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Grain Prices Drop, Cotton is Mixed
DR. AARON SMITH
KNOXVILLE, TENN.
Corn, wheat, and soybeans were down; and cotton was mixed for the last two weeks. Trading over the holiday season slowed however has begun to pick up as we start the New Year. Many traders are wondering how long it will take for farmers to open up bins and start selling 2013 corn. March corn futures set a new low on Friday briefly trading below $4.18/bu. Soybeans have dropped more than 50 cents over the past two weeks. Many are anticipating upward domestic supply adjustments in the next WASDE released January 10th. Additionally, weather in South America has remained favorable for the record planted soybean acreage. Cotton continues to climb closer to 80 cents after a brief stint at near 75 cents. Global wheat supplies continue to drag down domestic prices.
Corn
March 2014 corn futures closed at $4.23 down 10 cents from December 20th with support at $4.13 and resistance at $4.30. Limited cash bids were reported for the past week due to the holidays. Memphis reported cash corn sales at $4.48 to $4.50/bu on January 2nd. Corn net sales reported by exporters for the 2013/14 marketing year from December 20th to 26th were down from last week at 6.1 million bushels, primarily to Japan, Peru, the Dominican Republic, Columbia, and Guatemala. Net sales reported by exporters for the 2014/15 marketing year for the week were 0.8 million bushels to Mexico. Exports for the same time period were 33.2 million bushels primarily to South Korea, Japan, China, Mexico, and Peru. Corn export sales and commitments are 77 percent of the USDA estimated total annual exports for the 2013/14 marketing year (September 1 to August 31) compared to a 5-year average of 56 percent. Ethanol production for the week ending December 20th was 926,000 barrels per day down 2,000 barrels per day. Ending ethanol stocks were 15.660 million barrels up 35,000 barrels. May 2014 corn futures were trading at $4.31 down 10 cents from December 20th. Mar/May and Mar/Sep future spreads were 8 cents and 22 cents.
September 2014 corn futures closed at $4.45 down 9 cents from December 20th with support at $4.36 and resistance at $4.50. December 2014 corn futures have traded between $4.45 and $4.70/bu and are currently testing the lower end of the range. Protecting against the potential for dropping prices for harvest 2014 is strongly encouraged for all producers. Downside price protection could be obtained by purchasing a $4.50 September 2014 Put Option costing 38 cents establishing a $4.12 futures floor.
Soybeans
January 2014 soybean futures closed at $12.89 down 50 cents since December 20th with support at $12.58 and resistance at $12.85. Soybean to corn price ratio was 3.04 at the end of the week. Nearby futures contracts appear to have reversed their upward trend closing below 100 and 200 day moving averages. Limited information on cash bids from elevators and barge points were available for the week due to the holidays. Memphis cash sales reported January 2nd were $13.28 to $13.40/bu. Net sales reported by exporters for the 2013/14 marketing year from December 20th to 26th were greater than last week at 34.7 million bushels, primarily to China, Vietnam, Indonesia, Egypt, and Germany. Net sales reported by exporters for the 2014/15 marketing year were 8.7 million bushels, primarily to China and Japan. Exports for the same period were 56.1 million bushels primarily to China, Vietnam, Indonesia, Germany, and Spain. Soybean export sales and commitments are 101 percent of the USDA estimated total annual exports for the 2013/14 marketing year (September 1 to August 31), compared to a 5-year average of 76 percent. March 2014 soybean futures were trading at $12.71. Jan/Mar and Jan/Nov future spreads were -18 cents and -160 cents.
November 2014 soybean futures closed at $11.29 down 40 cents since December 20th with support at $11.21 and resistance at $11.38. November 2014 soybean futures broke through support at the $11.40/bu range and are currently trading between $11.25 and 11.35/bu. Strong export sales continue to support nearby soybean futures contracts however good weather in South America and an anticipated record soybean crop continue to dampen deferred future contract prices. Early planted soybeans have commenced harvest in Brazil however the bulk of production will not be harvested until March. Pricing some 2014 production prior to planting is strongly encouraged. Downside price protection could be achieved by purchasing an $11.40 November 2014 Put Option which would cost 78 cents and set a $10.62 futures floor.
Cotton
March 2014 cotton futures closed at 82.94 down 0.21 cents since December 20th with support at 82.05 and resistance at 84.63. Nearby cotton futures continue to trade at 82 to 84 cents. Cotton adjusted world price (AWP) increased 0.5 cents to 68.09 cents. Net sales reported by exporters for the 2013/14 marketing year from December 20th to 26th were down from last week at 85,900 bales of upland cotton, primarily to China, Bangladesh, Turkey, Mexico, and India. Net sales reported by exporters for the 2014/15 marketing year were 29,300 bales to Mexico, Columbia, and South Korea. Exports for the same period were 143,200 bales primarily to Turkey, China, Indonesia, Vietnam, and Mexico. Cotton export sales and commitments are 73 percent of the USDA estimated total annual exports for the 2013/14 marketing year (August 1 to July 31), compared to a 5-year average of 76 percent. May 2014 cotton futures are trading at 82.93 up 0.02 cents since December 20th. Mar/May and Mar/Dec future spreads were -0.01 cents and -4.78 cents.
December 2014 cotton futures closed at 78.16 up 1.2 cents since December 20th with support at 77.43 and resistance at 79.07. Since November 27th December 2014 cotton futures have increased more than 3 cents from a low of 75.25. This upward trend is unlikely to breach the 80 cent range however any further rallies in the market near 80 cents should be viewed as an opportunity to start establishing a price on 2014 production. Downside price protection could be obtained by purchasing a 79 cent December 2014 Put Option costing 5.24 cents establishing a 73.76 cent futures floor.
Wheat
March 2014 wheat futures closed at $6.05 down 8 cents since December 20th with support at $5.90 and resistance at $6.16. Limited cash bids were available due to the holidays. Old crop cash bids from Memphis for January 2nd were between $6.42 and $6.50/bu. Net sales reported by exporters for the 2013/14 marketing year from December 20th to 26th were 9.1 million bushels, primarily to Indonesia, Thailand, Columbia, Guatemala, and Peru. Net sales reported by exporters for the 2014/15 marketing year were 0.3 million bushels to Columbia. Exports for the same period were 10.4 million bushels primarily to Japan, Mexico, Guatemala, Brazil, and El Salvador. Wheat export sales are 82 percent of the USDA estimated total annual exports for the 2013/14 marketing year (June 1 to May 31), above the 5-year average of 76 percent. May 2014 wheat futures are trading at $6.11 down 9 cents. Mar/May and Mar/Jul future spreads were 6 cents and 9 cents.
July 2014 wheat futures closed at $6.14 down 103 cents with support at $6.02 and resistance at $6.23. Limited cash bids were available due to the holidays. New crop cash bids from Memphis for January 2nd were between $6.06 and $6.08/bu. Prices have declined substantially from late October highs. Competition for exports and near record production in many countries have drug prices down over the past couple months. Downside price protection could be obtained by purchasing a $6.20 July 2014 Put Option costing 38 cents establishing a $5.82 futures floor.∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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