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Corn Yields Likely To Exceed 2009 Levels
DR. AARON SMITH
KNOXVILLE, TENN.
Cotton was up; wheat was mixed; corn and soybeans were down for the week. Harvest corn futures continued to trade sideways for the sixth consecutive week. Average domestic corn yields are very likely to exceed the 2009 record of 164.7 bpa. Many analysts have 2014 yield estimates above 170 bpa (the USDA estimated yields at 167.4 bpa in the August WASDE). As a result of the estimated record yield, 2014 corn production is estimated at 14.031 billion bushels (above the current record of 13.925 billion bushels set in 2013). Record production, combined with potential storage and logistical issues, provides strong indications that we have likely not seen the seasonal low in corn prices. Harvest soybean prices have continued the slide that started with the June 30th Acreage report. Since June 30th November soybean futures have dropped over $2.15/bu. Similar to corn, soybean yields and production are also projected at a record of 45.4 bpa (current record 44 bpa in 2009) and 3.815 billion bushels (current record 3.359 in 2009). Nearby soybean futures have been helped by tight ending stocks and strong export and crush demand, however if the record crop is realized at harvest prices will continue to fall. December cotton futures backed off slightly at the end of the week after approaching the 68 cent level. Prices have rallied slightly from the lows set on August 1 and have been trending up for 4 weeks. Cotton yields are projected at 820 lbs per acre below the 2012 record of 887 lbs/acre. Domestic cotton production is estimated up 4.5 million bales from last year at 17.5 million bales (but well back of the 2005 record of 23.89 million bales). Concerns in the cotton market continue to focus on world supply exceeding use and the resulting increase in already large global stocks. Spring wheat harvest in the northern plains continues to be challenging as wet conditions have harvest well behind the 5-year average. Further compounding the situation are high levels of vomitoxin, lack of available storage, and rail transportation issues.
Today University of Tennessee Extension released its 2014 Farm Bill webpage. The webpage contains copies of Farm Bill presentations conducted across the state, publications, links to USDA Farm Bill sites, links to other University Farm Bill sites, and Farm Bill decision aids that will help producers and landowners examine program alternatives and make a more informed decision. The Farm Bill webpage will be updated as new information is released.
Corn
September 2014 corn futures closed at $3.59 down 6 cents from last week with support at $3.53 and resistance at $3.64. Across Tennessee average basis (cash price- nearby future price) weakened in Northwest and Lower-middle Tennessee and strengthened at Memphis, Northwest Barge Points, and Upper-Middle Tennessee. Overall basis for the week ranged from 27 under to 30 over the September futures contract with an average of 4 over at the end of the week. Corn net sales reported by exporters from August 15th to 21st were within expectations with net sales reductions of 1.3 million bushels for the 2013/14 marketing year and within expectations at 27.4 million bushels for the 2014/15 marketing year. Exports for the same time period were down from last week at 39.5 million bushels. Corn export sales and commitments are 100 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 107 percent. Ethanol production for the week ending August 22nd was 913,000 barrels per day down 24,000 barrels per day. Ending ethanol stocks were 17.317 million barrels down 934,000 barrels from last week. Nationally, the August 25th Crop Progress report estimated corn dough or beyond at 83 percent compared to 70 percent last week, 67 percent last year, and a 5-year average of 78 percent; corn dented or beyond at 35 percent compared to 22 percent last week, 21 percent last year, and a 5-year average of 43 percent; and corn condition at 73 percent good to excellent 7 percent poor to very poor. In Tennessee the Crop Progress report estimated, corn dough or beyond at 96 percent compared to 92 percent last week, 94 percent last year, and a 5-year average of 97 percent; corn dented or beyond at 66 percent compared to 53 percent last week, 77 percent last year, and a 5-year average of 86 percent; and corn condition at 77 percent good to excellent and 4 percent poor to very poor. This week September and December 2014 corn futures prices traded between $3.52 and $3.70. September cash forward contracts at elevators and barge points for the week averaged $3.44 with a range of $3.26 to $3.69. Sep/Dec and Sep/Mar future spreads were 5 cents and 18 cents, respectively.
December 2014 corn futures closed at $3.64 down 7 cents from last week with support at $3.58 and resistance at $3.71. March futures closed at $3.77. Downside price protection could be obtained by purchasing a $4.00 September 2015 Put Option costing 32 cents establishing a $3.68 futures floor.
Soybeans
September 2014 soybean futures closed at $10.89 down 77 cents for the week with support at $10.59 and resistance at $11.10. September soybean to corn price ratio was 3.03 at the end of the week. For the week, average soybean basis strengthened in all five regions. Basis ranged from 81 under to 102 over the September futures contract at elevators and barge points. Average basis at the end of the week was 7 over the September futures contract. Net sales reported by exporters were within expectations with net sales cancelations of 2.3 million bushels for the 2013/14 marketing year and above expectations for the 2014/15 marketing year with net sales of 47.4 million bushels. Exports for the same period were up from last week at 7.4 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 105 percent. Sep/Nov and Sep/Jan future spreads were -65 cents and -57 cents.
November 2014 soybean futures closed at $10.24 down 18 cents from last week with support at $10.13 and resistance at $10.39. The Crop Progress report estimated soybeans setting pods at 90 percent compared to 83 percent last week, 82 percent last year, and a 5-year average of 89 percent; and soybean condition at 70 percent good to excellent 7 percent poor to very poor. In Tennessee, the Crop Progress report estimated, soybeans setting pods at 84 percent compared to 75 percent last week, 75 percent last year, and a 5-year average of 87 percent; and soybean condition at 75 percent good to excellent 5 percent poor to very poor. This week November 2014 soybean futures traded between $10.19 and $10.37. Harvest soybean to corn price ratio was 2.81. November cash forward contracts averaged $10.26 with a range of $9.98 to $10.54. Downside price protection could be achieved by purchasing a $10.30 November 2014 Put Option which would cost 33 cents and set a $9.97 futures floor. January 2015 soybean futures were trading at $10.32.
Cotton
December 2014 cotton futures closed at 66.57 up 0.39 cents for the week with support at 65.43 and resistance at 67.23. Net sales reported by exporters were up from last week at 247,700 bales for the 2014/15 marketing year and 16,700 bales for the 2015/16 marketing year. Exports for the same period were down from last week at 96,700 bales. Cotton export sales are 50 percent of the USDA estimated total annual exports for the 2014/15 marketing year (August 1 to July 31), compared to a 5-year average of 41 percent. Oct 2014 cotton futures are trading at 67.60. The Crop Progress report estimated cotton setting bolls at 90 percent compared to 88 percent last week, 89 percent last year, and a 5-year average 93 percent; cotton bolls opening at 19 percent compared to 12 percent last week, 10 percent last year, and a 5-year average of 18 percent; and cotton condition at 51 percent good to excellent 16 percent poor to very poor. In Tennessee, the Crop Progress report estimated cotton setting bolls at 92 percent compared to 89 percent last week, 89 percent last year, and a 5-year average of 97 percent; cotton bolls opening at 15 percent compared to 8 percent last week, 1 percent last year, and a 5-year average of 15 percent; and cotton condition at 69 percent good to excellent 7 percent poor to very poor. December cotton futures traded between 65.01 and 67.72 cents this week. Downside price protection could be obtained by purchasing a 67 cent December 2014 Put Option costing 2.54 cents establishing a 64.46 cent futures floor.
March 2014 cotton futures closed at 67.01 up 0.44 cents for the week with support at 65.84 and resistance at 67.76. Cotton adjusted world price (AWP) increased 1.52 cents to 54.71 cents. Oct/Dec and Dec/Mar future spreads were -1.03 cents and 0.44 cents.
Wheat
September 2014 wheat futures closed at $5.50 down 2 cents from last week with support at $5.36 and resistance at $5.68. Net sales reported by exporters were within expectations at 14.8 million bushels for the 2014/15 marketing year. Exports for the same period were down from last week at 17.1 million bushels. Wheat export sales are 45 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 43 percent. September wheat futures traded between $5.31 and $5.64 this week. September wheat to corn price ratio was 1.53. In Tennessee, August cash contracts averaged $4.87 with a range of $3.92 to $5.85 at elevators and barge points. Sep/Dec and Sep/July future spreads were 13 cents and 49 cents.
December 2014 wheat futures closed at $5.63 up 1 cent from last week with support at $5.50 and resistance at $5.85. The Crop Progress report estimated spring wheat harvested at 27 percent compared to 17 percent last week, 39 percent last year, and a 5-year average of 49 percent; and spring wheat condition at 66 percent good to excellent 6 percent poor to very poor. December wheat to corn price ratio was 1.55. June/July 2015 cash forward contracts averaged $5.61 with a range of $5.32 to $5.90 at elevators and barge points. July 2015 wheat futures closed at $5.99. Downside price protection could be obtained by purchasing a $6.00 July 2015 Put Option costing 45 cents establishing a $5.55 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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