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Growers Looking Ahead To Make Planting Decisions
DR. AARON SMITH
Knoxville, Tenn.
Corn, soybeans, and wheat were down; cotton was up for the week. January saw corn, soybean, wheat, and cotton prices move lower. In January, March corn futures peaked January 6th at $4.09 and closed the month at $3.70 (down 39 cents); March soybean futures peaked January 8th at $10.62 and closed the month at $9.61 (down $1.01); March wheat futures peaked January 6th at $6.03 and closed the month at $5.02 (down $1.01); and March cotton futures peaked January 6th at 61.25 and closed the month at 59.36 (down 1.89 cents). Large domestic and global stocks have continued to provide downward price pressure across commodities. Additionally, Brazil has begun harvesting a soybean crop that will potentially be 5-15 percent larger than last year. This would add to global stocks and adversely affect U.S. soybean exports to China for the remainder of this marketing year.
As we look ahead toward planting, producers should consider the following when determining acres to be planted to each commodity: 1) the price ratios amongst the crops planted on your farm (particularly during the crop insurance discovery period); 2) relative input costs across commodities (how much money/inputs are you risking for each commodity?); and 3) crop rotation (maintaining a proper crop rotation for fertility, weed, and pest control is likely more beneficial than chasing the markets). These decisions can be very difficult, particularly when, at current prices, you may be looking at negative net returns for all commodities. In these challenging marketing periods, securing a price on a percentage of your crop prior to planting and reevaluating through the growing season is strongly advised.
Corn
March 2015 corn futures closed at $3.70 down 16 cents a bushel since last week. Across Tennessee average basis (cash price- nearby future price) strengthened or remained unchanged at Memphis, Northwest, and Lower-middle Tennessee and weakened at Northwest Barge Points and Upper-middle Tennessee. Overall average basis for the week ranged from 11 under to 31 over the March futures contract with an average of 12 over at the end of the week. Ethanol production for the week ending January 23rd was 978,000 barrels per day down 1,000 barrels per day from last week. Ending ethanol stocks were 20.631 million barrels up 244,000 barrels from last week. This week March 2015 corn futures prices traded between $3.65 and $3.88. Mar/May and Mar/Sep future spreads were 8 cents and 23 cents, respectively.
May 2015 corn futures closed at $3.78 down17 cents since last week. Corn net sales reported by exporters from January 16th to 22nd were within expectations with net sales of 42.1 million bushels for the 2014/15 marketing year and 0.6 million bushels for the 2015/16 marketing year. Exports for the same time period were up from last week at 37.1 million bushels. Corn export sales and commitments were 71 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 65 percent. September 2015 cash forward contracts averaged $3.89 with a range of $3.65 to $4.29. September 2015 futures closed at $3.93 down 16 cents from last week. Downside price protection could be obtained by purchasing a $4.00 September 2015 Put Option costing 34 cents establishing a $3.66 futures floor.
Soybeans
March 2015 soybean futures closed at $9.61 down 11 cents since last week. March soybean to corn price ratio was 2.60 at the end of the week. For the week, average soybean basis strengthened or remained unchanged at Memphis, Northwest, and Upper-middle Tennessee and weakened in Northwest Barge Points and Lower-middle Tennessee. Basis ranged from 10 under to 40 over the March futures contract at elevators and barge points. Average basis at the end of the week was 18 over the March futures contract. This week March 2015 soybean futures traded between $9.55 and $9.85.
May 2015 soybean futures closed at $9.67 down 12 cents since last week. Net sales reported by exporters were above expectations with net sales of 32.6 million bushels for the 2014/15 marketing year and 0.7 million bushels for the 2015/16 marketing year. Exports for the same period were down from last week at 59.9 million bushels. Soybean export sales and commitments were 94 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 88 percent. Mar/May and Mar/Nov future spreads were 6 cents and -16 cents. October/November 2015 cash forward contracts averaged $9.50 with a range of $9.19 to $9.92. Nov/Sep 2015 soybean to corn price ratio was 2.40. November 2015 futures closed at $9.45 down 14 cents from last week. Downside price protection could be achieved by purchasing a $9.60 November 2015 Put Option which would cost 69 cents and set an $8.91 futures floor.
Cotton
March 2015 cotton futures closed at 59.36 up 2.06 cents since last week. Cotton adjusted world price (AWP) decreased 0.6 cents from last week to 44.99 cents. March 2015 cotton futures traded between 57.26 and 59.78 cents this week.
May 2015 cotton futures closed at 60.02 up 1.82 cents since last week. Net sales reported by exporters were up from last week at 546,200 bales for the 2014/15 marketing year and 12,600 bales for the 2015/16 marketing year. Exports for the same period were down from last week at 274,800 bales. Upland cotton export sales were 98 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 86 percent. Mar/May and Mar/Dec futures spread were 0.66 cents and 3.43 cents. December 2015 cotton futures closed at 62.79 up 1.29 cents since last week. Downside price protection could be obtained by purchasing a 63 cent December 2015 Put Option costing 4.29 cents establishing a 58.71 cent futures floor.
Wheat
March 2015 wheat futures closed at $5.02 down 28 cents since last week. March wheat futures traded between $4.97 and $5.34 this week. March wheat to corn price ratio was 1.36. Mar/May and Mar/July future spreads were 4 cents and 9 cents, respectively. In Memphis, old crop cash wheat traded between $4.65 and $4.80 this week.
May 2015 wheat futures closed at $5.06 down 26 cents since last week. Net sales reported by exporters were above expectations at 20 million bushels for the 2014/15 marketing year and 0.8 million bushels for the 2015/16 marketing year. Exports for the same period were up from last week at 12.5 million bushels. Wheat export sales were 80 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 82 percent. June/July 2015 cash forward contracts averaged $5.14 with a range of $4.56 to $5.44 at elevators and barge points. July 2015 wheat futures closed at $5.11 down 25 cents since last week. Downside price protection could be obtained by purchasing a $5.20 July 2015 Put Option costing 37 cents establishing a $4.83 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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