Corn, Soybeans, And Wheat Were Up; Cotton Was Down For The Week

DR. AARON SMITH

KNOXVILLE, TENN.
   Has a bottom been established in soybean and corn markets? The current low in the December corn contract is $3.50 ¼ established on July 12. The current low in the November soybean contract is $8.26 ¼ established on July 16. For corn, the supply and demand fundamentals paint a much more bullish picture than soybeans. For example, global corn stocks are projected down over 1.5 billion bushels year-over-year, while global soybean stocks are projected up 82 million bushels. Global demand for both commodities remains strong, however trade disputes continue to weigh heavily on agricultural commodities. Approximately 47 percent of US soybean production and 15 percent of corn production are exported annually, as such disruptions to global trade adversely affects soybean prices more than corn prices. At this point in time, a swift resolution to the trade war with China appears unlikely. Whether a bottom has been established in corn and soybeans will depend on further escalation of the trade war and how weather progresses between now and harvest. Currently, a stronger argument can be made for a bottom in the corn market than the soybean market.
   Cotton markets are establishing a trading range of 82-89 cents. For Tennessee producers this represents a good opportunity to secure price on additional production for two reasons: 1) the current prices are above most producers breakeven and will result in a profitable outcome; and 2) current growing conditions favor above trend line yields (92 percent of the Tennessee cotton crop is rated good-to-excellent), reducing production risk.
   Corn
   Across Tennessee, average corn basis (cash price-nearby futures price) weakened or remained unchanged at Memphis, Northwest Barge Points, Northwest, Lower-middle, and Upper-middle Tennessee. Overall, basis for the week ranged from 21 under to 30 over the September futures contract with an average of 3 over at the end of the week. September 2018 corn futures closed at $3.55, up 14 cents since last Friday. For the week, September 2018 corn futures traded between $3.38 and $3.55. Corn net sales reported by exporters from July 6-12 were above expectations with net sales of 25.2 million bushels for the 2017/18 marketing year and 30.5 million bushels for the 2018/19 marketing year. Exports for the same time period were down 7 percent compared to last week at 50.9 million bushels. Corn export sales and commitments were 96 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 102 percent. Ethanol production for the week ending July 13 was 1.064 million barrels per day, up 31,000 from the previous week. Ethanol stocks were 21.768 million barrels, down 625,000 barrels. Sep/Dec and Sep/Mar future spreads were 14 and 25 cents, respectively.
   The Crop Progress report estimated corn condition at 72 percent good-to-excellent and 9 percent poor-to-very poor; and corn silking at 63 percent compared to 37 percent last week, 37 percent last year, and a 5-year average of 37 percent. In Tennessee, corn condition was estimated at 83 percent good-to-excellent and 2 percent poor-to-very poor; corn silking at 91 percent compared 83 percent last week, 89 percent last year, and a 5-year average of 83 percent; and corn doughing at 41 percent compared to 25 percent last week, 28 percent last year, and a 5-year average of 23 percent. In Tennessee, September 2018 corn cash forward contracts averaged $3.43 with a range of $3.26 to $3.71. December 2018 corn futures closed at $3.69, up 15 cents since last Friday. Downside price protection could be obtained by purchasing a $3.70 December 2018 Put Option costing 18 cents establishing a $3.52 futures floor. March 2019 corn futures closed at $3.80, up 14 cents since last Friday.
   Soybeans
   Average soybean basis weakened at Memphis, Northwest Barge Points, Northwest, and Upper-middle Tennessee and strengthened at Lower-middle Tennessee. Basis ranged from 36 under to 16 over the August futures contract at elevators and barge points. Average basis at the end of the week was 5 under the August futures contract. August 2018 soybean futures closed at $8.49, up 31 cents since last Friday. For the week, August 2018 soybean futures traded between $8.10 and $8.53. Net sales reported by exporters were within expectations with net sales of 9.3 million bushels for the 2017/18 marketing year and 22.5 million bushels for the 2018/19 marketing year. Exports for the same period were down 18 percent compared to last week at 22.2 million bushels. Soybean ex-port sales and commitments were 102 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 102 percent. September soybean-to-corn price ratio was 2.41 at the end of the week.
   Aug/Sep and Aug/Nov future spreads were 6 and 15 cents, respectively. September 2018 soybean futures closed at $8.55, up 31 cents since last Friday. The Crop Progress report estimated soybean condition at 69 percent good-to-excellent and 8 percent poor-to-very poor; soybeans blooming at 65 percent compared to 47 percent last week, 49 percent last year, and a 5-year average of 45 percent; and soybeans setting pods at 26 percent compared to 11 percent last week, 15 percent last year, and a 5-year average of 11 percent. In Tennessee, soybean condition was estimated at 84 percent good-to-excellent and 1 percent poor-to-very poor; soybeans emerged at 97 percent compared to 96 percent last week, 96 percent last year, and a 5-year average of 93 percent; soybeans blooming at 58 percent compared to 42 percent last week, 55 percent last year, and a 5-year average of 38 percent; and soybeans setting pods at 25 percent compared to 10 percent last week, 20 last year, and a 5-year average of 13 percent. In Tennessee, Oct/Nov 2018 soy-bean cash contracts average $8.32 with a range of $8.05 to $8.52. November 2018 soybean futures closed at $8.64, up 30 cents since last Friday. Downside price protection could be achieved by purchasing an $8.80 November 2018 Put Option which would cost 47 cents and set an $8.33 futures floor. Nov/Dec 2018 soybean-to-corn price ratio was 2.34 at the end of the week.
   Cotton
   Delta upland cotton spot price quotes for July 19 were 86.8 cents/lb (41-4-34) and 88.55 cents/lb (31-3-35). Adjusted World Price (AWP) increased 3.33 cents to 79.5 cents. Net sales reported by exporters were down from last week with net sales of 12,900 bales for the 2017/18 marketing year and 247,700 bales for the 2018/19 marketing year. Exports for the same period were down 12 percent compared to last week at 227,300 bales. Upland cotton export sales were 108 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 106 percent.
   The Crop Progress report estimated cotton condition at 41 percent good-to-excellent and 28 percent poor-to-very poor; cotton squaring at 72 percent compared to 59 percent last week, 69 percent last year, and a 5-year average of 70 percent; and cotton setting bolls at 31 percent compared to 21 percent last week, 25 percent last year, and a 5-year average of 24 percent. In Tennessee, cotton condition was estimated at 92 percent good-to-excellent and 0 percent poor-to-very poor; cotton squaring at 93 percent compared to 80 percent last week, 82 percent last year, and a 5-year average of 72 percent; and cotton setting bolls at 33 percent compared to 20 last week, 26 percent last year, and a 5-year average of 19 percent. December 2018 cotton futures closed at 87.08, down 0.76 cents since last Friday. For the week, December 2018 cotton futures traded between 86.2 and 88.8 cents. Dec/Mar and Dec/Dec cotton futures spreads were -0.12 cents and -6.83 cents, respectively. Downside price protection could be obtained by purchasing an 88 cent December 2018 Put Option costing 4.85 cents establishing an 83.15 cent futures floor. March 2019 cotton futures closed at 86.96, down 0.66 cents since last Friday. December 2019 cotton futures closed at 80.25, down 1.09 cents since last Friday.
   Wheat
   In Tennessee, July 2018 wheat cash contracts ranged from $4.78 to $5.20 for the week. Wheat net sales reported by exporters were within expectations with net sales of 11.0 million bushels for the 2018/19 marketing year. Exports for the week were up 52 percent compared to last week at 16.0 million bushels. Wheat export sales were 24 percent of the USDA estimated total annual exports for the 2018/19 marketing year (June 1 to May 31), compared to a 5-year average of 37 percent. The Crop Progress report estimated winter wheat harvested at 74 percent compared to 63 percent last week, 74 percent last year, and a 5-year average of 71 percent; spring wheat condition at 80 percent good-to-excellent and 4 percent poor-to-very poor; and spring wheat headed at 93 percent compared to 81 percent last week, 89 percent last year, and a 5-year average of 85 percent. In Tennessee, the Crop Progress report estimated winter wheat harvested at 100 percent compared to 98 percent last week.
   September 2018 wheat futures closed at $5.16, up 19 cents since last Friday. September 2018 wheat futures traded between $4.86 and $5.19 this week. September wheat-to-corn price ratio was 1.45. Sep/Dec and Sep/Jul future spreads were 17 cents and 44 cents, respectively. December 2018 wheat futures closed at $5.33, up 21 cents since last Friday. In Tennessee, June/July 2019 wheat cash contracts ranged from $5.30 to $5.45 for the week. July 2019 wheat futures closed at $5.60, up 18 cents since last Friday. Downside price protection could be obtained by purchasing a $5.70 July 2019 Put Option costing 52 cents establishing a $5.18 futures floor. ∆
   DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee

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