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Soybean Futures Remain In Quagmire
DR. AARON SMITH
KNOXVILLE, TENN.
Corn, cotton, and wheat were up; soybeans were mixed for the week. December 2015 corn futures set a new 150 day low on Wednesday before rebounding on Thursday and Friday to close up for the week. November soybean futures establish new 150 day lows this week at $9.39 per bushel. Soybean futures remain somewhat of a quagmire. Strong export and domestic demand provide bullish news, while large domestic and global ending stocks for the 2014/15 marketing year and the potential for increased planted acreage in 2015 fuel the bears. July wheat futures were able to continue their upward assent from lows two weeks ago, closing up 49 cents since March 6. December cotton futures have traded in a 5.27 cent trading range in 2015 (61.28 to 66.55). At the end of the month, USDA will release the Quarterly Grain Stocks and Prospective Planting reports. Both reports will be closely monitored to provide clarification for the old crop and new crop domestic balance sheets and could result in substantial price movements.
Corn
May 2015 corn futures closed at $3.85 up 5 cents a bushel since last week. Across Tennessee average basis (cash price- nearby future price) strengthened at Northwest Barge Points, Northwest, Lower-middle, and Upper-middle Tennessee and weakened at Memphis. Overall average basis for the week ranged from 14 under to 30 over the May futures contract with an average of 14 over at the end of the week. Ethanol production for the week ending March 13th was 947,000 barrels per day up 3,000 barrels per day from last week. Ending ethanol stocks were 20.82 million barrels down 353,000 barrels from last week. This week May 2015 corn futures prices traded between $3.67 and $3.87. May/Jul and May/Sep future spreads were 7 cents and 15 cents, respectively.
July 2015 corn futures closed at $3.92 up 4 cents from last week. Corn net sales reported by exporters March 6th to 12th were within expectations with net sales of 19.8 million bushels for the 2014/15 marketing year and 2.6 million bushels for the 2015/16 marketing year. Exports for the same time period were down from last week at 27.3 million bushels. Corn export sales and commitments were 80 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. September 2015 cash forward contracts averaged $3.82 with a range of $3.56 to $4.14. September 2015 futures closed at $4.00 up 5 cents from last week. Downside price protection could be obtained by purchasing a $4.10 September 2015 Put Option costing 35 cents establishing a $3.75 futures floor.
Soybeans
May 2015 soybean futures closed at $9.73 down 1 cent since last week. May soybean to corn price ratio was 2.53 at the end of the week. For the week, average soybean basis strengthened or remained unchanged at Memphis, Northwest, Upper-middle, and Lower-middle Tennessee and weakened at Northwest Barge Points. Basis ranged from 28 under to 29 over the May futures contract at elevators and barge points. Average basis at the end of the week was 13 over the May futures contract. This week May 2015 soybean futures traded between $9.53 and $9.80.
July 2015 soybean futures closed at $9.78 the same as last week. Net sales reported by exporters were within expectations with net sales of 12.6 million bushels for the 2014/15 marketing year and 0.2 million bushels for the 2015/16 marketing year. Exports for the same period were up from last week at 23.5 million bushels. Soybean export sales and commitments were 99 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 95 percent. May/Jul and May/Nov future spreads were 5 cent and -17 cents. October/November 2015 cash forward contracts averaged $9.34 with a range of $9.10 to $9.56 at elevators and barge points. Nov/Sep 2015 soybean to corn price ratio was 2.39. November 2015 futures closed at $9.56 up 3 cents from last week. Downside price protection could be achieved by purchasing a $9.60 November 2015 Put Option which would cost 64 cents and set an $8.96 futures floor.
Cotton
May 2015 cotton futures closed at 62.82 up 2.32 cents since last week. Cotton adjusted world price (AWP) decreased 0.70 cents from last week to 46.35 cents. May 2015 cotton futures traded between 59.83 and 63.41 cents this week.
July 2015 cotton futures closed at 63.4 up 2.21 cents since last week. Net sales reported by exporters were up from last week with net sales of 238,600 bales for the 2014/15 marketing year and net sales of 50,200 bales for the 2015/16 marketing year. Exports for the same period were down from last week at 296,000 bales. Upland cotton export sales were 97 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 95 percent. May/July and May/Dec futures spread were 0.58 cents and 1.24 cents. December 2015 cotton futures closed at 64.06 up 1.47 cents since last week. Downside price protection could be obtained by purchasing a 65 cent December 2015 Put Option costing 4.34 cents establishing a 60.66 percent futures floor.
Wheat
May 2015 wheat futures closed at $5.30 up 28 cents since last week. May wheat futures traded between $4.33 and $5.30 this week. May wheat to corn price ratio was 1.38. May/July and July/Sept future spreads were 3 cent and 9 cents, respectively. In Memphis, old crop cash wheat traded between $4.63 and $4.74 last week.
July 2015 wheat futures closed at $5.33 up 30 cents since last week. Net sales reported by exporters were within expectations at 14.4 million bushels for the 2014/15 marketing year and 5.3 million bushels for the 2015/16 marketing year. Exports for the same period were down from last week at 18 million bushels. Wheat export sales were 93 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 96 percent. June/July 2015 cash forward contracts averaged $5.08 with a range of $4.47 to $5.31 at elevators and barge points. Downside price protection could be obtained by purchasing a $5.40 July 2015 Put Option costing 38 cents establishing a $5.02 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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