Futures Crippled By Trade Problems, Record U.S. Yields

DR. AARON SMITH

KNOXVILLE, TENN.
   A sharp rally on Friday allowed corn and wheat futures to finish the week up a couple of cents. Soybeans also had a strong finish Friday closing up 11-13 cents for the day, however, soybean futures were still down 9-12 cents for the week. Cotton moved mostly sideways for the second consecutive week. For now, the December cotton contract appears to be settling in an 80 ½ to 84 ½ cent trading range. Holding the bottom of this rage will be key as we move through September or prices may trend lower.
   August was a disastrous month for commodity futures prices as trade disruptions and record projected domestic yields weighed heavily on markets. December corn opened the month at $3.86 ¼ and closed at $3.65, down 21 ¼ cents for the month. November soybeans opened the month at $9.13 and closed at $8.43 ½, down 69 ½ cents for the month. September wheat opened the month at $5.55 ¼ and closed at $5.18 ½, down 36 ¾ cents for the month. December cotton opened the month at 89.39 and closed at 82.22, down 7.17 cents for the month.
On August 27, 2018, the USDA announced details regarding the Market Facilitation Program (MFP) – a program designed to assist producers affected by retaliatory tariffs on agricultural commodities. Payments will be made to producers on 50 percent of their 2018 production at the following payment rates: $1.65/bu for soybeans; $0.01/bu for corn; $0.14/bu for wheat, and $0.06/lb for cotton. Producers must be 100 percent done harvest for the commodity before applying for payment at an FSA service center. Production records may be required for verification so it is imperative for producers to keep good production records during harvest. Additional program details can be found online at: https://www.usda.gov/media/press-releases/2018/08/27/usda-announces-details-assistance-farmers-impacted-unjustified
   Corn
   Across Tennessee, average corn basis (cash price-nearby futures price) weakened or remained unchanged at Memphis, Northwest Barge Points, Upper-middle, Lower-middle, and Northwest Tennessee. Overall, basis for the week ranged from 20 under to 8 over the September futures contract with an average of 8 under at the end of the week. September 2018 corn futures closed at $3.51, up 3 cents since last Friday. For the week, September 2018 corn futures traded between $3.40 and $3.52. Corn net sales reported by exporters from August 17-23, 2018 were within expectations with net sales of 6.9 million bushels for the 2017/18 marketing year and 20.7 million bushels for the 2018/19 marketing year. Exports for the same time period were up 2 percent compared to last week at 52.9 million bushels. Corn export sales and commitments were 99 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 104 percent. Ethanol production for the week ending August 24 was 1.070 million barrels per day, down 3,000 from the previous week. Ethanol stocks were 23.061 million barrels, down 198,000 barrels. Sep/Dec and Sep/Mar future spreads were 14 and 26 cents, respectively.
   The Crop Progress report estimated corn condition at 68 percent good-to-excellent and 12 percent poor-to-very poor; corn dough at 92 percent compared to 85 percent last week, 85 percent last year, and a 5-year average of 84 percent; corn dented at 61 percent compared to 44 percent last week, 42 percent last year, and a 5-year average of 42 percent; and corn mature at 10 percent compared to 5 percent last week and a 5-year average of 5 percent. In Tennessee, corn condition was estimated at 73 percent good-to-excellent and 7 percent poor-to-very poor; corn dough at 99 percent compared to 98 percent last week, 97 percent last year, and a 5-year average of 97 percent; corn dented at 85 percent compared to 71 percent last week, 83 percent last year, and a 5-year average of 80 percent; corn mature at 27 percent compared to 6 percent last week, 35 percent last year and a 5-year average of 21 percent; and corn harvested at 1 percent compared to 3 percent last year and a 5-year average of 1 percent. In Tennessee, September 2018 corn cash forward contracts averaged $3.29 with a range of $3.21 to $3.37. December 2018 corn futures closed at $3.65, up 3 cents since last Friday. Downside price protection could be obtained by purchasing a $3.70 December 2018 Put Option costing 15 cents establishing a $3.55 futures floor. March 2019 corn futures closed at $3.77, up 2 cents since last Friday.
   Soybeans
   Average soybean basis weakened or remained unchanged at Northwest Barge Points, Lower-middle, Upper-middle, and Northwest Tennessee and strengthened at Memphis. Basis ranged from 66 under to 38 under the September futures contract at elevators and barge points. Average basis at the end of the week was 47 under the September futures contract. September 2018 soybean futures closed at $8.33, down 9 cents since last Friday. For the week, September 2018 soybean futures traded between $8.16 and $8.40. Net sales reported by exporters were within expectations with net sales of 4.1 million bushels for the 2017/18 marketing year and 21.7 million bushels for the 2018/19 marketing year. Exports for the same period were up 55 percent compared to last week at 35.8 million bushels. Soybean export sales and commitments were 103 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 103 percent. September soybean-to-corn price ratio was 2.37 at the end of the week.
   Sep/Nov and Sep/Jan future spreads were 10 and 23 cents, respectively. The Crop Progress report estimated soybean condition at 66 percent good-to-excellent and 11 percent poor-to-very poor; soybeans setting pods at 95 percent compared to 91 percent last week, 92 percent last year, and a 5-year average of 90 percent; and soybeans dropping leaves at 7 percent compared to 5 percent last year and a 5-year average of 4 percent. In Tennessee, soybean condition was estimated at 73 percent good-to-excellent and 6 percent poor-to-very poor; soybeans setting pods at 95 percent compared to 88 percent last week, 89 percent last year, and a 5-year average of 86 percent; and soybeans dropping leaves at 3 percent compared to 3 percent last year and a 5-year average of 2 percent. In Tennessee, Oct/Nov 2018 soybean cash contracts average $7.73 with a range of $7.52 to $8.02. November 2018 soybean futures closed at $8.43, down 12 cents since last Friday. Downside price protection could be achieved by purchasing an $8.50 November 2018 Put Option which would cost 26 cents and set an $8.24 futures floor. Nov/Dec 2018 soybean-to-corn price ratio was 2.31 at the end of the week. January 2019 soybean futures closed at $8.56, down 12 cents since last Friday.
   Cotton
   Delta upland cotton spot price quotes for August 30 were 80.92 cents/lb (41-4-34) and 82.67 cents/lb (31-3-35). Adjusted World Price (AWP) increased 0.43 cents to 74.26 cents. Net sales reported by exporters were up from last week at 150,600 bales for the 2018/19 marketing year and 49,600 for the 2019/20 marketing year. Exports for the same time period were 172,600 bales, up 10 percent from last week. Upland cotton export sales were 60 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 38 percent.
   The Crop Progress report estimated cotton condition at 44 percent good-to-excellent and 31 percent poor-to-very poor; cotton setting bolls at 91 percent compared to 86 percent last week, 92 percent last year, and a 5-year average of 91 percent; and cotton opening bolls at 21 percent compared to 17 percent last week, 17 percent last year, and a 5-year average of 18 percent. In Tennessee, cotton condition was estimated at 82 percent good-to-excellent and 2 percent poor-to-very poor; cotton setting bolls at 99 percent compared to 98 percent last week, 98 percent last year, and a 5-year average of 94 percent; and cotton bolls opening at 23 percent compared to 14 percent last week, 9 percent last year, and a 5-year average of 11 percent. December 2018 cotton futures closed at 82.22, up 0.59 cents since last Friday. For the week, December 2018 cotton futures traded between 81.34 and 84.255 cents. Dec/Mar and Dec/Dec cotton futures spreads were 0.36 cents and -3.96 cents, respectively. Downside price protection could be obtained by purchasing an 83 cent December 2018 Put Option costing 2.9 cents establishing an 80.1 cent futures floor. March 2019 cotton futures closed at 82.58, up 0.79 cents since last Friday. December 2019 cotton futures closed at 78.26, up 1.48 cents since last Friday.
   Wheat
   In Tennessee, August 2018 cash wheat ranged from $4.98 to $5.72 for the week. Wheat net sales reported by exporters were within expectations with net sales of 15.2 million bushels for the 2018/19 marketing year. Exports for the week were down 12 percent compared to last week at 14.9 million bushels. Wheat export sales were 32 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 50 percent. The Crop Progress report estimated spring wheat harvested at 77 percent compared to 60 percent last week, 73 percent last year, and a 5-year average of 61 percent.
   September 2018 wheat futures closed at $5.18, up 4 cents since last Friday. September 2018 wheat futures traded between $4.95 and $5.25 this week. September wheat-to-corn price ratio was 1.48. Sep/Dec and Sep/Jul future spreads were 27 cents and 52 cents, respectively. December 2018 wheat futures closed at $5.45, up 9 cents since last Friday. In Tennessee, June/July 2019 wheat cash contracts ranged from $5.59 to $5.73 for the week. July 2019 wheat futures closed at $5.70, up 4 cents since last Friday. Downside price protection could be obtained by purchasing a $5.80 July 2019 Put Option costing 51 cents establishing a $5.29 futures floor. ∆
   DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee

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