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Soybeans, Cotton Show Yield Increases From Less Acreage
DR. AARON SMITH
KNOXVILLE, TENN.
Corn, soybeans, cotton, and wheat were down from last week. On Monday, the USDA released several reports including the January WASDE report. Highlights of these reports by commodity were:
Corn: Domestic yield was reduced 2.4 bpa to 171 bpa resulting in a decrease in estimated production of 191 million bushels. Ethanol use was increased 25 million bushels while feed and residual was decreased 100 million bushels. Overall changes in supply and demand resulted in domestic corn ending stocks decreasing 121 million bushels to an estimated 1.877 billion bushels. Corn stocks-to-use ratio is now estimated at 13.81 percent for the 2014/15 marketing year down from the October WASDE estimate of 15.24 percent. Foreign Corn ending stocks are estimated at 5.569 billion bushels.
Soybeans: Harvested acreage was decreased 300,000 acres while yield was increased 0.3 bpa to 47.8 bpa resulting in a net increase in domestic production of 11 million bushels. Exports were increased 10 million bushels to 1.77 billion based on strong year-to-date sales. Overall production increases were offset by increased use leaving estimated ending stocks unchanged at 410 million bushels. Foreign ending stocks were estimated up 34 million bushels to 2.926 billion bushels largely due to greater anticipated production from Brazil.
Cotton: Harvested area was decreased 170,000 acres and yield was increased 22 lbs/acre to 795 lbs/acre, resulting in a net change in estimated production of 160,000 bales. Use was left unchanged and domestic ending stocks increased 100,000 bales. Foreign ending stocks were increase 0.46 million bales with China up 0.5 million.
Wheat: Production was left unchanged from last month. Domestic feed use was decreased 30 million bushels contributing to an increase in estimated ending stocks of 33 million bushels to 687 million. Foreign wheat ending stocks were up 8 million bushels to 6.515 billion bushels.
Corn:
March 2015 corn futures closed at $3.87 down 13 cents a bushel since last week. Across Tennessee average basis (cash price- nearby future price) strengthened in Memphis, Northwest Barge Points, Northwest, Lower-middle, and Upper-middle Tennessee. Overall average basis for the week ranged from 11 under to 30 over the March futures contract with an average of 13 over at the end of the week. Ethanol production for the week ending January 9th was 978,000 barrels per day up 29,000 barrels per day from last week. Ending ethanol stocks were 20.229 million barrels up 1.384 million barrels from last week. This week March 2015 corn futures prices traded between $3.76 and $4.07. Mar/May and Mar/Sep future spreads were 7 cents and 19 cents, respectively.
May 2015 corn futures closed at $3.94 down 14 cents since last week. Corn net sales reported by exporters from January 2nd to 8th were above expectations with net sales of 32.2 million bushels for the 2014/15 marketing year and 1 million bushels for the 2015/16 marketing year. Exports for the same time period were down from last week at 15.8 million bushels. Corn export sales and commitments were 63 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 61 percent. September 2015 cash forward contracts averaged $3.92 with a range of $3.39 to $4.26. September 2015 futures closed at $4.06 down 11 cents from last week. Downside price protection could be obtained by purchasing a $4.10 September 2015 Put Option costing 33 cents establishing a $3.77 futures floor.
Soybeans
March 2015 soybean futures closed at $9.91 down 61 cents since last week. March soybean to corn price ratio was 2.56 at the end of the week. For the week, average soybean basis strengthened in Memphis, Northwest Barge Points, Northwest, Upper-middle, and Lower-middle Tennessee. Basis ranged from 7 under to 45 over the March futures contract at elevators and barge points. Average basis at the end of the week was 19 over the March futures contract. This week March 2015 soybean futures traded between $9.83 and $10.61.
May 2015 soybean futures closed at $9.97 down 60 cents since last week. Net sales reported by exporters were above expectations with net sales of 41.6 million bushels for the 2014/15 marketing year and 11.2 million bushels for the 2015/16 marketing year. Exports for the same period were up from last week at 64.3 million bushels. Soybean export sales and commitments were 92 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 85 percent. Mar/May and Mar/Nov future spreads were 6 cents and -16 cents. October/November 2015 cash forward contracts averaged $9.84 with a range of $9.26 to $10.28. Nov/Sep 2015 soybean to corn price ratio was 2.40. November 2015 futures closed at $9.75 down 44 cents from last week. Downside price protection could be achieved by purchasing a $9.80 November 2015 Put Option which would cost 72 cents and set a $9.08 futures floor.
Cotton
March 2015 cotton futures closed at 59.23 down 1.53 cents since last week. Cotton adjusted world price (AWP) decreased 0.36 cents from last week to 46.77 cents. March 2015 cotton futures traded between 58.66 and 60.75 cents this week.
May 2015 cotton futures closed at 60.02 down 1.33 cents since last week. Net sales reported by exporters were up from last week at 441,800 bales for the 2014/15 marketing year and 1,500 bales for the 2015/16 marketing year. Exports for the same period were up from last week at 227,800 bales. Upland cotton export sales were 87 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 81 percent. Mar/May and Mar/Dec futures spread were 0.79 cents and 3.81 cents. December 2015 cotton futures closed at 63.04 down 1.41 cents since last week. Downside price protection could be obtained by purchasing a 64 cent December 2015 Put Option costing 4.89 cents establishing a 59.11 cent futures floor.
Wheat
March 2015 wheat futures closed at $5.32 down 31 cents since last week. March wheat futures traded between $5.28 and $5.67 this week. March wheat to corn price ratio was 1.37. Mar/May and Mar/July future spreads were 2 cents and 6 cents, respectively. In Memphis, cash wheat traded between $4.92 and $5.15 this week.
May 2015 wheat futures closed at $5.34 down 33 cents since last week. Net sales reported by exporters were within expectations at 10.5 million bushels for the 2014/15 marketing year and 3.4 million bushels for the 2015/16 marketing year. Exports for the same period were down from last week at 8.3 million bushels. Wheat export sales were 76 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 78 percent. June/July 2015 cash forward contracts averaged $5.37 with a range of $4.80 to $5.75 at elevators and barge points. July 2015 wheat futures closed at $5.38 down 34 cents since last week. Downside price protection could be obtained by purchasing a $5.40 July 2015 Put Option costing 36 cents establishing a $5.04 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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