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Planting Progress Sends Commodity Prices Down
DR. AARON SMITH
KNOXVILLE, TENN.
Corn, cotton, and wheat were down; soybeans were up for the week. Harvest corn prices have dropped about 40 cents per bushel since May 9th due to strong planting progress and beneficial weather forecasts. November 2014 soybean futures achieved a new high this week at $12.79/bu. Prices were supported by good planting conditions that aided corn planting progress in many states and should limit producers switching corn acreage to soybeans. Nearby soybean futures received support through very tight ending stocks as a result of stronger crush margins and exports. China continues to be the key market in soybeans for both old crop and new crop as demand for protein has increased dramatically. December cotton futures retreated below the 80 cent level for the first time since April 10th. Hopefully cotton producers were able to price some 2014 in the lower middle 80’s prior to planting. There is a great deal of uncertainty in cotton markets due to record global reserves. Whether producers will get another chance to price cotton above 84 cents will depend in large part on Chinese cotton policy and weather conditions in Texas. July 2014 wheat futures dropped below $6.60/bu for the first time since March 12th, continuing the downward trend from last week.
Corn
July 2014 corn futures closed at $4.78 down 5 cents from last week with support at $4.67 and resistance at $4.87. Across Tennessee basis (cash price- nearby future price) strengthened in Lower-middle Tennessee and weakened or remained unchanged at Memphis, Northwest Barge Points, Upper-middle, and Northwest Tennessee. Overall basis for the week ranged from 4 under to 21 over the July futures contract with an average of 12 over at the end of the week. Corn net sales reported by exporters from May 9th to 15th were within expectations at 20 million bushels for the 2013/14 marketing year and within expectations at 2.5 million bushels for the 2014/15 marketing year. Exports for the same time period were up from last week at 45.6 million bushels. Corn export sales and commitments are 93 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 93 percent. Ethanol production for the week ending May 16th was 925,000 barrels per day up 3,000 barrels per day. Ending ethanol stocks were 16.99 million barrels down 312,000 barrels. July/Sept and July/Dec future spreads were -3 cents and -3 cents, respectively.
September 2014 corn futures closed at $4.75 down 6 cents from last week with support at $4.64 and resistance at $4.84. December futures closed at $4.75. Nationally, the May 19th Crop Progress report estimated corn planting at 73 percent compared to 59 percent last week, 65 percent last year, and a 5-year average of 76 percent; and corn emerged at 34 percent compared to 18 percent last week, 17 percent last year and a 5-year average of 42 percent. In Tennessee, corn planted was estimated at 93 percent compared to 87 percent last week, 77 percent last year, and a 5-year average of 85 percent; and corn emerged at 76 percent compared to 53 percent last week, 54 percent last year, and a 5-year average of 72 percent. This week September and December 2014 corn futures prices traded between $4.68 and $4.80. September cash forward contracts at elevators and barge points for the week averaged $4.63 with a range of $4.41 to $4.96. Downside price protection could be obtained by purchasing a $4.80 September 2014 Put Option costing 28 cents establishing a $4.52 futures floor.
Soybeans
July 2014 soybean futures closed at $15.15 up 50 cents for the week with support at $14.85 and resistance at $15.53. Nearby soybean to corn price ratio was 3.17 at the end of the week. For the week, average soybean basis strengthened or remained unchanged at Memphis, Northwest Barge Points, Northwest, and Lower-middle Tennessee and weakened at Upper-middle Tennessee. Basis ranged from 17 under to 40 over the July futures contract at elevators and barge points. Average basis at the end of the week was 13 over the July futures contract. Net sales reported by exporters from May 9th to 15th were above expectations with net sales of 6.0 million bushels for the 2013/14 marketing year and below expectations for the 2014/15 marketing year with net sales of 16.6 million bushels. Exports for the same period were up from last week at 7.5 million bushels. Soybean export sales and commitments are 103 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 99 percent. August 2014 soybean futures were trading at $14.45. July/Aug and July/Nov future spreads were -70 cents and -250 cents.
November 2014 soybean futures closed at $12.65 up 44 cents from last week with support at $12.50 and resistance at $12.85. The Crop Progress report estimated soybean planting at 33 percent compared to 20 percent last week, 21 percent last year, and a 5-year average of 38 percent and soybeans emerged at 9 percent compared to 3 percent last year and a 5-year average of 11 percent. In Tennessee, soybeans planted were estimated at 23 percent compared to 13 percent last week, 8 percent last year and a 5-year average of 21 percent and soybeans emerged at 10 percent compared to 3 percent last year and a 5-year average of 9 percent. This week November 2014 soybean futures traded between $12.17 and $12.79. Harvest soybean to corn price ratio was 2.66. November cash forward contracts averaged $12.47 with a range of $12.02 to $12.91. Downside price protection could be achieved by purchasing a $12.80 November 2014 Put Option which would cost 76 cents and set a $12.04 futures floor.
Cotton
July 2014 cotton futures closed at 86.31 down 3.51 cents for the week with support at 83.67 and resistance at 89.49. Cotton adjusted world price (AWP) decreased 0.46 cents to 70.41 cents. Net sales reported by exporters from May 9th to 15th were up from last week at 358,300 bales of upland cotton for the 2013/14 marketing year and 158,400 bales for the 2014/15 marketing year. Exports for the same period were up from last week at 190,000 bales. Cotton export sales and commitments are 102 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 103 percent. Oct 2014 cotton futures are trading at 79.37. July/Oct and July/Dec future spreads were -6.94 cents and -6.84 cents.
December 2014 cotton futures closed at 79.47 down 2.87 cents for the week with support at 77.04 and resistance at 82.22. The Crop Progress report estimated cotton planting at 46 percent compared to 30 percent last week, 37 percent last year, and a 5-year average of 48 percent. In Tennessee, cotton planted was estimated at 48 percent compared to 26 percent last week, 12 percent last year, and a 5-year average of 33 percent. December cotton futures traded between 78.41 and 82.71 cents this week. Downside price protection could be obtained by purchasing an 80 cent December 2014 Put Option costing 4.7 cents establishing a 75.3 cent futures floor.
Wheat
July 2014 wheat futures closed at $6.52 down 22 cents for the week with support at $6.45 and resistance at $6.76. Net sales reported by exporters from May 9th to 15th were within expectations at 5.2 million bushels for the 2013/14 marketing year and within expectations at 7.7 million bushels for the 2014/15 marketing year. Exports for the same period were 18.6 million bushels. Wheat export sales are 99 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 104 percent. The Crop Progress report estimated winter wheat condition at 29 percent good to excellent and 44 percent poor to very poor; and winter wheat headed was 57 percent compared to 44 percent last week, 41 percent last year, and a 5-year average of 58 percent. In Tennessee, winter wheat condition was estimated at 81 percent good to excellent and 2 percent poor to very poor; winter wheat headed was estimated at 90 percent compared to 68 percent last week, 93 percent last year, and a 5-year average of 96 percent. July wheat futures traded between $6.51 and $6.86 this week. July wheat to corn price ratio was 1.36. In Tennessee, June/July cash forward contracts averaged $6.50 with a range of $6.09 to $6.71 at elevators and barge points. July/Sept and July/Jul future spreads were 11 cents and 58 cents.
September 2014 wheat futures closed at $6.63 down 20 cents from last week with support at $6.56 and resistance at $6.87. The Crop Progress report estimated spring wheat planted at 49 percent compared to 34 percent last week, 64 percent last year, and a 5-year average of 68 percent; and spring wheat emerged was 24 percent compared to 12 percent last week, 20 percent last year, and a 5-year average of 40 percent. September wheat to corn price ratio was 1.40. July 2015 wheat futures closed at $7.10. Downside price protection could be obtained by purchasing a $7.20 July 2015 Put Option costing 72 cents establishing a $6.48 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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