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Record Corn, Soybean Crops Expected This Fall
DR. AARON SMITH
KNOXVILLE, TENN.
Corn, wheat, and cotton were down; soybeans were mixed for the week. The majority of crops across the country and throughout Tennessee are in good to excellent condition. As such, as we approach harvest this fall the likelihood of record production for corn and soybeans continues to increase. Having downside price protection entering the 2014 harvest period is strongly encouraged. Tennessee corn and soybean producers may want to consider a cash forward contract for some of their unpriced bushels. Soybean prices are very likely to decrease as we move into the harvest period and securing November contracts in the $10.50 -$11.00 range presents a profitable option for many producers. In addition to 2014 harvest prices, producers should be looking at opportunities in the futures markets to price 2015 production. Near record production will lead to higher carryovers in corn and soybeans than we have seen in recent years. Pricing some 2015 production with harvest futures above $4.00 for corn and above $10.50 for soybeans should be strongly considered. December cotton prices reached new lows on Friday at 62.02 cents/lb. Every time a floor appears to be established futures prices find a way to push lower. Improved growing conditions in Texas continue to fuel expectations of greater domestic production and ending stocks. China continues to be a wild card in cotton markets as they revise their domestic cotton policy and import and reserve programs. September wheat prices, the past 2 weeks, have established a trading range between $5.15 and $5.45 per bushel, any rallies in the market above this range between now and September should be looked at as opportunities to price any remaining wheat. Harvest prices for spring wheat will likely follow corn down this fall. The spring wheat crop in the North-central plains and Canada is in above average condition. At this point there is a tremendous amount of bearish news in grain and oilseed markets heading into the fall, protecting against further downward price movements this year and into the future is strongly recommended.
The University of Tennessee, Farm Credit Mid-America, Tennessee Soybean Promotion Board, and Tennessee Farm Bureau are holding informational meetings about the 2014 Farm Bill August 18th to 21st at Jackson, Dyersburg, Fayetteville, and Knoxville. Times, locations, and additional details can be found on our Crop Economics page.
Corn
September 2014 corn futures closed at $3.52 down 11 cents from last week with support at $3.47 and resistance at $3.61. Across Tennessee average basis (cash price – nearby future price) remained unchanged in Upper-middle, Lower-middle, and Northwest Tennessee and weakened at Memphis and Northwest Barge Points. Overall basis for the week ranged from 1 under to 31 over the September futures contract with an average of 15 over at the end of the week. Corn net sales reported by exporters from July 18th to 24th were below expectations at 6.8 million bushels for the 2013/14 marketing year and within expectations at 43 million bushels for the 2014/15 marketing year. Exports for the same time period were down from last week at 34.1 million bushels. Corn 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 104 percent. Ethanol production for the week ending July 25th was 954,000 barrels per day down 5,000 barrels per day. Ending ethanol stocks were 18.587 million barrels up 647,000 barrels. Nationally, the July 28th Crop Progress report estimated corn silking at 78 percent compared to 56 percent last week, 67 percent last year, and a 5-year average of 75 percent; corn dough or beyond at 17 percent compared to 8 percent last year and a 5-year average of 16 percent; and corn condition at 75 percent good to excellent 6 percent poor to very poor. In Tennessee, corn silking was estimated at 96 percent compared to 90 percent last week, 91 percent last year, and a 5-year average of 96 percent; corn dough or beyond at 46 percent compared to 29 percent last week, 54 percent last year, and a 5-year average of 64 percent; and corn condition at 76 percent good to excellent and 5 percent poor to very poor. This week September and December 2014 corn futures prices traded between $3.51 and $3.77. September cash forward contracts at elevators and barge points for the week averaged $3.51 with a range of $3.27 to $3.77. Sep/Dec and Sep/Mar future spreads were 10 cents and 22 cents, respectively.
December 2014 corn futures closed at $3.62 down 9 cents from last week with support at $3.57 and resistance at $3.70. March futures closed at $3.74. Downside price protection could be obtained by purchasing a $4.00 September 2015 Put Option costing 34 cents establishing a $3.66 futures floor.
Soybeans
August 2014 soybean futures closed at $12.15 up 3 cents for the week with support at $12.02 and resistance at $12.32. Nearby soybean to corn price ratio was 3.45 at the end of the week. For the week, average soybean basis weakened at Memphis, Northwest, and Upper-middle Tennessee and strengthened at Northwest Barge Points and Lower-middle Tennessee. Basis ranged from 22 under to 102 over the August futures contract at elevators and barge points. Average basis at the end of the week was 51 over the August futures contract. Net sales reported by exporters were within expectations with net sales of 6.9 million bushels for the 2013/14 marketing year and within expectations for the 2014/15 marketing year with net sales of 46.6 million bushels. Exports for the same period were down from last week at 3.9 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 104 percent. September 2014 soybean futures were trading at $10.73. Aug/Sep and Aug/Nov future spreads were -142 cents and -157 cents.
November 2014 soybean futures closed at $10.58 down 25 cents from last week with support at $10.41 and resistance at $10.88. The Crop Progress report estimated soybeans blooming at 76 percent compared to 60 percent last week, 62 percent last year, and a 5-year average of 72 percent; soybeans setting pods at 38 percent compared to 19 percent last week, 18 percent last year, and a 5-year average of 31 percent; and soybean condition at 71 percent good to excellent 6 percent poor to very poor. In Tennessee, the report estimated, soybeans blooming at 64 percent compared to 47 percent last week, 39 percent last year, and a 5-year average of 66 percent; soybeans setting pods at 32 percent compared to 16 percent last week, 18 percent last year, and a 5-year average of 38 percent; and soybean condition at 79 percent good to excellent 3 percent poor to very poor. This week November 2014 soybean futures traded between $10.56 and $11.16. Harvest soybean to corn price ratio was 2.92. November cash forward contracts averaged $10.96 with a range of $10.51 to $11.38. Downside price protection could be achieved by purchasing a $10.60 November 2014 Put Option which would cost 48 cents and set a $10.12 futures floor.
Cotton
December 2014 cotton futures closed at 63.27 down 2.08 cents for the week with support at 61.14 and resistance at 65.04. Net sales reported by exporters were up from last week at 5,700 bales of upland cotton for the 2013/14 marketing year and down from last week at 254,400 bales for the 2014/15 marketing year. Exports for the same period were up from last week at 118,400 bales. Cotton export sales and commitments are 107 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 109 percent. Oct 2014 cotton futures are trading at 62.49. The Crop Progress report estimated cotton squaring at 87 percent compared to 85 percent last week, 87 percent last year, and a 5-year average of 89 percent; cotton setting bolls at 49 percent compared to 38 percent last week, 37 percent last year, and a 5-year average 51 percent; and cotton condition at 54 percent good to excellent, 13 percent poor to very poor. In Tennessee, cotton squaring was estimated at 95 percent compared to 82 percent last week, 76 percent last year, and a 5-year average of 92 percent; cotton setting bolls at 55 percent compared to 30 percent last week, 19 percent last year, and a 5-year average of 54 percent; and cotton condition at 70 percent good to excellent 7 percent poor to very poor. December cotton futures traded between 62.02 and 66.05 cents this week. Downside price protection could be obtained by purchasing a 64 cent December 2014 Put Option costing 3.06 cents establishing a 60.94 cent futures floor.
March 2014 cotton futures closed at 63.91 down 2.12 cents for the week with support at 61.84 and resistance at 65.62. Cotton adjusted world price (AWP) decreased 2.38 cents to 59.40 cents. Oct/Dec and Dec/Mar future spreads were 0.78 cents and 0.64 cents.
Wheat
September 2014 wheat futures closed at $5.34 down 4 cents from last week with support at $5.22 and resistance at $5.49. Net sales reported by exporters were above expectations at 29.4 million bushels for the 2014/15 marketing year. Exports for the same period were down from last week at 15.4 million bushels. Wheat export sales are 40 percent of the USDA estimated total annual exports for the 2014/15 marketing year (June 1 to May 31), compared to a 5-year average of 34 percent. The Crop Progress report estimated winter wheat harvested at 83 percent compared to 75 percent last week, 80 percent last year, and a 5-year average of 80 percent. In Tennessee, winter wheat harvested was estimated at 94 percent compared to 91 percent last week, 100 percent last year, and a 5-year average of 100 percent. September wheat futures traded between $5.18 and $5.44 this week. September wheat to corn price ratio was 1.52. In Tennessee, July cash contracts averaged $5.03 with a range of $4.60 to $5.86 at elevators and barge points. Sep/Dec and Sep/July future spreads were 19 cents and 61 cents.
December 2014 wheat futures closed at $5.53 down 6 cents from last week with support at $5.42 and resistance at $5.67. The Crop Progress report estimated spring wheat headed at 93 percent compared to 84 percent last week, 93 percent last year, and a 5-year average of 93 percent; and spring wheat condition at 70 percent good to excellent 5 percent poor to very poor. December wheat to corn price ratio was 1.53. July 2015 wheat futures closed at $5.95. Downside price protection could be obtained by purchasing a $6.00 July 2015 Put Option costing 47 cents establishing a $5.53 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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