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Soybean Exports Have Exceeded USDA Expectations
Dr. Aaron Smith
KNOXVILLE, TENN.
Corn, cotton, and wheat were up; soybeans were down for the week. Since October 27th, March corn futures have traded between $3.70 and $4.01; it is likely that this trading range will persist as we conclude the 2014 calendar year. Moving into 2015, corn prices are likely to have more downside price pressure as farmers bring the record crop to market. Producers should be cautious about carrying unpriced corn into 2015 as limited upside potential exists. Volatility in nearby soybean futures continued with a trading range of 38 cents on Friday. Year-to-date, soybean exports have exceeded USDA expectations. Soybean export sales are currently above 1.4 billion bushels compared to total estimated exports for the 2014/15 marketing year (September 1st to August 31st) of 1.72 billion. It is likely that the USDA will adjust soybean exports on future WASDE reports to more accurately reflect the current export pace. Nearby cotton futures got back above 60 cents on Friday after trading below 60 cents for 8 consecutive trading days. March cotton futures have not traded above 64 cents since September 22nd. Wheat prices increased on weather concerns both domestically and in Eastern Europe and Russia.
Corn
December 2014 corn futures closed at $3.75 up 3 cents a bushel since last week with support at $3.65 and resistance at $3.85. Across Tennessee average basis (cash price- nearby future price) strengthened or remained unchanged at Memphis, Northwest Barge Points, Northwest, Upper-middle, and Lower-middle Tennessee. Overall average basis for the week ranged from 48 under to 31 over the December futures contract with an average of 3 over at the end of the week. Ethanol production for the week ending November 21st was 982,000 barrels per day up 12,000 barrels per day from last week. Ending ethanol stocks were 17.072 million barrels down 263,000 barrels from last week. Nationally, the November 24th Crop Progress report estimated corn harvested at 94 percent compared to 89 percent last week, 94 percent last year, and a 5-year average of 92 percent. In Tennessee, the Crop Progress report estimated corn harvested at 100 percent compared to 99 percent last week, 100 percent last year, and a 5-year average of 100 percent. This week December 2014 corn futures prices traded between $3.65 and $3.80. Dec/Mar and Dec/Sep future spreads were 13 cents and 34 cents, respectively.
January cash forward contracts at elevators and barge points for the week averaged $3.87 with a range of $3.51 to $4.07. March 2015 corn futures closed at $3.88 up 3 cents from last week with support at $3.77 and resistance at $3.99. Corn net sales reported by exporters from November 14th to 20th were above expectations with net sales of 37.2 million bushels for the 2014/15 marketing year. Exports for the same time period were up from last week at 24.3 million bushels. Corn export sales and commitments were 49 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. September 2015 futures closed at $4.09. 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 $10.16 down 23 cents for the week with support at $9.88 and resistance at $10.65. Jan/Dec soybean to corn price ratio was 2.71 at the end of the week. For the week, average soybean basis strengthened or remained unchanged at Memphis, Northwest, Northwest Barge Points, Upper middle, and Lower-middle Tennessee. Basis ranged from 27 under to 45 over the January futures contract at elevators and barge points. Average basis at the end of the week was 10 over the January futures contract. The Crop Progress report estimated soybeans harvested at 97 percent compared to 94 percent last week, 95 percent last year, and a 5-year average of 98 percent. In Tennessee, the Crop Progress report estimated soybeans harvested at 91 percent compared to 83 percent last week, 81 percent last year, and a 5-year average of 93 percent. January cash forward contracts averaged $10.43 with a range of $9.85 to $10.91. This week January 2015 soybean futures traded between $10.13 and $10.54.
March 2015 soybean futures closed at $10.22 down 24 cents for the week with support at $9.94 and resistance at $10.70. Net sales reported by exporters were above expectations with net sales of 54.6 million bushels for the 2014/15 marketing year and 0.07 million bushels for the 2015/16 marketing year. Exports for the same period were down from last week at 102.2 million bushels. Soybean export sales and commitments were 83 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 73 percent. Jan/Mar and Jan/Nov future spreads were 6 cents and -19 cents. Nov/Sep 2015 soybean to corn price ratio was 2.44. November 2015 futures closed at $9.97. Downside price protection could be achieved by purchasing a $10.00 November 2015 Put Option which would cost 73 cents and set a $9.27 futures floor.
Cotton
December 2014 cotton futures closed at 60.96 cents up 1.24 cents for the week with support at 60.44 and resistance at 62. Cotton adjusted world price (AWP) decreased 0.03 cents to 46.09 cents. The Crop Progress report estimated cotton harvested at 77 percent compared to 69 percent last week, 77 percent last year, and a 5-year average of 83 percent. In Tennessee, the Crop Progress report estimated cotton harvested at 87 percent compared to 71 percent last week, 66 percent last year, and a 5-year average of 90 percent. December 2014 cotton futures traded between 59.01 and 62 cents this week.
March 2014 cotton futures closed at 60.08 up 0.56 cents for the week with support at 59.3 and resistance at 61.1. Net sales reported by exporters were up from last week at 305,700 bales for the 2014/15 marketing year and 10,400 bales for the 2015/16 marketing year. Exports for the same period were up from last week at 107,600 bales. Upland cotton export sales were 71 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 69%. Dec/Mar and Dec/Dec futures spread were -0.88 cents and 3.4 cents. December 2015 cotton futures closed at 64.36. Downside price protection could be obtained by purchasing a 64 cent December 2015 Put Option costing 4.52 cents establishing a 59.48 cent futures floor.
Wheat
December 2014 wheat futures closed at $5.77 up 30 cents from last week with support at $5.48 and resistance at $5.93. In Memphis, old crop cash wheat traded between $4.97 and $5.17 for the week. December wheat futures traded between $5.39 and $5.79 this week. December wheat to corn price ratio was 1.54. Dec/Mar and Dec/July future spreads were 1 cents and 12 cents.
March 2015 wheat futures closed at $5.78 up 25 cents from last week with support at $5.49 and resistance at $5.95. Net sales reported by exporters were within expectations at 15.9 million bushels for the 2014/15 marketing year and 2.4 million bushels for the 2015/16 marketing year. Exports for the same period were down from last week at 6.6 million bushels. Wheat export sales were 66 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 67 percent. The Crop Progress report estimated winter wheat emerged at 92 percent compared to 87 percent last week, 92 percent last year, and a 5-year average of 89 percent; and winter wheat condition at 58 percent good to excellent and 6 percent poor to very poor. In Tennessee, winter wheat planting was estimated at 93 percent compared to 85 percent last week, 85 percent last year, and a 5-year average of 90 percent; winter wheat emerged at 69 percent compared to 59 percent last week, 55 percent last year, and a 5-year average of 68 percent; and winter wheat condition at 77 percent good to excellent and 2 percent poor to very poor. June/July 2015 cash forward contracts averaged $5.54 with a range of $5.03 to $5.85 at elevators and barge points. July 2015 wheat futures closed at $5.89. Downside price protection could be obtained by purchasing a $5.90 July 2015 Put Option costing 41 cents establishing a $5.49 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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