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Export Corn Net Sales Nearly Double
DR. AARON SMITH
KNOXVILLE, TENN.
Corn, cotton, soybeans, and wheat were up for the week. Corn net sales for export were almost double pre-report estimates at 85.1 million bushels for the week of April15-20. Immediately following the export sales report on Thursday, July corn futures increased 5 cents. Currently, total export commitments (outstanding sales + exports) total 1.459 billion bushels (540 million bushels of outstanding sales plus 919 million bushels of accumulated exports), 191 million bushels short of the USDA’s 2015/16 marketing year projection of 1.65 billion bushels, with 19 weeks remaining in the marketing year. To achieve the USDA projection, net sales would need to average just over 10 million bushels per week. This does not assume a net sales carryover from the 2015/16 marketing year into the 2016/17 marketing year (last year 56 million bushels were carried over from the 2014/15 to the 2015/16 marketing year) or account for any net sales cancellations. As such, due to the recent increase in export sales we may see the USDA raise corn exports 25-100 million bushels on future WASDE reports. Driving U.S. export sales are concerns that dry weather in Brazil could reduce production of second crop corn and the further weakening of the USD in recent weeks. This week the USD index reached an 8-month low and the Brazilian Real a 9 month high (relative the USD). A weaker USD is beneficial for all US agricultural exports. Like corn, soybeans have benefited from a weaker USD resulting in improved export prospects. Currently, soybean export commitments are 1.671 billion bushels (1.55 billion bushels of accumulated exports plus 126 million bushels of outstanding sales), 34 million bushels less than the USDA’s 2015/16 marketing year projection of 1.705 billion bushels. Weekly sales for the remainder of the marketing year would need to be 1.8 million bushels per week to meet the export target (again assuming no sales cancellations or carry over into the 2016/17 marketing year). For both corn and soybeans the increase in exports has been positive for prices; however even if the USDA increases exports 100 million bushels for both commodities carryover into the next marketing year would still be 1,762 and 345 million bushels, respectively. As such, further price improvements will be driven mostly by changes in new crop production as a result of weather.
CME has released the following daily limits effective May1st: corn – 25 cents (unchanged); wheat – 35 cents (unchanged); soybeans – 65 cents (up 5 cents); soybean meal $20/ton (unchanged); and soybean oil – 2cents/lb (unchanged)
Corn
May 2016 corn futures closed at $3.90 up 19 cents since last Friday. May 2016 corn futures traded between $3.68 and $3.92 for the week. Across Tennessee, average basis (cash price-nearby futures price) strengthened or remained unchanged at Memphis, Northwest Barge Points, Upper-middle, and Lower-middle Tennessee and weakened in Northwest Tennessee. Overall, basis for the week ranged from 6 under to 45 over the May futures contract with an average of 13 over at the end of the week. Ethanol production for the week ending April 22 was 927,000 barrels per day down 12,000 from last week. Ending ethanol stocks were 21.629 million barrels down 417,000 barrels from last week. Corn net sales reported by exporters from April 15-21 were above expectations with net sales of 85.1 million bushels for the 2015/16 marketing year and 17.3 million bushels for the 2016/17 marketing year. Exports for the same time period were down from last week at 42.9 million bushels. Corn export sales and commitments were 88 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 91 percent.
July 2016 corn futures closed at $3.91 up 16 cents since last Friday. May/Jul and May/Sep future spreads were both 1-cent. This week’s Crop Progress report estimated corn planted at 30 percent compared to 13 percent last week, 16 percent last year, and a 5-year average of 16 percent; and corn emerged at 5 percent compared to 2 percent last year and a 5-year average of 4 percent. In Tennessee, this week’s Crop Progress report indicated corn planting at 65 percent compared to 35 percent last week, 14 percent last year, and a 5-year average of 43 percent; and corn emerged at 15 percent compared to 2 percent last year and a 5-year average of 20 percent. In Tennessee, September 2016 cash forward contracts averaged $3.77 with a range of $3.57 to $4.05. September 2016 corn futures closed at $3.91 up 16 cents since last Friday. Downside price protection could be obtained by purchasing a $4.00 December 2016 Put Option costing 33 cents establishing a $3.67 futures floor.
Soybeans
May 2016 soybean futures closed at $10.21 up 34 cents since last Friday. May 2016 soybean futures traded between $9.77 and $10.36. For the week, average soybean basis weakened or remained unchanged at Memphis, Northwest Barge Points, Northwest, and Lower-middle Tennessee and strengthened at Upper-middle Tennessee. Basis ranged from 31 under to 9 over the May futures contract at elevators and barge points. Average basis at the end of the week was 6 under the May futures contract. Net sales reported by exporters were within expectations with net sales of 8.3 million bushels for the 2015/16 marketing year and net sales of 26.5 million bushels for the 2016/17 marketing year. Exports for the same period were down from last week at 10.2 million bushels. Soybean export sales and commitments were 98 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 99 percent. May soybean-to-corn price ratio was 2.62 at the end of the week.
July 2016 soybean futures closed at $10.29 up 33 cents since last Friday. May/Jul and May/Nov future spreads were 8 cents and -14 cents, respectively. This week’s Crop Progress report estimated soybeans planted at 3 percent compared to 2 percent last year and a 5-year average of 2 percent. In Tennessee, this week’s Crop Progress report indicated soybean planting at 2 percent compared to 1 percent last year and a 5-year average of 1 percent. November/September 2016 soybean-to-corn price ratio was 2.58 at the end of the week. In Tennessee, October/November 2016 cash forward contracts averaged $9.94with a range of $9.63 to $10.21 at elevators and barge points. November 2016 soybean futures closed at $10.07 up 24 cents since last Friday. Downside price protection could be achieved by purchasing a $10.20 November 2016 Put Option which would cost 61 cents and set a $9.59 futures floor.
Cotton
May 2016 cotton futures closed at 63.76 up 0.68 cents since last Friday. May 2016 cotton futures traded between 63.15 and 65.94 cents this week. Adjusted world price (AWP) increased 1.8 cents to 52.33 cents per pound. Delta upland cotton spot price quotes for April 28th were 63.94 cents/lb (41-4-34) and 66.69 cents/lb (31-3-35). Net sales reported by exporters were down from last week with net sales of 48,700 bales for the 2015/16 marketing year and 4,700 bales for the 2016/17 marketing year. Exports for the same period were up from last week at 244,300 bales. Upland cotton export sales were 87 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 101 percent.
July 2016 cotton futures closed at 63.77 up 0.08 cents since last Friday. May/Jul and May/Dec cotton futures spreads were 0.01 cents and -1.04 cents, respectively. December 2016 cotton futures closed at 62.72 up 0.2 cents since last Friday. This week’s Crop Progress report estimated cotton planted at 10 percent compared to 7 percent last week, 9 percent last year, and a 5-year average of 13 percent. In Tennessee, this week’s Crop Progress report indicated cotton planting at 1 percent compared to 0 percent last week, 2 percent last year, and a 5-year average of 1 percent. Downside price protection could be obtained by purchasing a 63-cent December 2016 Put Option costing 3.45 cents establishing a 59.55 cent futures floor.
Wheat
May 2016 wheat futures closed at $4.78 up 11 cents since last Friday. May 2016 wheat futures traded between $4.62 and $4.86 this week. May wheat-to-corn price ratio was 1.23. Net sales reported by exporters were above expectations with net sales of 12.9 million bushels for the 2015/16 marketing year and net sales of 16.7 million bushels for the 2016/17 marketing year. Exports for the same period were up from last week at 16.2 million bushels. Wheat export sales were 95 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 102 percent. In Memphis, old crop cash wheat traded between $4.66 and $4.74 for the week. May/Jul and May/Sept future spreads were 10 cents and 20 cents, respectively.
July 2016 wheat futures closed at $4.88 up 14 cents since last Friday. In Tennessee, June/July cash forward contracts averaged $4.77 with a range of $4.38 to $5.07. Nationally, winter wheat condition was estimated at 59 percent good-to-excellent and 8 percent poor-to-very poor; winter wheat headed at 26 percent compared to 12 percent last week, 25 percent last year, and a 5-year average of 24 percent; spring wheat planted at 42 percent compared to 27 percent last week, 50 percent last year, and a 5-year average of 28 percent; and spring wheat emerged at 8 percent compared to 8 percent last year and a 5-year average of 7 percent. In Tennessee, winter wheat condition was reported as 83 percent good-to-excellent and 2 percent poor-to-very poor; winter wheat jointing at 89 percent compared to 70 percent last week, 77 percent last year, and a 5-year average of 84 percent; and winter wheat headed 10 percent compared to 2 percent last week, 25 percent last year, and a 5-year average of 32 percent. Downside price protection could be obtained by purchasing a $4.90 July 2016 Put Option costing 21 cents establishing a $4.69 futures floor. September 2016 wheat futures closed at $4.98 up 15 cents since last Friday. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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