for the same period were down from last week at 92.6 million bushels. Soybean export sales and commitments were 51 percent of the USDA estimated total annual exports for the 2017/18 marketing year (September 1 to August 31), compared to a 5-year average of 67 percent. March 2018 soybean futures closed at $9.98 up 1 cent since last Friday. November 2018 soybean futures closed at $9.98 the same as last Friday. Down-side price protection could be achieved by purchasing a $10.00 November 2018 Put Option which would cost 59 cents and set a $9.41 futures floor. November/December 2018 soybean-to-corn price ratio was 2.57 at the end of the week.
   Cotton
   Delta upland cotton spot price quotes for November 9 were 67.54 cents/lb (41-4-34) and 69.29 cents/lb (31-3-35). Adjusted world price (AWP) increased 0.33 cents to 61.38 cents per pound. Net sales reported by exporters were down from last week with net sales of 205,300 bales for the 2017/18 marketing year and 31,200 bales for the 2018/19 marketing year. Exports for the same period were up from last week at 124,300 bales. Upland cotton export sales were 63 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 49 percent. Dec/Mar and Dec/Dec cotton futures spreads were 0.09 cents and 0.57 cents, respectively.
   Nationally, the Crop Progress report estimated cotton bolls opening at 96 percent compared to 93 percent last week, 98 percent last year, and a 5-year average of 98 percent; and cotton harvested at 54 percent compared to 46 percent last week, 55 percent last year, and a 5-year average of 55 percent. In Tennessee, cotton harvested was estimated at 71 percent compared to 65 percent last week, 84 percent last year, and a 5-year average of 63 percent. December 2017 cotton futures closed at 68.72 cents up 0.33 cents since last Friday. For the week, December 2017 cotton futures traded between 68.07 and 69.48 cents. March 2018 cotton futures closed at 69.14 up 0.37 cents since last Friday. December 2018 cotton futures closed at 69.62 down 0.14 cents since last Friday. Downside price protection could be obtained by purchasing a 70 cent December 2018 Put Option costing 4.8 cents establishing a 65.2 cent futures floor.
   Wheat
   In Memphis, old crop cash wheat ranged from $4.00 to $4.06. Wheat net sales reported by exporters were above expectations with net sales of 28.7 million bushels for the 2017/18 marketing year. Exports for the week were down from last week at 10.9 million bushels. Wheat export sales were 62 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 65 percent. Dec/Mar and Dec/Jul future spreads were 18 cents and 42 cents, respectively.
   December 2017 wheat futures closed at $4.31 up 6 cents since last Friday. December 2017 wheat futures traded between $4.19 and $4.34 this week. December wheat-to-corn price ratio was 1.26. Nationally, the Crop Progress report estimated winter wheat planted at 91 percent compared to 84 percent last week, 90 percent last year, and a 5-year average of 91 percent; winter wheat emerged at 75 percent compared to 65 percent last week, 78 percent last year, and a 5-year average of 77 percent; and winter wheat condition at 55 percent good-to-excellent and 11 percent poor-to-very poor. In Tennessee, winter wheat planted was estimated at 68 percent compared to 55 percent last week, 80 percent last year, and a 5-year average of 67 percent; winter wheat emerged at 44 percent compared to 28 percent last week, 43 percent last year, and a 5-year average of 39 percent; and winter wheat condition at 52 percent good-to-excellent and 2 percent poor-to-very poor. March 2018 wheat futures closed at $4.49 up 5 cents from last Friday. In Tennessee, June/July 2018 cash forward contracts ranged from $4.39 to $4.92 for the week. July 2018 wheat futures closed at $4.72 up 2 cents since last Friday. Downside price protection could be obtained by purchasing a $4.80 July 2018 Put Option costing 31 cents establishing a $4.49 futures floor. ∆
   DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee

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