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Grain Stocks Up, Only Minor Adjustments Expected
DR. AARON SMITH
KNOXVILLE, TENN.
Corn and soybeans were mixed; cotton and wheat were down for the week. Today the USDA released the September Grain Stocks report. The report indicated corn stocks of 1.74 billion bushels, soybean stocks of 197 million bushels and wheat stocks of 2.53 billion bushels. Compared to September 2015 corn stocks were up less than 1 percent, soybean stocks were up 3 percent, and wheat stocks were up 21 percent. Corn and soybean stocks were viewed as slightly bullish (more aptly described as less bearish than anticipated) while wheat stocks were larger than markets anticipated. Overall, the actual report numbers fell within the range of trade expectations. As such, only minor market adjustments should be anticipated. The markets focus will now shift to the crop currently being harvested.
In September, corn, soybeans, cotton, and wheat all traded sideways to slightly up. The December corn contract opened at $3.15 ½ and closed at $3.36 ½ (up 21 cents). The range for the month was $3.15 to $3.43 ¼. Soybeans followed a similar pattern, opening the month at $9.42 ¼ and closing at $9.54 (up 11 ¾ cents). The range for the month was $9.34 to $9.94. December cotton opened the month at 65.50 and closed at 68.08 (up 2.58 cents). The trading range was 65.45 to 72.36. December wheat opened at $3.90 and closed at $4.02 (up 12 cents) with a trading range of $3.89 ½ to $4.11 ¾. Large global supplies and an estimated record domestic harvest resulted in grain and oilseed prices consolidating throughout the month. The question that remains unanswered is if the seasonal low for corn and soybeans is in or if another leg down will be seen prior to a seasonal winter price appreciation.
Corn
December 2016 corn futures closed at $3.36 the same as last Friday. December 2016 corn futures traded between $3.25 and $3.37 for the week. Across Tennessee, average basis (cash price-nearby futures price) weakened at Memphis, Northwest Barge Points, Upper-middle, and Lower-middle Tennessee and strengthened at Northwest Tennessee. Overall, basis for the week ranged from 26 under to 5 over the December futures contract with an average of 9 under at the end of the week. Ethanol production for the week ending September 23 was 989,000 barrels per day up 8,000 from last week. Ethanol stocks were 20.578 million barrels, up 562,000 barrels. This week’s Crop Progress report estimated corn condition at 74 percent good-to-excellent and 7 percent poor-to-very poor; corn dented at 97 percent compared to 93 percent last week, 96 percent last year, and a 5-year average of 96 percent; corn mature at 73 percent compared to 53 percent last week, 66 percent last year, and a 5-year average of 64 percent; and corn harvested at 15 percent compared to 9 percent last week, 16 percent last year, and a 5-year average of 19 percent. In Tennessee, this week’s Crop Progress report indicated corn condition at 64 percent good-to-excellent and 10 percent poor-to-very poor; corn dented at 100 percent compared to 99 percent last week, 99 percent last year, and a 5-year average of 99 percent; corn mature at 98 percent compared to 93 percent last week, 93 percent last year, and a 5-year average of 92 percent; and corn harvested at 79 percent compared to 61 percent last week, 58 percent last year, and a 5-year average of 61 percent. Downside price protection could be obtained by purchasing a $3.40 December 2016 Put Option costing 12 cents establishing a $3.28 futures floor.
Corn net sales reported by exporters from September 16-22 were below expectations with net sales of 22.6 million bushels for the 2016/17 marketing year. Exports for the same time period were down from last week at 49.7 million bushels. Corn export sales and commitments were 34 percent of the USDA estimated total annual exports for the 2016/17 marketing year (September 1 to August 31) compared to a 5-year average of 33 percent. Dec/Mar and Dec/Dec future spreads were 10 and 40 cents, respectively. In Tennessee, January 2017 cash forward contracts averaged $3.39 with a range of $2.99 to $3.57. March 2017 corn futures closed at $3.46 the same as last Friday. December 2017 corn futures closed at $3.76 up 1 cent since last Friday.
Soybeans
November 2016 soybean futures closed at $9.54 down 1 cent since last Friday. November 2016 soybean futures traded between $9.34 and $9.60. For the week, average soybean basis weakened at Memphis, Northwest Barge Points, Northwest, Lower-middle, and Upper-middle Tennessee. Basis ranged from 20 under to 23 over the November futures contract at elevators and barge points. Average basis at the end of the week was 7 under the November futures contract. This week’s Crop Progress report estimated soybean condition at 73 percent good-to-excellent and 7 percent poor-to-very-poor; soybeans dropping leaves at 68 percent compared to 46 percent last week, 69 percent last year, and a 5-year average of 64 percent; and soybeans harvested at 10 percent compared to 4 percent last week, 17 percent last year, and a 5-year average of 13 percent. In Tennessee, this week’s Crop Progress report indicated soybean condition at 78 percent good-to-excellent and 4 percent poor-to-very poor; soybeans dropping leaves at 68 percent compared to 54 percent last week, 60 percent last year, and a 5-year average 52 percent; and soybeans harvested at 14 percent compared to 5 percent last week, 12 percent last year, and a 5-year average of 8 percent. November/December 2016 soybean-to-corn price ratio was 2.84 at the end of the week. Downside price protection could be achieved by purchasing a $9.60 November 2016 Put Option which would cost 21 cents and set a $9.39 futures floor.
Nov/Jan and Nov/Nov future spreads were 5 cents and -1 cents, respectively. In Tennessee, October/November 2016 cash forward contracts averaged $9.44 with a range of $9.22 to $9.69 at elevators and barge points. Net sales reported by exporters were above expectations with net sales of 62.2 million bushels for the 2016/17 marketing year and 0.003 million for the 2017/18 marketing year. Exports for the same period were down from last week at 14.5 million bushels. Soybean export sales and commitments were 48 percent of the USDA estimated total annual exports for the 2016/17 marketing year (September 1 to August 31), compared to a 5-year average of 52 percent. January 2017 soybean futures closed at $9.59 down 2 cents since last Friday. November 2017 soybean futures closed at $9.53 up 4 cents since last Friday. November/December 2017 soybean-to-corn price ratio was 2.53 at the end of the week.
Cotton
Delta upland cotton spot price quotes for September 29 were 67.23 cents/lb (41-4-34) and 69.98 cents/lb (31-3-35). October 2016 cotton futures closed at 68.29 down 0.79 cents since last Friday. Adjusted world price (AWP) increased 1.24 cents to 60.09 cents per pound. This week’s Crop Progress report estimated cotton condition at 48 percent good-to-excellent and 16 percent poor-to-very poor; cotton bolls opening at 63 percent compared to 48 percent last week, 66 percent last year, and a 5-year average of 65 percent; and cotton harvested at 10 percent compared to 6 percent last week, 10 percent last year, and a 5-year average of 10 percent. In Tennessee, this week’s Crop Progress report indicated cotton condition at 80 percent good-to-excellent and 4 percent poor-to-very poor; cotton bolls opening at 80 percent compared to 67 percent last week, 65 percent last year, and a 5-year average of 66 percent; and cotton harvested at 7 percent compared to 4 percent last week, 3 percent last year, and a 5-year average of 4 percent. December 2016 cotton futures closed at 68.08 down 1.99 cents since last Friday. December 2016 cotton futures traded between 67.12 and 71 cents this week. Downside price protection could be obtained by purchasing a 69 cent December 2016 Put Option costing 3.23 cents establishing a 65.77 cent futures floor.
Dec/Oct and Dec/Mar cotton futures spreads were 0.21 cents and 0.46 cents, respectively. Net sales reported by exporters were down from last week with net sales of 91,600 bales for the 2016/17 marketing year and 11,600 bales for the 2017/18 marketing year. Exports for the same period were down from last week at 153,500 bales. Upland cotton export sales were 47 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 47 percent. March 2017 cotton futures closed at 68.54 down 1.89 cents since last Friday.
Wheat
In Tennessee, September cash wheat prices averaged $4.32 with a range of $4.16 to $4.45 for the week. Net sales reported by exporters were within expectations with net sales of 21.0 million bushels for the 2016/17 marketing year. Exports for the week were up from last week at 31.0 million bushels. Wheat export sales were 55 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 55 percent. December 2016 wheat futures closed at $4.02 down 2 cents since last Friday. December 2016 wheat futures traded between $3.90 and $4.07 this week. December wheat-to-corn price ratio was 1.20.
Dec/Mar and Dec/Jul future spreads were 22 cents and 45 cents, respectively. March 2017 wheat futures closed at $4.24 down 4 cents since last Friday. March 2017 wheat-to-corn price ratio was 1.23. Nationally, the Crop Progress report indicated winter wheat planted at 30 percent compared to 17 percent last week, 28 percent last year, and a 5-year average of 30 percent; and winter wheat emerged at 8 percent compared to 6 percent last year and a 5-year average of 8 percent. In Tennessee, winter wheat planted was estimated at 1 percent compared to 1 percent last year and a 5-year average of 2 percent. In Memphis, June/July 2017 cash wheat ranged from $4.36 to $4.39. July 2017 wheat futures closed at $4.47 down 3 cents since last Friday. Downside price protection could be obtained by purchasing a $4.50 July 2017 Put Option costing 35 cents establishing a $4.15 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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