|
Cotton Futures Is Lone Bright Spot This Month
DR. AARON SMITH
KNOXVILLE, TENN.
Cotton was up; corn, soybeans, and wheat were down for the week. In April, July corn futures decreased 21 cents from $3.85/bu to $3.64/bu; July soybeans decreased 5 cents from $9.77/bu to $9.72/bu; July wheat decreased 41 cents from $5.15/bu to $4.74/bu; and July cotton increased 4.67 cents from 63.21 cents/lb to 67.88 cents/lb. For soybeans, wheat, and corn, large global stocks, a record South American harvest, and a high US dollar have contributed to lower prices. Cotton futures, the lone bright spot this past month, benefitted from strong export sales and reduced estimated domestic acreage, as indicated by the USDA’s Prospective Plantings report. Moving forward, a weaker-to-flat US dollar should help export sales. On the downside, concerns over feed use may persist if we see an increase in the number of cases of H5N2 bird flu. As we move through May we will likely see harvest futures trade in established ranges: Dec corn-$3.70 to $4.20; Nov soybeans-$9.30 to $9.80; July wheat-$4.60 to $5.20; and Dec cotton- 62 to 68 cents. Any rallies in grain and oilseed markets should be viewed as opportunities to price additional production as, baring a weather event, substantial price improvements remain unlikely in the current marketing environment. Nationally, corn planting progress is ahead of 2014 but slightly behind the five year average; however, Monday’s report release should show further improvement due to favorable planting conditions in many Corn Belt states. Due to wet weather, Tennessee continues to remain well behind typical planting progress. Tennessee producers may shift acreage to cotton, soybeans, or sorghum if wet conditions persist. Note: This week, the CME implemented new daily price limits effective May 1st. The new price limits (and expanded limits) are: corn: $0.30 ($0.45), soybeans: $0.70 ($1.05); and wheat $0.40 ($0.60).
Corn
July 2015 corn futures closed at $3.63 down 6 cents a bushel since last week. This week July 2015 corn futures prices traded between $3.60 and $3.70. Across Tennessee average basis (cash price- nearby future price) strengthened at Northwest Barge Points, Memphis, Northwest, Lower-middle, and Upper-middle Tennessee. Overall, average basis for the week ranged from 10 under to 39 over the July futures contract with an average of 12 over at the end of the week. Ethanol production for the week ending April 24th was 921,000 barrels per day down 9,000 barrels per day from last week. Ending ethanol stocks were 20.797 million barrels down 545,000 barrels from last week. Corn net sales reported by exporters from April 17th to 23rd were above expectations with net sales of 32.8 million bushels for the 2014/15 marketing year and 4.5 million bushels for the 2015/16 marketing year. Exports for the same time period were up from last week at 50 million bushels. Corn export sales and commitments were 88 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 91 percent. Jul/Sep and Jul/Dec future spreads were 6 cents and 17 cents, respectively.
September 2015 futures closed at $3.69 down 8 cents from last week. September 2015 cash forward contracts averaged $3.64 with a range of $3.39 to $3.94. Nationally, this week’s Crop Progress report estimated corn planted at 19% compared to 9 percent last week, 17 percent last year, and a 5-year average of 25 percent; and corn emerged at 2 percent compared to 3 percent last year and a 5-year average of 6 percent. In Tennessee, corn planted was estimated at 17 percent compared to 6 percent last week, 48 percent last year, and a 5-year average of 60 percent; and corn emerged at 3 percent compared to 10 percent last year and a 5-year average of 30 percent. Downside price protection could be obtained by purchasing a $3.70 September 2015 Put Option costing 22 cents establishing a $3.48 futures floor.
Soybeans
July 2015 soybean futures closed at $9.64 down 6 cents since last week. This week July 2015 soybean futures traded between $9.61 and $9.95. July soybean to corn price ratio was 2.66 at the end of the week. For the week, average soybean basis strengthened at Memphis, Northwest Barge Points, Northwest, Upper-middle, and Lower-middle Tennessee. Basis ranged from 10 under to 32 over the July futures contract at elevators and barge points. Average basis at the end of the week was 14 over the July futures contract. Net sales reported by exporters were within expectations with net sales of 15.9 million bushels for the 2014/15 marketing year and net sales reductions of 4.4 million bushels for the 2015/16 marketing year. Exports for the same period were up from last week at 9.7 million bushels. Soybean export sales and commitments were 101 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 98 percent. August 2015 soybean futures closed at $9.59 down 7 cents since last week. Jul/Aug and Jul/Nov future spreads were -5 cent and -24 cents, respectively.
November 2015 futures closed at $9.40 down 12 cents from last week. Nov/Sep 2015 soybean to corn price ratio was 2.55. October/November 2015 cash forward contracts averaged $9.46 with a range of $9.20 to $9.72 at elevators and barge points. Nationally, this week’s Crop Progress report estimated soybeans planted at 2 percent compared to 3 percent last year and a 5-year average of 4 percent. In Tennessee, soybeans planted were estimated at 1 percent compared to 2 percent last year and a 5-year average of 3 percent. Downside price protection could be achieved by purchasing a $9.60 November 2015 Put Option which would cost 62 cents and set an $8.98 futures floor.
Cotton
July 2015 cotton futures closed at 66.61 up 0.27 cents since last week. July 2015 cotton futures traded between 65.6 and 68.13 cents this week. Adjusted world price (AWP) increased 3.14 cents to 51.7 cents per pound. Net sales reported by exporters were down from last week with net sales of 124,200 bales for the 2014/15 marketing year and net sales of 42,900 bales for the 2015/16 marketing year. Exports for the same period were down from last week at 285,300 bales. Upland cotton export sales were 103 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 100 percent. October 2015 cotton futures closed at 66.3 up 0.69 cents since last week. Jul/Oct and Jul/Dec futures spread were -0.31 cents and -0.16 cents, respectively.
December 2015 cotton futures closed at 66.45 up 0.83 cents since last week. Nationally, this week’s Crop Progress report estimated cotton planted at 10 percent compared to 8 percent last week, 12 percent last year, and a 5-year average of 16 percent. In Tennessee, cotton planted was estimated at 3 percent compared to 3 percent last year and a 5-year average of 2 percent. Downside price protection could be obtained by purchasing a 67 cent December 2015 Put Option costing 3.68 cents establishing a 63.32 cent futures floor.
Wheat
July 2015 wheat futures closed at $4.74 down 14 cents since last week. July wheat futures traded between $4.64 and $4.90 this week. July wheat to corn price ratio was 1.31. In Memphis, old crop cash wheat traded between $4.27 and $4.37 last week. Net sales reported by exporters were below expectations with net cancellations of 16.5 million bushels for the 2014/15 marketing year and net sales of 31.3 million bushels for the 2015/16 marketing year. Exports for the same period were up from last week at 22.3 million bushels. Wheat export sales were 97 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 102 percent. Nationally, this week’s Crop Progress report estimated winter wheat condition at 42 percent good to excellent and 20 percent poor to very poor; winter wheat headed was estimated at 28 percent compared to 16 percent last week, 17 percent last year, and a 5-year average of 24 percent; spring wheat planted was estimated at 55 percent compared to 36 percent last week, 17 percent last year, and a 5-year average of 19 percent; and spring wheat emerged was estimated at 9 percent compared to 4 percent last year and a 5-year average of 9 percent. In Tennessee, winter wheat condition was estimated at 79 percent good to excellent and 2 percent poor to very poor; winter wheat jointing was estimated at 81 percent compared to 66 percent last week, 73 percent last year, and a 5-year average of 89 percent; and winter wheat headed was estimated at 13 percent compared to 1 percent last week, 18 percent last year and a 5-year average of 38 percent. June/July 2015 cash forward contracts averaged $4.65 with a range of $4.13 to $4.90 at elevators and barge points.
September 2015 wheat futures closed at $4.82 down 16 cents since last week. Jul/Sept and Jul/Jul future spreads were 8 cents and 59 cents, respectively. July 2016 wheat futures closed at $5.33 down 10 cents since last week. Downside price protection could be obtained by purchasing a $5.40 July 2016 Put Option costing 56 cents establishing a $4.84 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
|
|