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Soybean Exports Continue Providing Price Support
DR. AARON SMITH
KNOXVILLE, TENN.
Corn, soybeans, and wheat were up; cotton was down for the week. March corn futures have traded flat since October 28th in a range of $3.71 to $4.01. Due to record production and the 2 billion plus bushel carry over, producers should be cautious carrying unpriced corn into 2015 as it is likely we will see the market trade flat to down in early 2015. Soybean export sales continue to provide price support as net sales commitments year-to-date are near 1.46 billion bushels for the 2014/15 marketing year compared to the USDA estimated marketing year total of 1.72 billion bushels (2014/15 marketing year is from September 1, 2014 to August 31, 2015). Export sales will slow substantially in the New Year however it is likely that exports will exceed the current USDA marketing year estimates. South America remains somewhat of a wild card as we wait to see what the growing season will bring. For three weeks, March cotton futures have traded between 58.53 and 60.91 cents per pound. Cotton exports have provided some positive news but the global outlook for cotton in the near term remains bearish due to production continuing to exceed use. Wheat was up over 30 cents at the start of the week before giving back almost half of the initial gain. Concerns over winter kill in some areas of the US, Eastern Europe, and Russia have fueled the recent rally. Given the large global stocks of wheat, corn, and other grains it is unlikely that wheat prices will maintain their upward trajectory unless a major production disruption is confirmed. University of Tennessee Extension, Tennessee State University and USDA-FSA will be hosting 12 Farm Bill meetings in January and February across the state. Meetings are specific to the Farm Bill programs and decisions affecting row crop producers and will cover: yield updates, base acreage reallocation, ARC-Co, ARC-I, PLC, crop insurance, and the use of FSA online decision aids. Additional information can be found on the University of Tennessee Extension’s 2014 Farm Bill webpage or by contacting your local Extension agent or FSA office.
Corn
March 2015 corn futures closed at $3.95 up 7 cents a bushel since last week with support at $3.82 and resistance at $4.02. 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 26 under to 34 over the December futures contract with an average of 17 over at the end of the week. December 2014 futures closed at $3.81. Ethanol production for the week ending November 28th was 962,000 barrels per day down 20,000 barrels per day from last week. Ending ethanol stocks were 17.289 million barrels up 217,000 barrels from last week. This week March 2014 corn futures prices traded between $3.77 and $3.96. Mar/May and Mar/Sep future spreads were 8 cents and 19 cents, respectively.
May 2015 corn futures closed at $4.03. Corn net sales reported by exporters from November 21st to 27th were above expectations with net sales of 46.1 million bushels for the 2014/15 marketing year. Exports for the same time period were up from last week at 29.4 million bushels. Corn export sales and commitments were 51 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 52 percent. September 2015 cash forward contracts averaged $3.85 with a range of $3.51 to $4.18. September 2015 futures closed at $4.14. Downside price protection could be obtained by purchasing a $4.20 September 2015 Put Option costing 39 cents establishing a $3.81 futures floor.
Soybeans
January 2015 soybean futures closed at $10.36 up 20 cents for the week with support at $9.89 and resistance at $10.64. Jan/Mar soybean to corn price ratio was 2.62 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 15 under to 50 over the January futures contract at elevators and barge points. Average basis at the end of the week was 14 over the January futures contract. This week January 2015 soybean futures traded between $9.83 and $10.40.
March 2015 soybean futures closed at $10.42 up 20 cents for the week. Net sales reported by exporters were above expectations with net sales of 43.3 million bushels for the 2014/15 marketing year. Exports for the same period were down from last week at 74.9 million bushels. Soybean export sales and commitments were 85 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 75 percent. Jan/Mar and Jan/Nov future spreads were 6 cents and -23 cents. October/November 2015 cash forward contracts averaged $9.74 with a range of $9.31 to $10.43. Nov/Sep 2015 soybean to corn price ratio was 2.45. November 2015 futures closed at $10.13. Downside price protection could be achieved by purchasing a $10.20 November 2015 Put Option which would cost 75 cents and set a $9.45 futures floor.
Cotton
March 2015 cotton futures closed at 59.64 cents down 0.44 cents for the week with support at 58.70 and resistance at 61.38. Cotton adjusted world price (AWP) increased 0.27 cents to 46.36 cents. March 2015 cotton futures traded between 58.97 and 60.91 cents this week.
May 2015 cotton futures closed at 60.53. Net sales reported by exporters were down from last week at 167,000 bales for the 2014/15 marketing year. Exports for the same period were down from last week at 106,600 bales. Upland cotton export sales were 73 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 71 percent. Mar/May and Mar/Dec futures spread were 0.89 cents and 4.25 cents. December 2015 cotton futures closed at 63.89. Downside price protection could be obtained by purchasing a 64 cent December 2015 Put Option costing 4.37 cents establishing a 59.63 cent futures floor.
Wheat
March 2015 wheat futures closed at $5.794 up 16 cents from last week with support at $5.72 and resistance at $6.00. In Memphis, old crop cash wheat traded between $5.61 and $6.08 for the week. March wheat futures traded between $5.70 and $6.11 this week. March wheat to corn price ratio was 1.50. Mar/May and Mar/July future spreads were 5 cents and 8 cents.
May 2015 wheat futures closed at $5.99. Net sales reported by exporters were within expectations at 11.7 million bushels for the 2014/15 marketing year and net cancellations of 0.2 million bushels for the 2015/16 marketing year. Exports for the same period were up from last week at 16.5 million bushels. Wheat export sales were 68 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 69 percent. June/July 2015 cash forward contracts averaged $5.90 with a range of $5.39 to $6.26 at elevators and barge points. July 2015 wheat futures closed at $6.02. Downside price protection could be obtained by purchasing a $6.10 July 2015 Put Option costing 50 cents establishing a $5.60 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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