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Cotton Futures Test Low End Of Trading Range
DR. AARON SMITH
KNOXVILLE, TENN.
Corn, cotton, and soybeans were down; wheat was mixed for the week. Corn and soybean harvests continue to produce higher than expected yields leading many to believe that the already record USDA estimated yields of 171.7 bpa for corn and 46.6 bpa for soybeans will be increased in the October WASDE. December corn futures closed lower for a 6th consecutive week while November soybeans were down for a 7th straight week. December cotton futures set a new contract low of 60.83 cents/lb on Thursday before rebounding slightly on Friday. The short lived upward trend in cotton futures in August has been erased in September. Currently, December cotton futures are testing the low end of the trading range established the past two months. Wheat futures traded sideways for the week closing at $4.74, the same as last Friday. An additional factor contributing to lower commodity prices is the relative strength of the US Dollar. Since early July the US dollar index has increased 5.4 from 79.7 to 85.23. Increased strength in the US dollar, relative to other currencies decreases the competitiveness of US agricultural exports by making them relatively more expense for foreign entities to purchase. On Thursday, USDA Secretary Tom Vilsack announced the release of two farm bill decision aids that will assist producers in making commodity program and crop insurance choices. The decision aids were developed by collaborations led by the University of Illinois and Texas A&M University and can be found online at: www.fsa.usda.gov/arc-plc. Additionally, the Secretary announced starting Monday landowners will be able to update their payment yields and reallocate base acres at their local FSA office. Final dates to make yield updates and base acreage reallocation decisions were not revealed at this time nor was the election period for ARC or PLC.
Corn
December 2014 corn futures closed at $3.23 down 8 cents from last week with support at $3.21 and resistance at $3.32. Across Tennessee average basis (cash price- nearby future price) weakened in all five regions. Overall basis for the week ranged from 50 under to even the December futures contract with an average of 32 under at the end of the week. Ethanol production for the week ending September 19th was 889,000 barrels per day down 42,000 barrels per day from last week. Ending ethanol stocks were 18.592 million barrels down 213,000 barrels from last week. Nationally, the September 22nd Crop Progress report estimated corn dented or beyond at 90 percent compared to 82 percent last week, 90 percent last year, and a 5-year average of 92 percent; corn mature at 42 percent compared to 27 percent last week, 37 percent last year, and a 5-year average of 54 percent; corn harvested at 7 percent compared to 4 percent last week, 7 percent last year, and a 5-year average of 15 percent; and corn condition at 74 percent good to excellent 7 percent poor to very poor. In Tennessee, the Crop Progress report estimated, corn dented or beyond at 98 percent compared to 96 percent last week, 100 percent last year, and a 5-year average of 100 percent; corn mature at 85 percent compared to 67 percent last week, 76 percent last year, and a 5-year average of 87 percent; corn harvested at 37 percent compared to 20 percent last week, 36 percent last year, and a 5-year average of 56 percent; and corn condition at 84 percent good to excellent and 3 percent poor to very poor. This week December 2014 corn futures prices traded between $3.22 and $3.31. Dec/Mar and Dec/Sep future spreads were 12 cents and 35 cents, respectively.
January cash forward contracts at elevators and barge points for the week averaged $3.21 with a range of $2.83 to $3.53. March 2015 corn futures closed at $3.35 down 9 cents from last week with support at $3.34 and resistance at $3.45. Corn net sales reported by exporters from September 12th to 19th were within expectations with net sales of 32.9 million bushels for the 2014/15 marketing year. Exports for the same time period were up from last week at 40.9 million bushels. Corn export sales and commitments were 31 percent of the USDA estimated total annual exports for the 2014/15 marketing year (September 1 to August 31) compared to a 5-year average of 35 percent. September 2015 futures closed at $3.58. Downside price protection could be obtained by purchasing a $3.60 September 2015 Put Option costing 30 cents establishing a $3.30 futures floor.
Soybeans
November 2014 soybean futures closed at $9.10 down 47 cents for the week with support at $9.09 and resistance at $9.48. Nov/Dec soybean to corn price ratio was 2.82 at the end of the week. For the week, average soybean basis weakened at Northwest Barge Points, Memphis, Northwest, and Upper-middle Tennessee and strengthened at Lower-middle Tennessee. Basis ranged from 32 under to 27 over the November futures contract at elevators and barge points. Average basis at the end of the week was 5 under the November futures contract. The Crop Progress report estimated soybeans dropping leaves at 45 percent compared to 24 percent last week, 44 percent last year, and a 5-year average of 53 percent; soybeans harvested at 3 percent compared to 3 percent last year and a 5-year average of 8 percent; and soybean condition at 71 percent good to excellent 7 percent poor to very poor. In Tennessee, the Crop Progress report estimated soybeans dropping leaves at 42 percent compared to 30 percent last week, 25 percent last year, and a 5-year average of 49 percent; soybeans harvested at 6 percent, compared to 3 percent last week, 3 percent last year, and a 5-year average of 6 percent; and soybean condition at 82 percent good to excellent 3 percent poor to very poor. This week November 2014 soybean futures traded between $9.10 and $9.54. November cash forward contracts averaged $9.31 with a range of $8.87 to $9.72.
January 2015 soybean futures closed at $9.18 down 47 cents from last week with support at $9.08 and resistance at $9.38. Net sales reported by exporters were within expectations with net sales of 94.3 million bushels for the 2014/15 marketing year. Exports for the same period were up from last week at 15.3 million bushels. Soybean export sales and commitments were 61 percent of the USDA estimated total annual exports for the 2014/15 marketing year (September 1 to August 31), compared to a 5-year average of 51 percent. Nov/Jan and Nov/Nov future spreads were 8 cents and 21 cents. November 2015 futures closed at $9.31. Downside price protection could be achieved by purchasing a $9.40 November 2015 Put Option which would cost 70 cents and set an $8.70 futures floor.
Cotton
December 2014 cotton futures closed at 61.89 down 2.5 cents for the week with support at 60.05 and resistance at 64.17. Cotton adjusted world price (AWP) decreased 3.25 cents to 50.94 cents. Oct 2014 cotton futures are trading at 62.48. The Crop Progress report estimated cotton bolls opening at 58 percent compared to 51 percent last week, 45 percent last year, and a 5-year average of 60 percent; cotton harvested at 8 percent compared to 6 percent last week, 5 percent last year, and a 5-year average of 9 percent; and cotton condition at 48 percent good to excellent 18 percent poor to very poor. In Tennessee, the Crop Progress report estimated cotton bolls opening at 61 percent compared to 49 percent last week, 24 percent last year, and a 5-year average of 63 percent; and cotton condition at 72 percent good to excellent 5 percent poor to very poor. December cotton futures traded between 60.83 and 64.40 cents this week. Downside price protection could be obtained by purchasing a 62 cent December 2014 Put Option costing 2 cents establishing a 60 cent futures floor.
March 2014 cotton futures closed at 61.46 down 2.83 cents for the week with support at 59.82 and resistance at 63.42. Net sales reported by exporters were up from last week at 155,700 bales for the 2014/15 marketing year and net sales of 11,600 bales for the 2015/16 marketing year. Exports for the same period were down from last week at 87,900 bales. Cotton export sales were 57 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 47 percent. Oct/Dec and Dec/Mar future spreads were -0.59 cents and -0.43 cents.
Wheat
December 2014 wheat futures closed at $4.74 the same as last week with support at $4.57 and resistance at $4.91. In Memphis, old crop cash wheat traded between $4.29 and $4.70 for the week. The Crop Progress report estimated spring wheat harvested at 86 percent compared to 74 percent last week, 93 percent last year, and a 5-year average of 92 percent. December wheat futures traded between $4.66 and $4.84 this week. December wheat to corn price ratio was 1.47. Dec/Mar and Dec/July future spreads were 13 cents and 29 cents.
March 2015 wheat futures closed at $4.87 down 4 cents from last week with support at $4.72 and resistance at $5.03. Net sales reported by exporters were within expectations at 14.6 million bushels for the 2014/15 marketing year. Exports for the same period were down from last week at 17.4 million bushels. Wheat export sales were 53 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 51 percent. The Crop Progress report estimated winter wheat planted at 25 percent compared to 12 percent last week, 21 percent last year, and a 5-year average of 22 percent. In Tennessee, winter wheat planting was estimated at 2 percent compared to a 5-year average of 1 percent. June/July 2015 cash forward contracts averaged $4.73 with a range of $4.44 to $4.99 at elevators and barge points. July 2015 wheat futures closed at $5.03. Downside price protection could be obtained by purchasing a $5.10 July 2015 Put Option costing 40 cents establishing a $4.70 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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