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2014 Harvest Corn Futures Continue Downward
DR. AARON SMITH
KNOXVILLE, TENN.
Corn, cotton, soybeans, and wheat were down for the week. Corn planting is approaching completion and is right on the 5-year average nationally. Some planting concerns remain in Northern Corn Belt states however substantial progress was made in North Dakota (17 percent to 67 percent planted) and Minnesota (53 percent to 81 percent planted) this week. 2014 harvest corn futures continued their downward trend this week and are now trading 15 cents below the 100-day moving average. Old crop soybeans are trading near $15.00/bu as domestic supplies remain tight, while harvest prices continue to trade at about a $2.50 per bushel discount from the nearby. Soybean planting is slightly ahead of the 5-year average pace. December 2014 cotton futures were down almost 8 cents from May 8th highs. Support failed to hold at the 80 cent level and prices are now near the 77 cent area. Hopefully producers were able to price some production while December futures were trading between 80 and 85 cents. Likely there will be additional pricing opportunities above the 80 cent level. Producers should be patient however they should not let pricing opportunities above 80 cents pass ideally by. As mentioned in previous posts, there is a great deal of global uncertainty in the cotton market and this latest retreat from prices close to 85 cents signals an unwillingness to push prices past this level. On the downside look for support near the 76 cent range until something new is presented to the market. Nationally winter wheat condition is below average. The hardest hit states are Oklahoma (78 percent poor or very poor), Texas (65 percent poor or very poor), and Kansas (61 percent poor or very poor). Despite these poor conditions wheat prices have continued their decline due to large global supplies and improved geopolitical outlook in Ukraine.
Corn
July 2014 corn futures closed at $4.65 down 13 cents from last week with support at $4.59 and resistance at $4.76. Across Tennessee basis (cash price- nearby future price) strengthened in all five regions. Overall basis for the week ranged from 4 under to 23 over the July futures contract with an average of 14 over at the end of the week. Corn net sales reported by exporters from May 16th to 22nd were above expectations at 24.5 million bushels for the 2013/14 marketing year and below expectations at 3.6 million bushels for the 2014/15 marketing year. Exports for the same time period were up from last week at 47.6 million bushels. Corn export sales and commitments are 95 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 94 percent. Ethanol production for the week ending May 23rd was 927,000 barrels per day up 2,000 barrels per day. Ending ethanol stocks were 17.489 million barrels down 499,000 barrels. July/Sept and July/Dec future spreads were -7 cents and -8 cents, respectively.
September 2014 corn futures closed at $4.58 down 17 cents from last week with support at $4.51 and resistance at $4.69. December futures closed at $4.57. Nationally, the May 27th Crop Progress report estimated corn planting at 88 percent compared to 73 percent last week, 84 percent last year, and a 5-year average of 88 percent; and corn emerged at 60 percent compared to 34 percent last week, 49 percent last year and a 5-year average of 64 percent. In Tennessee, corn planted was estimated at 97 percent compared to 93 percent last week, 86 percent last year, and a 5-year average of 92 percent; and corn emerged at 87 percent compared to 76 percent last week, 71 percent last year, and a 5-year average of 82 percent. This week September and December 2014 corn futures prices traded between $4.56 and $4.72. September cash forward contracts at elevators and barge points for the week averaged $4.55 with a range of $4.31 to $4.89. Downside price protection could be obtained by purchasing a $4.60 September 2014 Put Option costing 25 cents establishing a $4.35 futures floor.
Soybeans
July 2014 soybean futures closed at $14.93 down 22 cents for the week with support at $14.81 and resistance at $15.12. Nearby soybean to corn price ratio was 3.21 at the end of the week. For the week, average soybean basis weakened at Northwest Barge Points, Northwest, Lower-middle, and Upper-middle Tennessee and strengthened at Memphis. Basis ranged from 9 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 16th to 22nd were within expectations with net sales of 2.2 million bushels for the 2013/14 marketing year and above expectations for the 2014/15 marketing year with net sales of 32.4 million bushels. Exports for the same period were down from last week at 4.4 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 100 percent. August 2014 soybean futures were trading at $14.24. July/Aug and July/Nov future spreads were -69 cents and -260 cents.
November 2014 soybean futures closed at $12.33 down 32 cents from last week with support at $12.20 and resistance at $12.55. The Crop Progress report estimated soybean planting at 59 percent compared to 33 percent last week, 41 percent last year, and a 5-year average of 56 percent and soybeans emerged at 25 percent compared to 9 percent last week, 12 percent last year, and a 5-year average of 27 percent. In Tennessee, soybeans planted were estimated at 39 percent compared to 23 percent last week, 19 percent last year, and a 5-year average of 34 percent and soybeans emerged at 21 percent compared to 10 percent last week, 7 percent last year, and a 5-year average of 16%. This week November 2014 soybean futures traded between $12.31 and $12.63. Harvest soybean to corn price ratio was 2.69. November cash forward contracts averaged $12.40 with a range of $12.09 to $12.61. Downside price protection could be achieved by purchasing a $12.40 November 2014 Put Option which would cost 67 cents and set an $11.73 futures floor.
Cotton
July 2014 cotton futures closed at 86.27 down 0.04 cents for the week with support at 84.84 and resistance at 87.40. Cotton adjusted world price (AWP) decreased 2.12 cents to 68.29 cents. Net sales reported by exporters from May 16th to 22nd were down from last week at 61,000 bales of upland cotton for the 2013/14 marketing year and 114,300 bales for the 2014/15 marketing year. Exports for the same period were up from last week at 216,600 bales. Cotton export sales and commitments are 103 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 104 percent. Oct 2014 cotton futures are trading at 77.47. July/Oct and July/Dec future spreads were -9.14 cents and -8.8 cents.
December 2014 cotton futures closed at 77.47 down 2.0 cents for the week with support at 76.65 and resistance at 78.73. The Crop Progress report estimated cotton planting at 62 percent compared to 46 percent last week, 56 percent last year, and a 5-year average of 64 percent. In Tennessee, cotton planted was estimated at 76 percent compared to 48 percent last week, 34 percent last year, and a 5-year average of 60 percent. December cotton futures traded between 77.0 and 79.47 cents this week. Downside price protection could be obtained by purchasing a 78 cent December 2014 Put Option costing 4.13 cents establishing a 73.87 cent futures floor.
Wheat
July 2014 wheat futures closed at $6.27 down 25 cents for the week with support at $6.18 and resistance at $6.41. Net sales reported by exporters from May 16th to 22nd were within expectations at 1.9 million bushels for the 2013/14 marketing year and above expectations at 19.5 million bushels for the 2014/15 marketing year. Exports for the same period were up from last week at 19.5 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 30 percent good to excellent and 44 percent poor to very poor; and winter wheat headed was 70 percent compared to 57 percent last week, 58 percent last year, and a 5-year average of 69 percent. In Tennessee, winter wheat condition was estimated at 82 percent good to excellent and 2 percent poor to very poor; winter wheat headed was estimated at 97 percent compared to 90 percent last week, 95 percent last year, and a 5-year average of 98 percent. July wheat futures traded between $6.25 and $6.48 this week. July wheat to corn price ratio was 1.35. In Tennessee, June/July cash forward contracts averaged $6.21 with a range of $5.83 to $6.41 at elevators and barge points. July/Sept and July/Jul future spreads were 12 cents and 64 cents.
September 2014 wheat futures closed at $6.39 down 19 cents from last week with support at $6.31 and resistance at $6.53. The Crop Progress report estimated spring wheat planted at 74 percent compared to 49 percent last week, 77 percent last year, and a 5-year average of 82 percent; and spring wheat emerged was 43 percent compared to 24 percent last week, 39 percent last year, and a 5-year average of 57 percent. September wheat to corn price ratio was 1.40. July 2015 wheat futures closed at $6.91. Downside price protection could be obtained by purchasing a $7.00 July 2015 Put Option costing 68 cents establishing a $6.32 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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