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Soybean Rebound Friday Expected To Be Short Lived
DR. AARON SMITH
KNOXVILLE, TENN.
Corn, soybeans, and wheat were up; cotton was mixed for the week. December corn futures came close to contract lows getting as low as $3.65 at the beginning of the week before rallying to a high of $3.84 ½ on Friday (closing at $3.78). Harvest soybean futures set a new contract low Monday at $8.96 ¾ before rebounding to a high of $9.27 on Friday (closing at $9.14). Unless adverse weather conditions materialize in larger production regions it is likely that this rally will be short lived as the majority of the Corn Belt has had above average growing conditions year-to-date. On May 29th, the EPA announced the renewable fuel standard (RFS) volumes for 2014through 2016. The proposed RFS volumes in billions of gallons for 2014, 2015, and 2016 are: i) cellulosic biofuel - 0.033, 0.106, and 0.206; ii) biodiesel – 1.63, 1.70, and 1.80; iii) advanced biofuels – 2.68, 2.90, and 3.40; and iv) implied renewable fuel (corn-based ethanol) – 13.25, 13.4, and14.0. Cotton futures traded mostly sideways this week. According to the US Drought Monitor, due to the strong storms of the past two weeks, most of Texas and Oklahoma are now classified as drought free. It will take some time to determine how much damage, versus the precipitation benefit, the severe storms have caused to the crops in the region. Wheat futures have traded between $4.60 and $5.35 the past 6 weeks, with dramatic week-to-week changes. The last five Friday closes for July wheat have been $4.81, $5.11, $5.15, $4.77 and $5.18. Weather, currency value, and large domestic and global stocks continue to be the dominant factors in wheat markets.
Corn
July 2015 corn futures closed at $3.60 up 9 cents from last week. This week July 2015 corn futures prices traded between $3.48 and $3.67. Across Tennessee average basis (cash price- nearby future price) strengthened or remained unchanged at Northwest, Lower-middle, and Upper-middle Tennessee and weakened at Memphis and Northwest Barge Points. Overall, average basis for the week ranged from 2 over to 40 over the July futures contract with an average of 15 over at the end of the week. Ethanol production for the week ending May 29th was 972,000 barrels per day up 3,000 barrels per day from last week. Ending ethanol stocks were 20.068 million barrels down 29,000 barrels from last week. Corn net sales reported by exporters from May 22nd to 28th were below expectations with net sales of 18.3 million bushels for the 2014/15 marketing year and net sales cancellations of 2.2 million bushels for the 2015/16 marketing year. Exports for the same time period were down from last week at 37.7 million bushels. Corn export sales and commitments were 90 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 97 percent. Jul/Sep and Jul/Dec future spreads were 7 cents and 18 cents, respectively.
September 2015 futures closed at $3.67 up 10 cents from last week. September 2015 cash forward contracts averaged $3.59 with a range of $3.38 to $3.90. 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 95 percent compared to 92 percent last week, 94 percent last year, and a 5-year average of 94 percent; and corn emerged at 84 percent compared to 74 percent last week, 77 percent last year, and a 5-year average of 79 percent. In Tennessee, corn condition was estimated at 78 percent good to excellent and 5 percent poor to very poor; corn planted was estimated at 98 percent compared to 97 percent last week, 99 percent last year, and a 5-year average of 97 percent; and corn emerged at 92 percent compared to 84 percent last week, 93 percent last year, and a 5-year average of 91 percent. Downside price protection could be obtained by purchasing a $3.70 September 2015 Put Option costing 19 cents establishing a $3.51 futures floor.
Soybeans
July 2015 soybean futures closed at $9.37 up 3 cents since last week. This week July 2015 soybean futures traded between $9.21 and $9.52. July soybean to corn price ratio was 2.60 at the end of the week. For the week, average soybean basis weakened 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 15 over the July futures contract. Net sales reported by exporters were above expectations with net sales of 4.8 million bushels for the 2014/15 marketing year and net sales of 12.8 million bushels for the 2015/16 marketing year. Exports for the same period were down from last week at 8.3 million bushels. Soybean export sales and commitments were 104 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 $9.24 up 5 cents since last week. Jul/Aug and Jul/Nov future spreads were -13 cents and -23 cents, respectively.
November 2015 futures closed at $9.14 up 9 cents from last week. Nov/Sep 2015 soybean to corn price ratio was 2.49. October/November 2015 cash forward contracts averaged $9.08 with a range of $8.71 to $9.34 at elevators and barge points. Nationally, this week’s Crop Progress report estimated soybeans planted at 71 percent compared to 61 percent last week, 75 percent last year, and a 5-year average of 70 percent; and soybeans emerged at 49 percent compared to 32 percent last week, 46 percent last year, and a 5-year average of 45 percent. In Tennessee, soybeans planted were estimated at 49% compared to 42 percent last week, 52 percent last year, and a 5-year average of 50 percent; and soybeans emerged at 34 percent compared to 25 percent last week, 30 percent last year, and a 5-year average of 30 percent. Downside price protection could be achieved by purchasing a $9.20 November 2015 Put Option which would cost 47 cents and set an $8.73 futures floor.
Cotton
July 2015 cotton futures closed at 64.01 down 0.34 cents since last week. July 2015 cotton futures traded between 63.33 and 65.95 cents this week. Adjusted world price (AWP) increased 0.82 cents to 50.86 cents per pound. Delta upland cotton spot price quotes for June 4 were 63.62 to 66.37 cents/lb. Net sales reported by exporters were down from last week with net sales of 106,600 bales for the 2014/15 marketing year and 53,600 bales for the 2015/16 marketing year. Exports for the same period were down from last week at 300,500 bales. Upland cotton export sales were 107 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 105 percent. October 2015 cotton futures closed at 65.88 up 0.58 cents since last week. Jul/Oct and Jul/Dec futures spreads were 1.87 cents and 0.54 cents, respectively.
December 2015 cotton futures closed at 64.55 down 0.09 cents since last week. Nationally, this week’s Crop Progress report estimated cotton planted at 61 percent compared to 47 percent last week, 72 percent last year, and a 5-year average of 78 percent; and cotton squaring at 3 percent compared to 5 percent last year and a 5-year average of 6 percent. In Tennessee, cotton planted was estimated at 87 percent compared to 70 percent last week, 89 percent last year, and a 5-year average of 80 percent; and cotton squaring at 1 percent compared to 0 percent last week, 1 percent last year and a 5-year average of 0 percent. Downside price protection could be obtained by purchasing a 65 cent December 2015 Put Option costing 3.52 cents establishing a 61.48 cent futures floor.
Wheat
July 2015 wheat futures closed at $5.17 up 40 cents since last week. July wheat futures traded between $4.74 and $5.34 this week. July wheat to corn price ratio was 1.44. In Memphis, old crop cash wheat traded between $5.03 and $5.33 this week. Net sales reported by exporters were within expectations with net sales cancellations of 0.7 million bushels for the 2014/15 marketing year and net sales of 13.4 million bushels for the 2015/16 marketing year. Exports for the same period were down from last week at 14.9 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 44 percent good to excellent and 20 percent poor to very poor; winter wheat headed at 84 percent compared to 77 percent last week, 78 percent last year, and a 5-year average of 77 percent; spring wheat condition at 71 percent good to excellent and 4 percent poor to very poor; and spring wheat emerged at 91 percent compared to 80 percent last week, 64 percent last year, and a 5-year average of 69 percent. In Tennessee, winter wheat condition was estimated at 82 percent good to excellent and 2 percent poor to very poor; winter wheat headed at 100 percent compared to 99 percent last week, 98 percent last year, and a 5-year average of 100 percent; and winter wheat coloring at 71 percent compared to 38 percent last week. June/July 2015 cash forward contracts averaged $4.99 with a range of $4.25 to $5.38 at elevators and barge points.
September 2015 wheat futures closed at $5.21 up 39 cents since last week. Jul/Sept and Jul/Jul future spreads were 4 cents and 41 cents, respectively. July 2016 wheat futures closed at $5.58 up 33 cents since last week. Downside price protection could be obtained by purchasing a $5.60 July 2016 Put Option costing 53 cents establishing a $5.07 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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