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Soybean Export Commitment To China Is Good News
DR. AARON SMITH
KNOXVILLE, TENN.
Corn, soybeans, and wheat were up; cotton was mixed for the week. December corn rallied at the end of the week posting double-digit gains from this week’s low on Monday. In Tennessee, gains in the futures market were offset by a weakening basis at barge points and county elevators as harvest was in full swing until rain came on Thursday/Friday. December futures are now almost 30 cents higher than the contract low of $3.57 ½ on August 12th. For now, futures may have difficulty gaining much traction above $3.95, so producers without the ability to store may want consider additional corn sales when December futures are above $3.85. Soybean futures got a very welcome bump at the end of the week as the Chinese delegation in Iowa agreed to buy 484 million bushels of soybeans (approximately $5.3 billion). Details about the transactions are unclear at this time so the exact impact on 2015/16 marketing year exports is still uncertain. That being said, the soybean export sales commitment to China is very good news as 2015/16 outstanding sales were roughly half of what they were for the 2014/15 marketing year at this time last year. Soybean prices will likely continue to see some volatility next week as details about export sales and harvest yields/production are further revealed. Cotton spent a three-day period trading above and below 60 cents before staying above the 60 cent threshold on Friday. For the short term we are likely to see December cotton continue to trade between 59-63 cents, with a chance for a brief decrease down to 57-58 cent range. Rallies in cotton futures may be contingent on harvest weather as cooler and wet conditions may adversely affect the later developing crop. July 16 wheat futures are up almost 40 cents from the September 4th contract low. Wheat producers will need to determine if they are comfortable pricing their crop prior to planting at futures prices of $5.10-$5.30 or holding off for a rally that may or may not materialize.
Corn
December 2015 corn futures closed at $3.89 up 12 cents from last week. This week, December 2015 corn futures traded between $3.75 and $3.89. Across Tennessee, average basis (cash price-nearby futures price) weakened or remained unchanged at Memphis, Northwest Barge Points, Northwest, Upper-middle, and Lower-middle Tennessee. Overall, average basis for the week ranged from 46 under to 10 over the December futures contract with an average of 22 under at the end of the week. Ethanol production for the week ending September 18th was 938,000 barrels per day down 23,000 from last week. Ending ethanol stocks were 18.9 million barrels up 609,000 barrels from last week. Corn net sales reported by exporters from September 11th to 17th were below expectations with net sales of 16.8 million bushels for the 2015/16 marketing year. Exports for the same time period were down from last week at 31.3 million bushels. Corn export sales and commitments were 21 percent of the USDA estimated total annual exports for the 2015/16 marketing year (September 1 to August 31) compared to a 5-year average of 36 percent. Nationally, this week’s Crop Progress report estimated corn condition at 68 percent good-to-excellent and 10 percent poor-to-very poor; corn dented or beyond at 94 percent compared to 87 percent last week, 89 percent last year, and a 5-year average of 93 percent; corn mature at 53 percent compared to 35 percent last week, 40 percent last year, and a 5-year average of 56 percent; and corn harvested at 10 percent compared to 5 percent last week, 7 percent last year, and a 5-year average of 15 percent. In Tennessee, corn condition was estimated at 85 percent good-to-excellent and 2 percent poor-to-very poor; corn dented or beyond at 98 percent compared to 96 percent last week, 98 percent last year, and a 5-year average of 99 percent; corn mature at 87 percent compared to 74 percent last week, 82 percent last year, and a 5-year average of 89 percent; and corn harvested at 43 percent compared to 17 percent last week, 35 percent last year, and a 5-year average of 59 percent. In Tennessee, January 2016 cash forward contracts averaged $3.72 with a range of $3.35 to $4.04. Downside price protection could be obtained by purchasing a $3.90 December 2015 Put Option costing 17 cents establishing a $3.73 futures floor.
March 2016 corn futures closed at $4.00 up 12 cents since last week. Dec/Mar and Dec/Sep future spreads were 11 cents and 16 cents, respectively. September 2016 corn futures closed at $4.05 up 9 cents since last week.
Soybeans
November 2015 soybean futures closed at $8.89 up 22 cents since last week. This week November 2015 soybean futures traded between $8.58 and $8.90. November/December soybean-to-corn price ratio was 2.29 at the end of the week. For the week, average soybean basis weakened or remained unchanged at Memphis, Northwest Barge Points, Northwest, Upper-middle, and Lower-middle Tennessee. Basis ranged from 25 under to 30 over the November futures contract at elevators and barge points. Average basis at the end of the week was even the November futures contract. Net sales reported by exporters were above expectations with net sales of 48.4 million bushels for the 2015/16 marketing year. Exports for the same period were down from last week at 12.8 million bushels. Soybean export sales and commitments were 39 percent of the USDA estimated total annual exports for the 2015/16 marketing year (September 1 to August 31), compared to a 5-year average of 53 percent. Nationally, this week’s Crop Progress report estimated soybean condition at 63 percent good-to-excellent and 11 percent poor-to-very poor; soybeans dropping leaves at 56 percent compared to 35 percent last week, 42 percent last year, and a 5-year average of 50 percent soybeans harvested at 3 percent compared to 7 percent last year and a 5-year average of 7 percent. In Tennessee, soybean condition was estimated at 77 percent good-to-excellent and 6 percent poor-to-very poor; soybeans dropping leaves at 48 percent compared to 32 percent last week, 40 percent last year, and a 5-year average of 46 percent; and soybeans harvested at 5 percent compared to 6 percent last year and a 5-year average of 6 percent. In Tennessee, October/November 2015 cash forward contracts averaged $8.68 with a range of $8.37 to $8.94 at elevators and barge points. Downside price protection could be achieved by purchasing an $8.90 November 2015 Put Option which would cost 21 cents and set an $8.58 futures floor.
January 2016 soybean futures closed at $8.93 up 22 cents since last week. Sep/Nov and Sep/Jan future spreads were 4 cents and 4 cents, respectively. November 2016 soybean futures closed at $8.93 up 24 cents from last week. September/November 2016 soybean-to-corn price ratio was 2.20 at the end of the week.
Cotton
December 2015 cotton futures closed at 60.64 up 0.09 cents since last week. December 2015 cotton futures traded between 59.7 and 61.17 cents this week. Adjusted world price (AWP) decreased 1.76 cents to 44.61 cents per pound. Delta upland cotton spot price quotes for September 24th were 59.06 to 61.81 cents/lb. Net sales reported by exporters were down from last week with net sales of 90,800 bales for the 2015/16 marketing year and 5,000 bales for the 2016/17 marketing year. Exports for the same period were up from last week at 109,300 bales. Upland cotton export sales were 32 percent of the USDA estimated total annual exports for the 2015/16 marketing year (August 1 to July 31), compared to a 5-year average of 51 percent. Nationally, this week’s Crop Progress report estimated cotton condition at 52 percent good-to-excellent and 12 percent poor-to-very poor; cotton bolls opening at 57 percent compared to 46 percent last week, 57 percent last year, and 5-year average of 61 percent; and cotton harvested at 7 percent compared to 4 percent last week, 8 percent last year, and a 5-year average of 9 percent. In Tennessee, cotton condition was estimated at 82 percent good-to-excellent and 1 percent poor-to-very poor; cotton bolls opening at 57 percent compared to 42 percent last week, 59 percent last year, and a 5-year average of 66 percent; and cotton harvested at 2 percent compared to 0 percent last week, 1 percent last year, and a 5-year average of 5 percent. Downside price protection could be obtained by purchasing a 61 cent December 2015 Put Option costing 2.20 cents establishing a 58.8 cent futures floor.
March 2016 cotton futures closed at 60.34 down 0.18 cents since last week. Dec/Mar and Dec/Dec cotton futures spreads were -0.30 cents and 0.12 cents, respectively. December 2016 cotton futures closed at 60.76 down 0.41 cents since last week.
Wheat
December 2015 wheat futures closed at $5.07 up 21 cents since last week. December wheat futures traded between $4.80 and $5.10 this week. December wheat-to-corn price ratio was 1.30. Net sales reported by exporters were within expectations with net sales of 10.4 million bushels for the 2015/16 marketing year and 1.1 million bushels for the 2016/17 marketing year. Exports for the same period were up from last week at 22.6 million bushels. Wheat export sales were 45 percent of the USDA estimated total annual exports for the 2015/16 marketing year (June 1 to May 31), compared to a 5-year average of 53 percent. Dec/Mar and Dec/Jul future spreads were 8 cents and 15 cents, respectively.
March 2016 wheat futures closed at $5.15 up 22 cents from last week. Nationally, this week’s Crop Progress report estimated winter wheat planted at 19 percent compared to 9 percent last week, 23 percent last year, and a 5-year average of 20 percent. In Tennessee, June/July cash forward contracts averaged $4.86 with a range of $4.04 to $5.27. July 2016 wheat futures closed at $5.22 up 20 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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