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Corn Net Sales By Exporters Above Expectations
DR. AARON SMITH
KNOXVILLE, TENN.
Soybeans, wheat, and cotton were down; and corn was up for the week. Corn, soybean, wheat, and cotton exports continued to be very strong exceeding expectations for the past week. Some slowdown is anticipated for the upcoming week as Chinese purchases will likely drop off due to the Chinese New Year holiday. Corn movement has been limited this week due to extreme cold weather in much of the country. The cold weather has increased natural gas requirements for ethanol production and increased ethanol producer costs. South American soybean harvest is progressing. Many speculate that China will cancel some soybean contracts from the USA in favor of Brazilian soybeans which are currently cheaper at present, this has not occurred yet. Concerns could creep into the wheat market with continued cold weather anticipated again next week in several regions.
Corn
March 2014 corn futures closed at $4.34 up 5 cents from last week with support at $4.30 and resistance at $4.36. Across Tennessee basis (cash price- nearby future price) strengthened in all five regions. Overall basis for the week ranged between 1 under and 31 over the March futures contract. Corn net sales reported by exporters for the 2013/14 marketing year from January 17th to 23rd were above expectations at 72.3 million bushels, primarily to Japan, Spain, Egypt, and South Korea. Net sales reported by exporters for the 2014/15 marketing year were 4.2 million bushels primarily to Japan. Exports for the same time period were 39.5 million bushels primarily to Japan, Mexico, Columbia, Peru, and South Korea. Corn export sales and commitments are 87 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 62 percent. Ethanol production for the week ending January 24th was 900,000 barrels per day down 5,000 barrels per day. Ending ethanol stocks were 16.932 million barrels down 86,000 barrels. May 2014 corn futures were trading at $4.39 up 3 cents from last week. Mar/May and Mar/Sep future spreads were 5 cents and 12 cents.
September 2014 corn futures closed at $4.46 up 2 cents from last week with support at $4.41 and resistance at $4.48. This week September and December 2014 corn futures prices traded between $4.41 and $4.53/bu. Planting intention projects should be watched closely as they could have a significant impact on harvest prices. Having some 2014 production priced at his point in the year is strongly encouraged. Downside price protection could be obtained by purchasing a $4.50 September 2014 Put Option costing 31 cents establishing a $4.19 futures floor.
Soybeans
March 2014 soybean futures closed at $12.82 down 2 cents for the week with support at $12.66 and resistance at $12.91. Soybean to corn price ratio was 2.95 at the end of the week. For the week, soybean basis weakened in all regions except Lower-Middle Tennessee. Basis ranged from 1 under to 68 over the March futures contract at elevators and barge points. Average basis at the end of the week was 34 over the March futures contract. Net sales reported by exporters for the 2013/14 marketing year from January 17th to 23rd were above expectations at 18.2 million bushels, primarily to China, the Netherlands, Mexico, Japan, and Spain. Net sales reported by exporters for the 2014/15 marketing year were 13.6 million bushels, primarily to China and Japan. Exports for the same period were 77.7 million bushels primarily to China, the Netherlands, Japan, Spain, and Germany. Soybean export sales and commitments were 105 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 83 percent. May 2014 soybean futures were trading at $12.68. Mar/May and Mar/Nov future spreads were -14 cents and -178 cents.
November 2014 soybean futures closed at $11.04 down 5 cents for the week with support at $10.82 and resistance at $11.16. This week November 2014 soybean futures traded between $10.88 and $11.11/bu. $10.88/bu represents a new contract low for harvest 2014. Downside price protection could be achieved by purchasing an $11.20 November 2014 Put Option which would cost 68 cents and set a $10.52 futures floor.
Cotton
March 2014 cotton futures closed at 85.83 down 1.38 cents for the week with support at 85.18 and resistance at 86.88. Cotton adjusted world price (AWP) decreased 1.17 cents to 70.37 cents. Net sales reported by exporters for the 2013/14 marketing year from January 17th to 23rd were down from last week at 479,700 bales of upland cotton, primarily to Vietnam, China, Mexico, Indonesia, and South Korea. Net sales reported by exporters for the 2014/15 marketing year were 51,900 bales primarily to Mexico, South Korea, Indonesia, and Thailand. Exports for the same period were a marketing year high of 304,100 bales primarily to Turkey, China, Indonesia, Mexico, and Vietnam. Cotton export sales and commitments are 86 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 82 percent. May 2014 cotton futures are trading at 86.33 down 1.16 cents from last week. Mar/May and Mar/Dec future spreads were 0.5 cents and -9.43 cents.
December 2014 cotton futures closed at 76.40 down 2.14 cents for the week with support at 76.01 and resistance at 76.99. Futures prices near 80 cents represent a good starting point to commence pricing for 2014 production. Downside price protection could be obtained by purchasing a 77 cent December 2014 Put Option costing 5.09 cents establishing a 71.91 cent futures floor.
Wheat
March 2014 wheat futures closed at $5.55 down 10 cents for the week with support at $5.48 and resistance at $5.61. Net sales reported by exporters for the 2013/14 marketing year from January 17th to 23rd were above expectations at 29.2 million bushels, primarily to Japan, South Korea, Nigeria, the Philippines, and Taiwan. Net sales reported by exporters for the 2014/15 marketing year were 0.073 million bushels primarily to South Korea. Exports for the same period were 15.5 million bushels primarily to Nigeria, Sri Lanka, Mexico, Japan, and Guatemala. Wheat export sales are 85 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 83 percent. Old crop wheat was trading between $5.93 and $6.00. May 2014 wheat futures are trading at $5.58 down 13 cents from last week. Mar/May and Mar/Jul future spreads were 3 cents and 6 cents.
July 2014 wheat futures closed at $5.61 down 16 cents from last week with support at $5.55 and resistance at $5.67. In Tennessee, June/July cash forward contracts averaged $5.50/bu with a range of $4.90/bu to $5.78/bu at elevators and barge points. Prices have continued to drop since October. Continued cold weather could provide some price support should damage to the winter wheat crop in some areas occur. Downside price protection could be obtained by purchasing a $5.70 July 2014 Put Option costing 35 cents establishing a $5.35 futures floor.∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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