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December Corn Rebounds Due To Strong Export Sales
DR. AARON SMITH
KNOXVILLE, TENN.
Corn, soybeans, and wheat were up; cotton was down for the week. December corn rebounded this week, closing up 10 cents, after setting a new contract low last Friday at $3.22 ½. Strong export sales, buoyed by a 2-month low in the USD index, contributed to the price rebound. Prices have appreciated in spite of the bearish WASDE report last week which included record yield (175.1 bu/acre) and production (15.153 billion bushels). Harvest futures will likely trade in the short-term between $3.30 and $3.50.
November soybeans rallied 22 ¾ cents this week ($9.81 ¾ to $10.04 ½). Soybean price direction remains difficult to project as arguments can be made for short-term bearish and bullish price moves. The August WASDE report estimated record yield (48.9 bu/acre) and production (4.06 billion bushels). Strong demand (exports) for soybeans, soybean meal, and soybean oil has provided a counter balance to the record domestic crop. Given the uncertainty in soybean prices as we move towards harvest, producers should evaluate price points (prices sufficient to cover cost of production plus a return to management), yield potential, storage availability, and the current amount of the crop priced to determine if additional pricing should be secured. In Tennessee, futures prices over $10.00 with average-to-above average yield will result in profit for many producers; as such it may be prudent to execute additional sales.
December cotton futures had a second consecutive down week and are now almost 10 cents lower than the 77.98 contract high established on August 5. Domestic production, primarily in west Texas, remains uncertain however recent and projected rains have mitigated some of the concern. December cotton futures have strong support near 64 cents and resistance near 72 cents.
September wheat futures are up 28 cents from the August 2 low of $3.99 ¼. Reduced production potential in France and Germany has provided some support however Russia and Canada will likely offset these production decreases. Wheat price potential remains limited due to large estimated global supplies. Currently, it appears unlikely that July wheat futures will rally above $5.00 prior to planting this fall.
Corn
September 2016 corn futures closed at $3.34 up 12 cents since last Friday. September 2016 corn futures traded between $3.21 and $3.34 for the week. Across Tennessee, average basis (cash price-nearby futures price) weakened at Lower-middle and Upper-middle Tennessee and strengthened or remained unchanged at Northwest Barge Points, Memphis, and Northwest Tennessee. Overall, basis for the week ranged from 11 under to 46 over the September futures contract with an average of 2 over at the end of the week. Ethanol production for the week ending August 12 was 1,029,000 barrels per day up 11,000 from last week. Ethanol stocks were 20.425 million barrels, down 35,000 barrels. Corn net sales reported by exporters from August 5-11 were within expectations with net sales of 6.6 million bushels for the 2015/16 marketing year and 41.0 million bushels for the 2016/17 marketing year. Exports for the same time period were down from last week at 45.9 million bushels. Corn export sales and commitments were 102 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 104 percent.
Sep/Dec and Sep/Mar future spreads were 9 and 19 cents, respectively. This week’s Crop Progress report estimated corn condition at 74 percent good-to-excellent and 7 percent poor-to-very poor; corn dough or beyond at 73 percent compared to 53 percent last week, 65 percent last year, and a 5-year average of 60 percent; and corn dent or beyond at 21 percent compared to 9 percent last week, 18 percent last year, and a 5-year average of 21 percent. In Tennessee, this week’s Crop Progress report indicated corn condition at 66 percent good-to-excellent and 8 percent poor-to-very poor; corn dough or beyond at 94 percent compared to 88 percent last week, 91 percent last year, and a 5-year average of 91 percent; and corn dent or beyond at 65 percent compared to 50 percent last week, 45 percent last year, and a 5-year average of 58 percent. In Tennessee, September 2016 cash forward contracts averaged $3.28 with a range of $3.12 to $3.47. December 2016 corn futures closed at $3.43 up 10 cents since last Friday. Downside price protection could be obtained by purchasing a $3.50 December 2016 Put Option costing 20 cents establishing a $3.30 futures floor. March 2017 corn futures closed at $3.53 up 10 cents since last Friday.
Soybeans
September 2016 soybean futures closed at $10.27 up 28 cents since last Friday. September 2016 soybean futures traded between $9.97 and $10.37. For the week, average soybean basis strengthened at Northwest Barge Points, Northwest, and Upper-middle Tennessee and weakened at Memphis and Lower-middle Tennessee. Basis ranged from 18 under to 44 over the September futures contract at elevators and barge points. Average basis at the end of the week was 5 over the September futures contract. Net sales reported by exporters were within expectations with net sales of 6.5 million bushels for the 2015/16 marketing year and net sales of 58.7 million bushels for the 2016/17 marketing year. Exports for the same period were down from last week at 31.8 million bushels. Soybean export sales and commitments were 103 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 104 percent. September soybean-to-corn price ratio was 3.07 at the end of the week.
Sep/Nov and Sep/Jan future spreads were -23 cents and -22 cents, respectively. This week’s Crop Progress report estimated soybean condition at 72 percent good-to-excellent and 7 percent poor-to-very-poor; soybeans blooming at 95 percent compared to 91 percent last week, 92 percent last year, and a 5-year average of 93 percent; and soybeans setting pods at 80 percent compared to 69 percent last week, 76 percent last year, and a 5-year average of 75 percent. In Tennessee, this week’s Crop Progress report indicated soybean condition at 75 percent good-to-excellent and 5 percent poor-to-very poor; soybeans blooming at 94 percent compared to 89 percent last week, 87 percent last year, and a 5-year average of 87 percent; and soybeans setting pods at 80 percent compared to 68 percent last week, 68 percent last year, and a 5-year average of 69 percent. November/December 2016 soybean-to-corn price ratio was 2.93 at the end of the week. In Tennessee, October/November 2016 cash forward contracts averaged $10.15 with a range of $9.82 to $10.51 at elevators and barge points. November 2016 soybean futures closed at $10.04 up 23 cents since last Friday. Downside price protection could be achieved by purchasing a $10.10 November 2016 Put Option which would cost 33 cents and set a $9.77 futures floor. January 2017 soybean futures closed at $10.05 up 23 cents since last Friday.
Cotton
October 2016 cotton futures closed at 67.57 down 2.31 cents since last Friday. Adjusted world price (AWP) decreased 4.46 cents to 60.23 cents per pound. Delta upland cotton spot price quotes for August 18 were 68 cents/lb (41-4-34) and 70.75 cents/lb (31-3-35). Net sales reported by exporters were up from last week with net sales of 205,000 bales for the 2016/17 marketing year and net sales of 13,200 bales for the 2016/17 marketing year. Exports for the same period were up from last week at 175,800 bales. Upland cotton export sales were 34 percent of the USDA estimated total annual exports for the 2016/17 marketing year (August 1 to July 31), compared to a 5-year average of 41 percent.
This week’s Crop Progress report estimated cotton condition at 48 percent good-to-excellent and 18 percent poor-to-very poor; cotton setting bolls at 88 percent compared to 70 percent last week, 72 percent last year, and a 5-year average of 83 percent; and cotton bolls opening at 12 percent compared to 9 percent last week, 9 percent last year, and a 5-year average of 10 percent. In Tennessee, this week’s Crop Progress report indicated cotton condition at 77 percent good-to-excellent and 4 percent poor-to-very poor; cotton setting bolls at 91 percent compared to 80 percent last week, 77 percent last year, and a 5-year average of 84 percent; and cotton bolls opening at 5 percent compared to 1 percent last week, 3 percent last year, and a 5-year average of 2 percent. December 2016 cotton futures closed at 68.03 down 2.62 cents since last Friday. Dec/Oct and Dec/Mar cotton futures spreads were -0.46 cents and 0.73 cents, respectively. December 2016 cotton futures traded between 66.88 and 71.51 cents this week. Downside price protection could be obtained by purchasing a 69 cent December 2016 Put Option costing 3.4 cents establishing a 65.6 cent futures floor. March 2017 cotton futures closed at 68.76 down 2.35 cents since last Friday.
Wheat
In Tennessee, August cash wheat prices averaged $3.96 with a range of $3.40 to $4.17 for the week. Nationally, the Crop Progress report indicated winter wheat harvested at 97 percent compared to 94 percent last week, 99 percent last year, and a 5-year average of 95 percent; spring wheat condition at 66 percent good-to-excellent and 9 percent poor-to-very poor; and spring wheat harvested at 48 percent compared to 30 percent last week, 46 percent last year, and a 5-year average of 30 percent.
September 2016 wheat futures closed at $4.27 up 5 cents since last Friday. September 2016 wheat futures traded between $4.14 and $4.32 this week. September wheat-to-corn price ratio was 1.28. Net sales reported by exporters were within expectations with net sales of 18.0 million bushels for the 2016/17 marketing year. Exports for the week were up from last week at 26.4 million bushels. Wheat export sales were 44 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 44 percent. Sep/Dec and Sep/Jul future spreads were 17 cents and 58 cents, respectively. December 2016 wheat futures closed at $4.44 up 4 cents since last Friday. December wheat-to-corn price ratio was 1.29. In Memphis, June/July 2017 cash wheat ranged from $4.65 to $4.73. July 2017 wheat futures closed at $4.85 up 3 cents since last Friday. Downside price protection could be obtained by purchasing a $4.90 July 2017 Put Option costing 44 cents establishing a $4.46 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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