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Planting Estimates Show Decrease Of 4.9 Million Acres
DR. AARON SMITH
KNOXVILLE, TENN.
Corn, cotton, and wheat were up; soybeans were down for the week. On Thursday, the USDA released updated tables with long-term projections for key agricultural commodities (2014-2024). Highlights of the report for each commodity are: Corn: In 2015, planted acreage was estimated at 88 million acres down 2.9 million acres from 2014. Marketing year average farm price for the next five years was estimated from a low of $3.40 (2015) to a high of $3.55 (2019). Soybeans: In 2015, planted acreage was estimated at 84.0 million acres down 0.2 million acres from 2014. Marketing year average farm price for the next five years was estimated from a low of $8.50 (2015) to a high of $9.20 (2019). Cotton: In 2015, planted acreage was estimated at 9.8 million acres down 1 million acres from 2014. Marketing year average farm price for the next five years was estimated from a low of $0.595 (2015) to a high of $0.655 (2019). Wheat: In 2015, planted acreage was estimated at 56 million acres down 0.8 million acres from 2014. Marketing year average farm price for the next five years was estimated from a low of $4.65 (2016) to a high of $5.00 (2015).These estimates are provided by the USDA primarily for budgeting purposes; as such it is important to be cautious in reading too much into these numbers. However, two interesting points about the updates: 1) Combining the estimated planted acreage for the four crops above results in a net decrease in planted acreage of 4.9 million acres from 2014 to 2015. The decrease in soybean acreage is particularly eyebrow rising as many initial estimates for the 2015 production year have soybeans adding significant acreage (somewhere close to 88 million planted acres). 2) The USDA see’s row crop prices bottoming out in the 2015/16 marketing year and then gradually increasing. This may be of significance to producers when they go to make their 2014 Farm Bill program elections this winter, as price projections will play a key role in determining which programs a producer selects. Soybean prices are not estimated to fall below the PLC reference price of $8.40/bu while corn is estimated to be below the $3.70/bu PLC reference price for all five years. Again these are estimates and must be taken with a grain of salt. The updated tables are available at: http://www.usda.gov/oce/commodity/projections/index.htm.
Corn
March 2015 corn futures closed at $4.10 up 3 cents a bushel since last week. Across Tennessee average basis (cash price- nearby future price) strengthened in Memphis and weakened in Northwest, Northwest Barge Points, Lower-middle, and Upper-middle Tennessee. Overall average basis for the week ranged from 29 under to 31 over the March futures contract with an average of 2 under at the end of the week. Ethanol production for the week ending December 12th was 990,000 barrels per day up 2,000 barrels per day from last week. Ending ethanol stocks were 17.659 million barrels down 91,000 barrels from last week. This week March 2015 corn futures prices traded between $4.03 and $4.14. Mar/May and Mar/Sep future spreads were 9 cents and 18 cents, respectively.
May 2015 corn futures closed at $4.19 up 4 cents from last week. Corn net sales reported by exporters from December 5th to 11th were within expectations with net sales of 27.3 million bushels for the 2014/15 marketing year and 0.2 million bushels for the 2015/16 marketing year. Exports for the same time period were up from last week at 29.7 million bushels. Corn export sales and commitments were 55% 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 56 percent. September 2015 cash forward contracts averaged $4.10 with a range of $3.91 to $4.39. September 2015 futures closed at $4.28 up 4 cents from last week. Downside price protection could be obtained by purchasing a $4.30 September 2015 Put Option costing 38 cents establishing a $3.92 futures floor.
Soybeans
January 2015 soybean futures closed at $10.30 down 17 cents for the week. Jan/Mar soybean to corn price ratio was 2.51 at the end of the week. For the week, average soybean basis weakened or remained unchanged in Memphis, Northwest, Northwest Barge Points, Upper middle, and Lower-middle Tennessee. Basis ranged from 10 under to 42 over the January futures contract at elevators and barge points. Average basis at the end of the week was 12 over the January futures contract. This week January 2015 soybean futures traded between $10.15 and $10.55.
March 2015 soybean futures closed at $10.38 down 15 cents for the week. Net sales reported by exporters were within expectations with net sales of 25.6 million bushels for the 2014/15 marketing year and 12.9 million bushels for the 2015/16 marketing year. Exports for the same period were down from last week at 69.5 million bushels. Soybean export sales and commitments were 86 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 79 percent. Jan/Mar and Jan/Nov future spreads were 8 cents and -13 cents. October/November 2015 cash forward contracts averaged $9.88 with a range of $9.55 to $10.25. Nov/Sep 2015 soybean to corn price ratio was 2.38. November 2015 futures closed at $10.17 down 2 cents from last week. Downside price protection could be achieved by purchasing a $10.20 November 2015 Put Option which would cost 80 cents and set a $9.40 futures floor.
Cotton
March 2015 cotton futures closed at 60.89 cents up 0.35 cents for the week. Cotton adjusted world price (AWP) increased 1.21 cents to 47.66 cents. March 2015 cotton futures traded between 59.49 and 61.13 cents this week.
May 2015 cotton futures closed at 61.35 up 0.28 cents for the week. Net sales reported by exporters were up from last week at 89,500 bales for the 2014/15 marketing year and 44,200 bales for the 2015/16 marketing year. Exports for the same period were down from last week at 174,500 bales. Upland cotton export sales were 76 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 75 percent. Mar/May and Mar/Dec futures spread were 0.46 cents and 3.65 cents. December 2015 cotton futures closed at 64.54 up 0.04 cents for the week. Downside price protection could be obtained by purchasing a 65 cent December 2015 Put Option costing 4.81 cents establishing a 60.19 cent futures floor.
Wheat
March 2015 wheat futures closed at $6.32 up 26 cents from last week. In Memphis, old crop cash wheat traded between $5.93 and $6.24 for the week. March wheat futures traded between $5.99 and $6.77 this week. March wheat to corn price ratio was 1.54. Mar/May and Mar/July future spreads were 3 cents and 2 cents, respectively.
May 2015 wheat futures closed at $6.35 up 27 cents for the week. Net sales reported by exporters were above expectations at 17.5 million bushels for the 2014/15 marketing year and 1.2 million bushels for the 2015/16 marketing year. Exports for the same period were up from last week at 15.2 million bushels. Wheat export sales were 71 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 72 percent. June/July 2015 cash forward contracts averaged $6.23 with a range of $5.60 to $6.67 at elevators and barge points. July 2015 wheat futures closed at $6.34 up 27 cents for the week. Downside price protection could be obtained by purchasing a $6.40 July 2015 Put Option costing 50 cents establishing a $5.90 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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