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Corn Harvest Futures Decline To New Low
DR. AARON SMITH
KNOXVILLE, TENN.
Corn, soybeans, and cotton were down; wheat was mixed for the week. December corn established a new contract low on Friday at $3.33 ¼. Corn futures are now at the lowest point since October 2014 when prices bottomed out at $3.18 ¼. Adequate moisture, limited excessive temperatures-to-date, and improved July-August forecasts have been the primary driver for harvest futures declining from a high of $4.49 on June 17 to the new low this week (a net decrease of $1.16 per bushel or a 26 percent loss in value). Harvest soybean price declines have been just as dramatic as corn, with a decrease of $2.20 per bushel or 18.5 percent ($11.86 on June 13 to a low of $9.66 on July 22). Greater yield uncertainty remains in soybeans, as opposed to corn. As such, expect continued volatility in soybeans for the next few weeks. Wheat bounced back on Friday closing up 7-10 cents, however the strong down trend remains in effect. September wheat has decreased $1.27 (24 percent of value) from a high of $5.33 ¾ on June 8 to a low of $4.06 ½ on July 20. Excellent wheat yields in Tennessee and the US will add to record global supplies. Consequently substantial improvements in wheat prices should not be anticipated. In July, cotton was the lone bright spot (it’s been a while since we could say that) for Tennessee row crop commodities, increasing almost 10 cents/lb. December futures reached a peak of 75 cents on July 15 before retreating back down to 72.68 on Friday. For the next few weeks it will be important for cotton futures to hold the recent gains. Look for cotton to establish a new trading range from 68-75 cents for the short term.
Corn
September 2016 corn futures closed at $3.35 down 17 cents since last Friday. September 2016 corn futures traded between $3.26 and $3.57 for the week. Across Tennessee, average basis (cash price-nearby futures price) strengthened or remained unchanged at Northwest Barge Points, Memphis, and Northwest Tennessee and weakened at Lower-middle and Upper-middle Tennessee. Overall, basis for the week ranged from 3 under to 41 over the September futures contract with an average of 15 over at the end of the week. Ethanol production for the week ending July 15 was 1,029,000 barrels per day up 25,000 from last week. Ethanol stocks were 21.157 million barrels, up 26,000 barrels. Corn net sales reported by exporters from July 8-14 were below expectations with net sales of 13.6 million bushels for the 2015/16 marketing year and 19.9 million bushels for the 2016/17 marketing year. Exports for the same time period were unchanged from last week at 48.9 million bushels. Corn export sales and commitments were 100 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 103 percent.
Sep/Dec and Sep/Mar future spreads were 6 and 16 cents, respectively. This week’s Crop Progress report estimated corn condition at 76 percent good-to-excellent and 5 percent poor-to-very poor; and corn silking at 56 percent compared to 32 percent last week, 47 percent last year, and a 5-year average of 46 percent. In Tennessee, this week’s Crop Progress report indicated corn condition at 68 percent good-to-excellent and 9 percent poor-to-very poor; corn silking at 91 percent compared to 81 percent last week, 86 percent last year, and a 5-year average of 86 percent; and corn dough or beyond at 35 percent compared to 11 percent last week, 24 percent last year, and a 5-year average of 32 percent. In Tennessee, September 2016 cash forward contracts averaged $3.45 with a range of $3.15 to $3.72. December 2016 corn futures closed at $3.41 down 17 cents since last Friday. Downside price protection could be obtained by purchasing a $3.50 December 2016 Put Option costing 23 cents establishing a $3.27 futures floor. March 2017 corn futures closed at $3.51 down 15 cents since last Friday.
Soybeans
August 2016 soybean futures closed at $10.06 down 66 cents since last Friday. August 2016 soybean futures traded between $9.85 and $10.82. For the week, average soybean basis strengthened or remained unchanged at Memphis, Upper-middle, Northwest, Northwest Barge Points, and Lower-middle Tennessee. Basis ranged from 33 under to 40 over the August futures contract at elevators and barge points. Average basis at the end of the week was 2 over the August futures contract. Net sales reported by exporters were above expectations with net sales of 11.9 million bushels for the 2015/16 marketing year and net sales of 36.8 million bushels for the 2016/17 marketing year. Exports for the same period were down from last week at 14.5 million bushels. Soybean export sales and commitments were 106 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 103 percent. August/September soybean-to-corn price ratio was 3.00 at the end of the week.
September 2016 soybean futures closed at $9.98 down 67 cents since last Friday. Aug/Sep and Aug/Nov future spreads were -8 cents and -18 cents, respectively. This week’s Crop Progress report estimated soybean condition at 71 percent good-to-excellent and 7 percent poor-to-very-poor; soybeans blooming at 59 percent compared to 40 percent last week, 51 percent last year, and a 5-year average of 49 percent; and soybeans setting pods at 18 percent compared to 7 percent last week, 14 percent last year, and a 5-year average of 13 percent. In Tennessee, this week’s Crop Progress report indicated soybean condition at 76 percent good-to-excellent and 4 percent poor-to-very poor; soybeans blooming at 55 percent compared to 35 percent last week, 38 percent last year, and a 5-year average of 41 percent; and soybeans setting pods at 28 percent compared to 10 percent last week, 16 percent last year, and a 5-year average of 16 percent. November/December 2016 soybean-to-corn price ratio was 2.9 at the end of the week. In Tennessee, October/November 2016 cash forward contracts averaged $10.27 with a range of $9.74 to $10.91 at elevators and barge points. November 2016 soybean futures closed at $9.88 down 69 cents since last Friday. Downside price protection could be achieved by purchasing a $10.00 November 2016 Put Option which would cost 58 cents and set a $9.42 futures floor.
Cotton
October 2016 cotton futures closed at 72.52 down 1.34 cents since last Friday. Adjusted world price (AWP) increased 5.21 cents to 65.28 cents per pound. Delta upland cotton spot price quotes for July 21 were 72.16 cents/lb (41-4-34) and 74.91 cents/lb (31-3-35). Net sales reported by exporters were up from last week with net sales of 72,100 bales for the 2015/16 marketing year and 188,400 bales for the 2016/17 marketing year. Exports for the same period were up from last week at 186,600 bales. Upland cotton export sales were 107 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 107 percent.
This week’s Crop Progress report estimated cotton condition at 54 percent good-to-excellent and 10 percent poor-to-very poor; cotton squaring at 77 percent compared to 57 percent last week, 72 percent last year, and a 5-year average of 76 percent; and cotton setting bolls at 28 percent compared to 19 percent last week, 29 percent last year, and a 5-year average of 30 percent. In Tennessee, this week’s Crop Progress report indicated cotton condition at 78 percent good-to-excellent and 3 percent poor-to-very poor; cotton squaring at 83 percent compared to 75 percent last week, 72 percent last year, and a 5-year average of 76 percent; and cotton setting bolls at 33 percent compared to 17 percent last week, 22 percent last year, and a 5-year average of 24 percent. December 2016 cotton futures closed at 72.68 down 1.6 cents since last Friday. Dec/Oct and Dec/Mar cotton futures spreads were -0.16 cents and 0.64 cents, respectively. December 2016 cotton futures traded between 71.76 and 74.95 cents this week. Downside price protection could be obtained by purchasing a 73 cent December 2016 Put Option costing 4.31 cents establishing a 68.69 cent futures floor. March 2017 cotton futures closed at 73.32 down 0.87 cents since last Friday.
Wheat
In Tennessee, July cash wheat prices averaged $4.06 with a range of $3.78 to $4.30 for the week. Nationally, the Crop Progress report indicated winter wheat harvested at 76 percent compared to 66 percent last week, 72 percent last year, and a 5-year average of 73 percent; spring wheat condition at 69 percent good-to-excellent and 7 percent poor-to-very poor; and spring wheat headed at 96 percent compared to 91 percent last week, 95 percent last year, and a 5-year average of 81 percent. In Tennessee, winter wheat harvested was estimated at 98 percent compared to 97 percent last week, 99 percent last year, and a 5-year average 97 percent.
September 2016 wheat futures closed at $4.25 up 1 cent since last Friday. September 2016 wheat futures traded between $4.06 and $4.31 this week. September wheat-to-corn price ratio was 1.27. Net sales reported by exporters were within expectations with net sales of 17.6 million bushels for the 2016/17 marketing year. Exports for the week were down from last week at 13.2 million bushels. Wheat export sales were 37 percent of the USDA estimated total annual exports for the 2016/17 marketing year (June 1 to May 31), compared to a 5-year average of 36%. Sep/Dec and Sep/Jul future spreads were 25 cents and 69 cents, respectively. December 2016 wheat futures closed at $4.50 up 1 cent since last Friday. December wheat-to-corn price ratio was 1.32. July 2017 wheat futures closed at $4.94 down 2 cents since last Friday. Downside price protection could be obtained by purchasing a $5.00 July 2017 Put Option costing 53 cents establishing a $4.47 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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