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September Corn And November Soybeans Establish New Contract Lows This Week
DR. AARON SMITH
KNOXVILLE, TENN.
Corn and wheat were down; cotton was up; and soybeans were mixed for the week. September corn and November soybeans established new contract lows this week. For the month of May: September corn decreased 15 ½ cents ($3.72 ¾ to $3.57 ¼); November soybeans decreased 46 ¾ cents ($9.52 ½ to $9.05 ¾); July wheat increased 1 cent ($4.76 to $4.77); and December cotton decreased 2 cents (66.64 to 64.64 cents). Corn and soybeans moved lower this month due to larger estimated global and domestic ending stocks, excellent planting and growing conditions year-to-date, a stronger US dollar, and a record South American harvest. Until domestic acreage estimates are changed or a weather event occurs it is likely that both commodities will continue to trade sideways to lower. At present, harvest soybean to corn price ratio is 2.46 (November /December futures contracts). Given the current outlook for both commodities we will likely see this price ratio decrease (ie. soybean prices will decrease relative to corn prices) as we move towards harvest. Neither commodity is likely to make a substantial bullish move, without a major weather event. Harvest cotton futures prices continue to be unable to break out of the 61 to 68 cent trading range that began back in mid-September 2014. Lower global cotton production could lead to cotton use exceeding production for the first time in 5-years. However, it will take time to erode the substantial global stocks that currently exist and thus a major price rally seems unlikely. For now, domestic producers should focus on cotton quality to obtain price premiums as this remains the most likely path to profitable farm gate cotton prices. For wheat, the month of May was a tug-of-war between surplus stocks and quality concerns. The month began with July wheat setting a new contract low at $4.60 ¾. Wheat prices then rallied 60 cents mid-month before giving back almost all of the gains.
Corn
July 2015 corn futures closed at $3.51 down 9 cents from last week. This week July 2015 corn futures prices traded between $3.48 and $3.62. Across Tennessee average basis (cash price- nearby future price) weakened or remained unchanged at Memphis, Northwest Barge Points, Northwest, Lower-middle, and Upper-middle Tennessee. Overall, average basis for the week ranged from 1 over to 40 over the July futures contract with an average of 12 over at the end of the week. Ethanol production for the week ending May 22nd was 969,000 barrels per day up 11,000 barrels per day from last week. Ending ethanol stocks were 20.097 million barrels down 337,000 barrels from last week. Corn net sales reported by exporters from May 15th to 21st were within expectations with net sales of 25.8 million bushels for the 2014/15 marketing year and 0.3 million bushels for the 2015/16 marketing year. Exports for the same time period were down from last week at 42.2 million bushels. Corn export sales and commitments were 89 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 96 percent. Jul/Sep and Jul/Dec future spreads were 6 cents and 17 cents, respectively.
September 2015 futures closed at $3.57 down 9 cents from last week. September 2015 cash forward contracts averaged $3.53 with a range of $3.35 to $3.82. Nationally, this week’s Crop Progress report estimated corn condition at 74 percent good to excellent and 3 percent poor to very poor; corn planted at 92 percent compared to 85 percent last week, 86 percent last year, and a 5-year average of 88 percent; and corn emerged at 74 percent compared to 56 percent last week, 56 percent last year, and a 5-year average of 62 percent. In Tennessee, corn condition was estimated at 77 percent good to excellent and 4 percent poor to very poor; corn planted was estimated at 97 percent compared to 93 percent last week, 96 percent last year, and a 5-year average of 93 percent; and corn emerged at 84 percent compared to 67 percent last week, 85 percent last year, and a 5-year average of 82 percent. Downside price protection could be obtained by purchasing a $3.60 September 2015 Put Option costing 19 cents establishing a $3.41 futures floor.
Soybeans
July 2015 soybean futures closed at $9.34 up 10 cents since last week. This week July 2015 soybean futures traded between $9.20 and $9.37. July soybean to corn price ratio was 2.56 at the end of the week. For the week, average soybean basis strengthened or remained unchanged at Northwest Barge Points, Northwest, Memphis, Upper-middle, and Lower-middle Tennessee. Basis ranged from 10 under to 40 over the July futures contract at elevators and barge points. Average basis at the end of the week was 19 over the July futures contract. Net sales reported by exporters were within expectations with net sales of 11.8 million bushels for the 2014/15 marketing year and net sales of 2.0 million bushels for the 2015/16 marketing year. Exports for the same period were up from last week at 12.8 million bushels. Soybean export sales and commitments were 103 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 100 percent. August 2015 soybean futures closed at $9.19 up 3 cents since last week. Jul/Aug and Jul/Nov future spreads were -15 cents and -29 cents, respectively.
November 2015 futures closed at $9.05 down 2 cents from last week. Nov/Sep 2015 soybean to corn price ratio was 2.54. October/November 2015 cash forward contracts averaged $8.99 with a range of $8.72 to $9.22 at elevators and barge points. Nationally, this week’s Crop Progress report estimated soybeans planted at 61 percent compared to 45 percent last week, 55 percent last year, and a 5-year average of 55 percent; and soybeans emerged at 32 percent compared to 13 percent last week, 23 percent last year, and a 5-year average of 25 percent. In Tennessee, soybeans planted were estimated at 42 percent compared to 37 percent last week, 37 percent last year, and a 5-year average of 35 percent; and soybeans emerged at 25 percent compared to 12 percent last week, 19 percent last year, and a 5-year average of 18 percent. Downside price protection could be achieved by purchasing a $9.20 November 2015 Put Option which would cost 52 cents and set an $8.68 futures floor.
Cotton
July 2015 cotton futures closed at 64.35 up 1.05 cents since last week. July 2015 cotton futures traded between 63.03 and 66.59 cents this week. Adjusted world price (AWP) decreased 1.96 cents to 50.04 cents per pound. Delta upland cotton spot price quotes for May 28 were 62.83 to 65.58 cents/lb. Net sales reported by exporters were up from last week with net sales of 117,500 bales for the 2014/15 marketing year and 57,300 bales for the 2015/16 marketing year. Exports for the same period were down from last week at 339,200 bales. Upland cotton export sales were 106 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 104 percent. October 2015 cotton futures closed at 65.3 up 0.08 cents since last week. Jul/Oct and Jul/Dec futures spreads were 0.95 cents and 0.29 cents, respectively.
December 2015 cotton futures closed at 64.64 up 0.26 cents since last week. Nationally, this week’s Crop Progress report estimated cotton planted at 47 percent compared to 35 percent last week, 60 percent last year, and a 5-year average of 61 percent. In Tennessee, cotton planted was estimated at 70 percent compared to 50 percent last week, 72 percent last year, and a 5-year average of 59 percent. Downside price protection could be obtained by purchasing a 65 cent December 2015 Put Option costing 3.39 cents establishing a 61.61 cent futures floor.
Wheat
July 2015 wheat futures closed at $4.77 down 38 cents since last week. July wheat futures traded between $4.74 and $5.19 this week. July wheat to corn price ratio was 1.36. In Memphis, old crop cash wheat traded between $4.47 and $4.54 this week. Net sales reported by exporters were within expectations with net sales of 1.6 million bushels for the 2014/15 marketing year and net sales of 9.3 million bushels for the 2015/16 marketing year. Exports for the same period were up from last week at 18.2 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 105 percent. Nationally, this week’s Crop Progress report estimated winter wheat condition at 45 percent good to excellent and 19 percent poor to very poor; winter wheat headed was estimated at 77 percent compared to 68 percent last week, 68 percent last year, and a 5-year average of 67 percent; spring wheat condition at 69 percent good to excellent and 4 percent poor to very poor; spring wheat planted was estimated at 96 percent compared to 94 percent last week, 70 percent last year, and a 5-year average of 79 percent; and spring wheat emerged was estimated at 80 percent compared to 67 percent last week, 40 percent last year, and a 5-year average of 54 percent. In Tennessee, winter wheat condition was estimated at 85 percent good to excellent and 2 percent poor to very poor; and winter wheat headed was estimated at 99 percent compared to 95 percent last week, 96 percent last year, and a 5-year average of 98 percent. June/July 2015 cash forward contracts averaged $4.85 with a range of $4.28 to $5.12 at elevators and barge points.
September 2015 wheat futures closed at $4.82 down 41cents since last week. Jul/Sept and Jul/Jul future spreads were 5 cents and 48 cents, respectively. July 2016 wheat futures closed at $5.25 down 39 cents since last week. Downside price protection could be obtained by purchasing a $5.30 July 2016 Put Option costing 55 cents establishing a $4.75 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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