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Corn, Soybeans Drop, Wheat, Cotton Prices Rise
DR. AARON SMITH
KNOXVILLE, TENN.
Corn and soybeans were down; wheat and cotton were up for the week. Corn and soybean prices fell substantially at the end of the week as weather forecasts added some drier conditions that will allow farmers to get back into the field to continue planting. Next Friday the USDA will release the May WASDE report. The report will contain the first estimates of supply and use for the 2014-15 marketing year. Estimated yield numbers for the new crop and carry over numbers for old crop corn and soybeans will be closely watched. Harvest 2014 cotton prices continue to creep closer to 85 cents. December cotton futures have continued on a steady incline since the end of February when prices were near 77 cents/lb. How much higher prices can go remains to be seen and will be dependent on planting progress, weather conditions, and Chinese reaction to potentially higher prices. There is a 10 cent inverse spread in cotton futures that is also providing support for harvest prices (strong nearby prices pulling deferred futures prices up). Pricing some 2014 cotton production in the mid 80 cent range should be strongly considered. The Wheat Quality Council 2014 Hard Winter Wheat Tour concluded May 1st and provided an estimated average yield of 33.2 bu/acre down from last year's 38 bu/acre (estimated tour yield last year was 41.1 bu/acre) and well below the 5-year average of 41.8 bu/acre. Drought conditions were primarily to blame for reduced yield prospects in the region. July wheat futures prices traded above $7.00/bu for most of the week.
Corn
July 2014 corn futures closed at $4.99 down 13 cents from last week with support at $4.90 and resistance at $5.14. Across Tennessee basis (cash price- nearby future price) weakened at Memphis, northwest, and lower-middle Tennessee and strengthened at northwest barge points and upper-middle Tennessee. Overall basis for the week ranged from 4 under to 35 over the May futures contract with an average of 14 over at the end of the week. Corn net sales reported by exporters from April 18th to 24th were above expectations at 36.9 million bushels for the 2013/14 marketing year and below expectations at 0.5 million bushels for the 2014/15 marketing year. Exports for the same time period were 47.9 million bushels. Corn export sales and commitments are 99 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 88 percent. Ethanol production for the week ending April 25th was 898,000 barrels per day down 12,000 barrels per day. Ending ethanol stocks were 17.212 million barrels up 694,000 barrels. July/Sept and July/Dec future spreads were -3 cents and -5 cents, respectively.
September 2014 corn futures closed at $4.96 down 13 cents from last week with support at $4.87 and resistance at $5.10. December futures closed at $4.94. Nationally, the April 28th Crop Progress report estimated corn planting at 19 percent compared to 6 percent last week, 5 percent last year, and a 5-year average of 28 percent; and corn emerged at 3 percent compared to 2 percent last year and a 5-year average of 6 percent. In Tennessee, corn planted was estimated at 53 percent compared to 19 percent last week, 45 percent last year, and a 5-year average of 59 percent; and corn emerged at 12 percent compared to 15 percent last year and a 5-year average of 33 percent. This week September and December 2014 corn futures prices traded between $4.92 and $5.16. September cash forward contracts at elevators and barge points for the week averaged $4.98 with a range of $4.73 to $5.17. Downside price protection could be obtained by purchasing a $5.00 September 2014 Put Option costing 34 cents establishing a $4.66 futures floor.
Soybeans
July 2014 soybean futures closed at $14.70 down 24 cents for the week with support at $14.43 and resistance at $14.85. Nearby soybean to corn price ratio was 2.95 at the end of the week. For the week, average soybean basis strengthened in upper-middle Tennessee, weakened at Memphis, northwest, and lower-middle Tennessee, and remained unchanged at northwest barge points. Basis ranged from 23 under to 40 over the May futures contract at elevators and barge points. Average basis at the end of the week was 2 over the May futures contract. Net sales reported by exporters from April 18th to 24th were within expectations with net cancelations of 0.6 million bushels for the 2013/14 marketing year and below expectations for the 2014/15 marketing year with net sales of 2.9 million bushels. Exports for the same period were 10 million bushels. Soybean export sales and commitments are 104 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 97 percent. August 2014 soybean futures were trading at $14.07. July/Aug and July/Nov future spreads were -63 cents and -248 cents.
November 2014 soybean futures closed at $12.22 down 17 cents from last week with support at $12.13 and resistance at $12.33. The Crop Progress report estimated soybean planting at 3 percent compared to 0 percent last year, and a 5-year average of 4 percent. In Tennessee, soybeans planted were estimated at 2 percent compared to 0 percent last year and a 5-year average of 3 percent. This week November 2014 soybean futures traded between $12.19 and $12.49. Harvest soybean to corn price ratio was 2.46. November cash forward contracts averaged $12.38 with a range of $11.96 to $12.59. Downside price protection could be achieved by purchasing a $12.40 November 2014 Put Option which would cost 77 cents and set an $11.63 futures floor.
Cotton
July 2014 cotton futures closed at 94.32 up 1.07 cents for the week with support at 93.16 and resistance at 95.68. Cotton adjusted world price (AWP) increased 0.99 cents to 71.68 cents. Net sales reported by exporters from April 18th to April 24th were down from last week at 31,400 bales of upland cotton for the 2013/14 marketing year and 48,900 bales for the 2014/15 marketing year. Exports for the same period were up from last week at 218,200 bales. Cotton export sales and commitments are 95 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 100 percent. Oct 2014 cotton futures are trading at 84.56. July/Oct and July/Dec future spreads were -9.76 cents and -10.38 cents.
December 2014 cotton futures closed at 83.94 up 1.23 cents for the week with support at 82.8 and resistance at 84.52. The Crop Progress report estimated cotton planting at 13 percent compared to 9 percent last week, 13 percent last year, and a 5-year average of 18 percent. In Tennessee, cotton planted was estimated at 3 percent compared to 0 percent last week and a 5-year average of 3 percent. December cotton futures traded between 82.46 and 83.95 cents this week. Downside price protection could be obtained by purchasing an 84 cent December 2014 Put Option costing 5.08 cents establishing a 78.92 cent futures floor.
Wheat
July 2014 wheat futures closed at $7.16 up 8 cents for the week with support at $6.99 and resistance at $7.28. The Crop Progress report estimated winter wheat condition at 33 percent good to excellent and 34 percent poor to very poor; and winter wheat headed was 18 percent compared to 9 percent last week, 13 percent last year, and a 5-year average of 26 percent. In Tennessee, winter wheat condition was estimated at 79 percent good to excellent and 2 percent poor to very poor; winter wheat jointed was estimated at 76 percent compared to 55 percent last week, 92 percent last year, and a 5-year average of 93 percent; and winter wheat headed was 21 percent compared to 2 percent last week, 16 percent last year, and a 5-year average of 43 percent. July wheat futures traded between $6.97 and $7.20 this week. July wheat to corn price ratio was 1.43. In Tennessee, June/July cash forward contracts averaged $6.97 with a range of $6.57 to $7.18 at elevators and barge points. July/Sept and July/Dec future spreads were 8 cents and 24 cents. Downside price protection could be obtained by purchasing a $7.20 July 2014 Put Option costing 30 cents establishing a $6.90 futures floor.
September 2014 wheat futures closed at $7.24 up 8 cents from last week with support at $7.08 and resistance at $7.36. Net sales reported by exporters from April 18th to 24th were within expectations at 7.9 million bushels for the 2013/14 marketing year and below expectations at 8.1 million bushels for the 2014/15 marketing year. Exports for the same period were 24.9 million bushels. Wheat export sales are 98 percent of the USDA estimated total annual exports for the 2013/14 marketing year (June 1 to May 31), compared to a 5-year average of 102 percent. September wheat to corn price ratio was 1.46.∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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