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Prices May Drop As Record Crop Moves To Market
DR. AARON SMITH
KNOXVILLE, TENN.
Corn, cotton, and wheat were down; soybeans were up for the week. December 2014 corn started the week at $3.81 per bushel decreased 19 cents before rebounding on Thursday from strong export sales numbers, closing down 9 cents for the week. As we move through the holiday season, it is likely that we will see March corn continue trading between $3.50 and $4.00, however as we move into the new year prices may turn lower as the record crop moves to market. Producers should strongly consider pricing production that will be stored into the New Year. Given the size of the corn crop there is limited upside in the corn market for the near future. In October, January soybean futures increased $1.30/bu from $9.19 to $10.49, since then prices have traded sideways in a range of $9.95 to $10.86. A great deal of volatility remains in the soybean futures market with daily high-low price spreads of 20+ cents, although this has moderated some from the 50+ cent spreads of the previous week. Like corn, we are likely to see soybean futures trade reasonably flat, but with continued volatility. Nearby cotton futures remain below 60 cents per pound. It is important for producers to be cognizant that marketing loan gains and loan deficiency payments count toward the payment limits in the new Farm Bill. As such, any payments received could restrict 2014 payments under the ARC or PLC programs that producers will be choosing in the New Year.
Corn
December 2014 corn futures closed at $3.72 down 9 cents a bushel since last week with support at $3.62 and resistance at $3.86. Across Tennessee average basis (cash price- nearby future price) strengthened or remained unchanged at Memphis, Northwest Barge Points, Northwest, and Lower-middle Tennessee and weakened in Upper-middle Tennessee. Overall average basis for the week ranged from 46 under to 31 over the December futures contract with an average of 3 under at the end of the week. Ethanol production for the week ending November 14th was 970,000 barrels per day up 24,000 barrels per day from last week. Ending ethanol stocks were 17.335 million barrels down 370,000 barrels from last week. Nationally, the November 17th Crop Progress report estimated corn harvested at 89 percent compared to 80 percent last week, 90 percent last year, and a 5-year average of 88 percent. In Tennessee, the Crop Progress report estimated corn harvested at 99 percent compared to 98 percent last week, 97 percent last year, and a 5-year average of 99 percent. This week December 2014 corn futures prices traded between $3.62 and $3.84. Dec/Mar and Dec/Sep future spreads were 13 cents and 35 cents, respectively.
January cash forward contracts at elevators and barge points for the week averaged $3.79 with a range of $3.41 to $4.06. March 2015 corn futures closed at $3.85 down 9 cents from last week with support at $3.75 and resistance at $3.98. Corn net sales reported by exporters from November 7th to 13th were above expectations with net sales of 35.8 million bushels for the 2014/15 marketing year. Exports for the same time period were down from last week at 15.2 million bushels. Corn export sales and commitments were 46 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 49 percent. September 2015 futures closed at $4.07. Downside price protection could be obtained by purchasing a $4.10 September 2015 Put Option costing 36 cents establishing a $3.74 futures floor.
Soybeans
January 2015 soybean futures closed at $10.39 up 17 cents for the week with support at $10.04 and resistance at $10.57. Jan/Dec soybean to corn price ratio was 2.79 at the end of the week. For the week, average soybean basis strengthened or remained unchanged at Memphis, Northwest, and Lower-middle Tennessee and weakened at Northwest Barge Points and Upper middle Tennessee. Basis ranged from 30 under to 40 over the January futures contract at elevators and barge points. Average basis at the end of the week was 7 over the January futures contract. The Crop Progress report estimated soybeans harvested at 94 percent compared to 90 percent last week, 94 percent last year, and a 5-year average of 96 percent. In Tennessee, the Crop Progress report estimated soybeans harvested at 83 percent compared to 73 percent last week, 72 percent last year, and a 5-year average of 77 percent. January cash forward contracts averaged $10.29 with a range of $9.68 to $10.81. This week January 2015 soybean futures traded between $10.03 and $10.42.
March 2015 soybean futures closed at $10.46 up 16 cents for the week with support at $10.12 and resistance at $10.64. Net sales reported by exporters were below expectations with net sales of 17.7 million bushels for the 2014/15 marketing year. Exports for the same period were up from last week at 113.1 million bushels. Soybean export sales and commitments were 79 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 70 percent. Jan/Mar and Jan/Nov future spreads were 7 cents and -22 cents. Nov/Sep 2015 soybean to corn price ratio was 2.50. November 2015 futures closed at $10.17. Downside price protection could be achieved by purchasing a $10.20 November 2015 Put Option which would cost 76 cents and set a $9.44 futures floor.
Cotton
December 2014 cotton futures closed at 59.72 cents down 0.08 cents for the week with support at 58.07 and resistance at 60.63. Cotton adjusted world price (AWP) decreased 2.45 cents to 46.12 cents. The Crop Progress report estimated cotton harvested at 69 percent compared to 62 percent last week, 66 percent last year, and a 5-year average of 74 percent. In Tennessee, the Crop Progress report estimated cotton harvested at 71 percent compared to 60 percent last week, 54 percent last year, and a 5-year average of 82 percent. December cotton futures traded between 57.84 and 60.1 cents this week.
March 2014 cotton futures closed at 59.52 down 0.11 cents for the week with support at 58.41 and resistance at 60.29. Net sales reported by exporters were up from last week at 172,000 bales for the 2014/15 marketing year. Exports for the same period were down from last week at 62,600 bales. Upland cotton export sales were 68 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 66 percent. Dec/Mar and Dec/Dec futures spread were -0.20 cents and 4.11 cents. December 2015 cotton futures closed at 63.83. Downside price protection could be obtained by purchasing a 64 cent December 2015 Put Option costing 4.84 cents establishing a 59.16 cent futures floor.
Wheat
December 2014 wheat futures closed at $5.47 down 13 cents from last week with support at $5.34 and resistance at $5.60. In Memphis, old crop cash wheat traded between $4.92 and $5.07 for the week. December wheat futures traded between $5.32 and $5.63 this week. December wheat to corn price ratio was 1.47. Dec/Mar and Dec/July future spreads were 6 cents and 19 cents.
March 2015 wheat futures closed at $5.53 down 9 cents from last week with support at $5.41 and resistance at $5.66. Net sales reported by exporters were within expectations at 13.3 million bushels for the 2014/15 marketing year. Exports for the same period were down from last week at 6.6 million bushels. Wheat export sales were 65 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 65 percent. The Crop Progress report estimated winter wheat planted at 95 percent compared to 93 percent last week, 99 percent last year, and a 5-year average of 97 percent; winter wheat emerged at 87 percent compared to 83 percent last week, 88 percent last year, and a 5-year average of 84 percent; and winter wheat condition at 60 percent good to excellent and 6 percent poor to very poor. In Tennessee, winter wheat planting was estimated at 85 percent compared to 75 percent last week, 73 percent last year, and a 5-year average of 83 percent; winter wheat emerged at 59 percent compared to 45 percent last week, 42 percent last year, and a 5-year average of 54 percent; and winter wheat condition at 78 percent good to excellent and 1 percent poor to very poor. June/July 2015 cash forward contracts averaged $5.42 with a range of $4.94 to $5.73 at elevators and barge points. July 2015 wheat futures closed at $5.66. Downside price protection could be obtained by purchasing a $5.70 July 2015 Put Option costing 41 cents establishing a $5.29 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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