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Markets Reasonably Quiet, Trading Sideways
DR. AARON SMITH
KNOXVILLE, TENN.
Corn and soybeans were up; wheat was down; and cotton was mixed for the week. Markets were reasonably quite this week trading mostly sideways in tight ranges as we approach the holiday season. March corn appreciated modestly this week trading between $3.64 and $3.72. Seasonally, this is the time of year when corn prices have a post-harvest rally however producers should not anticipate the 79 cent rally, off the low, that last year’s March corn contract achieved. Even a mild 10-15 cent pre-yearend rally may be difficult due to the significant headwinds the US dollar and world coarse grain stocks provide. The USD index now appears poised to take out its, five year, nearby contract high of 100.715 (March 16, 2015). This continued appreciation will continue to work against U.S. agricultural exports. January soybeans closed down 2 cents from last Friday’s close, trading in a 15 cent window ($8.51 ¼ to $8.67 ¼). The focus for soybean markets will be on South American weather from December through February. With record soybean acreage in Brazil and Argentina, price swings based on weather reports are to be expected. The Argentine presidential runoff will occur on Sunday November 22nd. Both candidates are promising to drop export tariffs on corn and soybeans which could increase available global supplies. As of the start of the soybean marketing year (September 1), Argentina was estimated to have 1.1 billion bushels of soybeans on-hand or roughly 40 percent of world stocks. As such, any changes in tariff levels or currency value in Argentina could dramatically alter soybean prices. Since January 1, 2015, March cotton futures have traded between 59.45 and 67.46 cents or an 8.01 cent trading range. This is a remarkably consistent (approximately 12 percent of contract value) trading range considering the volatility we have seen over the same time period for corn (96 cent trading range; 24 percent of contract value), soybeans (183 cent trading range; 20 percent of contract value), and wheat (154 cent trading range; 29 percent of contract value). November has not been a kind month to July wheat futures, prices are nearly 40 cents lower than the October close.
Corn
December 2015 corn futures closed at $3.63 up 5 cents since last week. This week, December 2015 corn futures traded between $3.57 and $3.66. Across Tennessee, average basis (cash price-nearby futures price) strengthened or remained unchanged at Memphis, Northwest Barge Points, Northwest, and Lower-middle Tennessee and weakened in Upper-middle Tennessee. Overall, basis for the week ranged from 16 under to 27 over the December futures contract with an average of 12 over at the end of the week. Ethanol production for the week ending November 13th was 975,000 barrels per day down 7,000 from last week. Ending ethanol stocks were 19.249 million barrels up 395,000 barrels from last week. Corn net sales reported by exporters from November 6th to 12th were within expectations with net sales of 30.7 million bushels for the 2015/16 marketing year. Exports for the same time period were up from last week at 15.3 million bushels. Corn export sales and commitments were 32 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 51 percent. Nationally, this week’s Crop Progress report estimated corn harvested at 96 percent compared to 93 percent last week, 88 percent last year, and a 5-year average of 94 percent. In Tennessee, corn harvested was estimated at 98 percent compared to 98 percent last week, 99 percent last year, and a 5-year average of 99 percent.
In Tennessee, January 2016 cash forward contracts averaged $3.80 with a range of $3.56 to $3.96. March 2016 corn futures closed at $3.69 up 4 cents since last week. Dec/Mar and Dec/Sep future spreads were 6 cents and 21 cents, respectively. September 2016 corn futures closed at $3.84 up 4 cents since last week. Downside price protection could be obtained by purchasing a $4.00 December 2016 Put Option costing 38 cents establishing a $3.62 futures floor.
Soybeans
January 2016 soybean futures closed at $8.57 up 2 cents since last week. This week January 2016 soybean futures traded between $8.52 and $8.67. January/December soybean-to-corn price ratio was 2.36 at the end of the week. For the week, average soybean basis weakened at Memphis and Upper-middle Tennessee and strengthened or remained unchanged at Northwest Barge Points, Northwest, and Lower-middle Tennessee. Basis ranged from 10 under to 33 over the January futures contract at elevators and barge points. Average basis at the end of the week was 11 over the January futures contract. Net sales reported by exporters were above expectations with net sales of 66.1 million bushels for the 2015/16 marketing year. Exports for the same period were up from last week at 83.4 million bushels. Soybean export sales and commitments were 66 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 72 percent. In Tennessee, this week’s Crop Progress report estimated soybeans harvested at 87 percent compared to 80 percent last week, 82 percent last year, and a 5-year average of 87 percent. In Tennessee, January 2015 cash forward contracts averaged $8.76 with a range of $8.43 to $9.01 at elevators and barge points.
March 2016 soybean futures closed at $8.60 up 4 cents since last week. Jan/Mar and Jan/Nov future spreads were 3 cents and 21 cents, respectively. November/September 2016 soybean-to-corn price ratio was 2.29 at the end of the week. November 2016 soybean futures closed at $8.78 up 4 cents from last week. Downside price protection could be achieved by purchasing an $8.80 November 2016 Put Option which would cost 57 cents and set an $8.23 futures floor.
Cotton
December 2015 cotton futures closed at 60.04 down 1.64 cents since last week. December 2015 cotton futures traded between 59.82 and 62.85 cents this week. Adjusted world price (AWP) increased 0.29 cents to 46.88 cents per pound. Delta upland cotton spot price quotes for November 19th were 63.37 to 66.12 cents/lb. Net sales reported by exporters were up from last week with net sales of 194,400 bales for the 2015/16 marketing year and 5,300 bales for the 2016/17 marketing year. Exports for the same period were down from last week at 53,800 bales. Upland cotton export sales were 43 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 70 percent. Nationally, this week’s Crop Progress report estimated cotton harvested at 64 percent compared to 58 percent last week, 68 percent last year, and a 5-year average of 74 percent. In Tennessee, cotton harvested was estimated at 78 percent compared to 68 percent last week, 69 percent last year, and a 5-year average of 82 percent.
March 2016 cotton futures closed at 62.83 up 0.84 cents since last week. Dec/Mar and Dec/Dec cotton futures spreads were 2.79 cents and 4.25 cents, respectively. December 2016 cotton futures closed at 64.29 up 1 cent since last week. Downside price protection could be obtained by purchasing a 65 cent December 2016 Put Option costing 4.78 cents establishing a 60.22 cent futures floor.
Wheat
December 2015 wheat futures closed at $4.88 down 7 cents since last week. December wheat futures traded between $4.80 and $4.98 this week. December wheat-to-corn price ratio was 1.34. Net sales reported by exporters were above expectations with net sales of 26.5 million bushels for the 2015/16 marketing year. Exports for the same period were up from last week at 12.8 million bushels. Wheat export sales were 64 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 66 percent. Dec/Mar and Dec/Jul future spreads were 2 cents and 7 cents, respectively.
March 2016 wheat futures closed at $4.90 down 7 cents since last week. Nationally, this week’s Crop Progress report estimated winter wheat condition at 52 percent good-to-excellent and 10 percent poor-to-very poor; winter wheat planted at 94 percent compared to 92 percent last week, 95 percent last year, and a 5-year average of 98 percent; and winter wheat emerged at 87 percent compared to 80 percent last week, 86 percent last year, and a 5-year average of 86 percent. In Tennessee, winter wheat condition was estimated at 78 percent good-to-excellent and 1 percent poor-to-very poor; winter wheat planted at 84 percent compared to 74 percent last week, 84 percent last year, and a 5-year average of 85 percent; and winter wheat emerged at 65 percent compared to 53 percent last week, 57 percent last year, and a 5-year average of 56 percent. In Tennessee, June/July cash forward contracts averaged $4.77 with a range of $4.06 to $5.21. July 2016 wheat futures closed at $4.95 down 7 cents since last week. Downside price protection could be obtained by purchasing a $5.00 July 2016 Put Option costing 40 cents establishing a $4.60 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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