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WASDE Report: Corn, Cotton, Soybeans Expectations Unchanged
DR. AARON SMITH
KNOXVILLE, TENN.
Corn, soybeans, cotton, and wheat were up for the week. On Tuesday February 10th, the USDA released its monthly World Agricultural Supply and Demand Estimates (WASDE) report. As expected, the report did not contain any major revisions and overall was not a major market mover.
Corn: Domestic production was left unchanged at 14.216 billion bushels. Feed and residual use was decreased by 25 million bushels while ethanol use was increased by 75 million bushels. As a result, domestic ending stocks were revised down 50 million bushels. Estimated marketing year average price had a mid-point of $3.65. Estimated global ending stocks increased 49 million bushels largely due to increased Argentinian production.
Soybeans: Like corn, domestic soybean production was left unchanged at 3.969 billion bushels. Crush and exports were increased 15 and 20 million bushels with an increase in imports of 10 million bushels partially offsetting these increases. Net changes resulted in a 25 million bushel reduction in estimated ending stocks to 385 million bushels. The mid-point estimated marketing year average price was left unchanged at $10.20. Estimated global soybean stocks decreased 56 million bushels partially due to a 37 million bushel reduction in the estimated Brazilian crop.
Cotton: No changes to cotton production were realized from the January report. Estimated exports increased 700,000 bales and domestic use decreased 150,000. Overall US stocks were estimated down 500,000 bales at 4.2 million bales. Mid-point marketing year average price was estimated at $0.61. Global ending stocks were estimated up 1.2 million bales at 109.84 million bales. China holds approximately 59 percent of global cotton stocks.
Wheat: Domestic wheat imports and exports were decreased resulting in a net 5 million bushel increase in estimated ending stocks to 692 million bushels. Estimated mid-point marketing year average price was decreased to $6.00. World ending stocks were estimated at 7.27 billion bushels up 68 million from the January estimate.
Corn
March 2015 corn futures closed at $3.87 up 2 cents a bushel since last week. Across Tennessee average basis (cash price- nearby future price) strengthened at Northwest Barge Points, Upper-middle, and Northwest Tennessee and weakened at Memphis and Lower-middle Tennessee. Overall average basis for the week ranged from 7 under to 28 over the March futures contract with an average of 14 over at the end of the week. Ethanol production for the week ending February 6th was 961,000 barrels per day up 13,000 barrels per day from last week. Ending ethanol stocks were 21.135 million barrels up 149,000 barrels from last week. This week March 2015 corn futures prices traded between $3.81 and $3.91. Mar/May and Mar/Sep future spreads were 8 cents and 22 cents, respectively.
May 2015 corn futures closed at $3.95 up 1 cent since last week. Corn net sales reported by exporters from January 30th to February 5th were above expectations with net sales of 39.5 million bushels for the 2014/15 marketing year and 4.6 million bushels for the 2015/16 marketing year. Exports for the same time period were down from last week at 24.4 million bushels. Corn export sales and commitments were 75 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 70 percent. September 2015 cash forward contracts averaged $3.97 with a range of $3.74 to $4.36. September 2015 futures closed at $4.09 up 1 cent 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 $9.90 up 17 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 weakened at Lower-middle Tennessee and strengthened at Memphis, Northwest, Northwest Barge Points, and Upper-middle Tennessee. Basis ranged from 10 under to 35 over the March futures contract at elevators and barge points. Average basis at the end of the week was 16 over the March futures contract. This week March 2015 soybean futures traded between $9.67 and $9.97.
May 2015 soybean futures closed at $9.94 up 14 cents since last week. Net sales reported by exporters were above expectations with net sales of 27.4 million bushels for the 2014/15 marketing year and 0.03 million bushels for the 2015/16 marketing year. Exports for the same period were down from last week at 58.9 million bushels. Soybean export sales and commitments were 95 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 90 percent. Mar/May and Mar/Nov future spreads were 4 cents and -19 cents. October/November 2015 cash forward contracts averaged $9.50 with a range of $9.23 to $9.85 at elevators and barge points. Nov/Sep 2015 soybean to corn price ratio was 2.37. November 2015 futures closed at $9.71 up 11 cents from last week. Downside price protection could be achieved by purchasing a $9.80 November 2015 Put Option which would cost 65 cents and set an $9.15 futures floor.
Cotton
March 2015 cotton futures closed at 62.7 up 1.11 cents since last week. Cotton adjusted world price (AWP) increased 1.27 cents from last week to 47.76 cents. March 2015 cotton futures traded between 61.25 and 63.44 cents this week.
May 2015 cotton futures closed at 63.32 up 1.69 cents since last week. Net sales reported by exporters were down from last week at 52,200 bales for the 2014/15 marketing year and 12,100 bales for the 2015/16 marketing year. Exports for the same period were up from last week at 289,700 bales. Upland cotton export sales were 93 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 89 percent. Mar/May and Mar/Dec futures spread were 0.62 cents and 1.37 cents. December 2015 cotton futures closed at 64.07 up 0.87 cents since last week. Downside price protection could be obtained by purchasing a 65 cent December 2015 Put Option costing 4.85 cents establishing a 60.15 cent futures floor.
Wheat
March 2015 wheat futures closed at $5.33 up 6 cents since last week. March wheat futures traded between $5.15 and $5.34 this week. March wheat to corn price ratio was 1.38. Mar/May and Mar/July future spreads were -4 cents and -1 cent, respectively. In Memphis, old crop cash wheat traded between $4.81 and $4.89 this week.
May 2015 wheat futures closed at $5.29 the same as last week. Net sales reported by exporters were within expectations at 15 million bushels for the 2014/15 marketing year and 0.3 million bushels for the 2015/16 marketing year. Exports for the same period were down from last week at 13.7 million bushels. Wheat export sales were 85 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 86 percent. June/July 2015 cash forward contracts averaged $5.20 with a range of $4.63 to $5.49 at elevators and barge points. July 2015 wheat futures closed at $5.32 up 1 cent since last week. Downside price protection could be obtained by purchasing a $5.40 July 2015 Put Option costing 37 cents establishing a $5.03 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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