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Corn And Soybean Export Sales Exceed Expectations For The Week
DR. AARON SMITH
KNOXVILLE, TENN.
Corn and soybeans were up; cotton and wheat were down for the week. Corn and soybean export sales exceed expectations for the week. However, the strong sales pace will need to continue in order to meet the USDA’s marketing year projections of 2.175 billion bushels of corn and 1.985 billion bushels of soybeans. Currently, outstanding corn and soybean export sales are up 93 percent and 27 percent, from last year at this time. The marketing year for corn and soybeans began September 1 so there is still a substantial amount of time that can change export outlook. Important factors that will influence export sales are the value of the USD, South American crop progress, and China’s economic growth. Exports will be imperative to realize even moderate price increases this winter.
December corn increased 10 cents on Monday before trading sideways for the remainder of the week. Currently, the December contract has resistance at $3.50 and support at $3.25. Next week’s WASDE report could move the market out of the trading range if a surprise materializes.
November soybeans retreated after early week gains to close up 2 cents for the week. Currently, soybeans have solid support at $9.40 and resistance at $9.75. Over the past 5 weeks we have seen soybean prices start to consolidate near $9.60. This could indicate a move out of the sideways trend is forthcoming. The WASDE report, domestic yields, and South American planting progress will substantially influence the direction of the breakout.
December cotton tested 70 cents on Tuesday before falling back to 66.98 to close the week. The long term up trend in cotton markets remains intact despite the 11 cent step back from the current top on August 5th. Cotton markets will need some new bullish information to move back up into the 70 cent range during the harvest season, otherwise continued trading between 66 and 70 cents is likely.
December wheat has been range bound for over a month trading almost exclusively between $3.90 and $4.10. With July futures at $4.40 it is hard for producers to get excited about planting wheat this fall. Positive returns for Tennessee wheat producers continue to be unlikely due to the glut of supply across the globe.
Corn
December 2016 corn futures closed at $3.39 up 3 cents since last Friday. December 2016 corn futures traded between $3.35 and $3.49 for the week. Across Tennessee, average basis (cash price-nearby futures price) weakened or remained unchanged 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 6 over the December futures contract with an average of 14 under at the end of the week. Ethanol production for the week ending September 30 was 980,000 barrels per day down 9,000 from last week. Ethanol stocks were 20.177 million barrels, down 401,000 barrels. This week’s Crop Progress report estimated corn condition at 73 percent good-to-excellent and 8 percent poor-to-very poor; corn mature at 86 percent compared to 73 percent last week, 82 percent last year, and a 5-year average of 79 percent; and corn harvested at 24 percent compared to 15 percent last week, 24 percent last year, and a 5-year average of 27 percent. In Tennessee, this week’s Crop Progress report indicated corn condition at 63 percent good-to-excellent and 10 percent poor-to-very poor; corn mature at 99 percent compared to 98 percent last week, 97 percent last year, and a 5-year average of 96 percent; and corn harvested at 89 percent compared to 79 percent last week, 73 percent last year, and a 5-year average of 73 percent. Downside price protection could be obtained by purchasing a $3.40 December 2016 Put Option costing 10 cents establishing a $3.30 futures floor.
Corn net sales reported by exporters from September 23-29 were above expectations with net sales of 81.1 million bushels for the 2016/17 marketing year and 21.3 million bushels for the 2017/18 marketing year. Exports for the same time period were up from last week at 54.7 million bushels. Corn export sales and commitments were 35 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 37 percent. Dec/Mar and Dec/Dec future spreads were 10 and 40 cents, respectively. In Tennessee, January 2017 cash forward contracts averaged $3.61 with a range of $3.25 to $3.83. March 2017 corn futures closed at $3.49 up 3 cents since last Friday. December 2017 corn futures closed at $3.79 up 3 cents since last Friday.
Soybeans
November 2016 soybean futures closed at $9.56 up 2 cents since last Friday. November 2016 soybean futures traded between $9.46 and $9.75. For the week, average soybean basis weakened at Northwest Barge Points, Northwest, Lower-middle, and Upper-middle Tennessee and strengthened at Memphis. Basis ranged from 26 under to 14 over the November futures contract at elevators and barge points. Average basis at the end of the week was 9 under the November futures contract. This week’s Crop Progress report estimated soybean condition at 74 percent good-to-excellent and 7 percent poor-to-very-poor; soybeans dropping leaves at 83 percent compared to 68 percent last week, 82 percent last year, and a 5-year average of 79 percent; and soybeans harvested at 26 percent compared to 10 percent last week, 36 percent last year, and a 5-year average of 27 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 83 percent compared to 68 percent last week, 74 percent last year, and a 5-year average of 65 percent; and soybeans harvested at 29 percent compared to 14 percent last week, 21 percent last year, and a 5-year average of 16 percent. November/December 2016 soybean-to-corn price ratio was 2.82 at the end of the week. Downside price protection could be achieved by purchasing a $9.60 November 2016 Put Option which would cost 18 cents and set a $9.42 futures floor.
Nov/Jan and Nov/Nov future spreads were 7 cents and 4 cents, respectively. In Tennessee, November 2016 cash forward contracts averaged $9.82 with a range of $9.29 to $10.08 at elevators and barge points. Net sales reported by exporters were above expectations with net sales of 80.1 million bushels for the 2016/17 marketing year. Exports for the same period were up from last week at 37.7 million bushels. Soybean export sales and commitments were 52 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 54 percent. January 2017 soybean futures closed at $9.63 up 4 cents since last Friday. November 2017 soybean futures closed at $9.60 up 7 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 October 6 were 67 cents/lb (41-4-34) and 69.75 cents/lb (31-3-35). Adjusted world price (AWP) decreased 1.38 cents to 58.71 cents per pound. This week’s Crop Progress report estimated cotton condition at 49 percent good-to-excellent and 15 percent poor-to-very poor; cotton bolls opening at 71 percent compared to 63 percent last week, 75 percent last year, and a 5-year average of 74 percent; and cotton harvested at 16 percent compared to 10 percent last week, 15 percent last year, and a 5-year average of 14 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 89 percent compared to 80 percent last week, 76 percent last year, and a 5-year average of 75 percent; and cotton harvested at 15 percent compared to 7 percent last week, 4 percent last year, and a 5-year average of 10 percent. December 2016 cotton futures closed at 66.98 down 1.1 cents since last Friday. December 2016 cotton futures traded between 66.85 and 70 cents this week. Downside price protection could be obtained by purchasing a 67 cent December 2016 Put Option costing 1.92 cents establishing a 65.08 cent futures floor.
Dec/Mar and Dec/May cotton futures spreads were 0.64 cents and 0.97 cents, respectively. Net sales reported by exporters were up from last week with net sales of 158,900 bales for the 2016/17 marketing year. Exports for the same period were up from last week at 212,500 bales. Upland cotton export sales were 49 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 48 percent. March 2017 cotton futures closed at 67.62 down 0.92 cents since last Friday.
Wheat
Wheat net sales reported by exporters were below expectations with net sales of 13.9 million bushels for the 2016/17 marketing year. Exports for the week were down from last week at 25.7 million bushels. Wheat export sales were 56 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 57 percent. December 2016 wheat futures closed at $3.94 down 8 cents since last Friday. December 2016 wheat futures traded between $3.92 and $4.09 this week. December wheat-to-corn price ratio was 1.16.
Dec/Mar and Dec/Jul future spreads were 20 cents and 46 cents, respectively. March 2017 wheat futures closed at $4.14 down 10 cents since last Friday. March 2017 wheat-to-corn price ratio was 1.19. Nationally, the Crop Progress report indicated winter wheat planted at 43 percent compared to 30 percent last week, 44 percent last year, and a 5-year average of 45 percent; and winter wheat emerged at 20 percent compared to 8 percent last week, 16 percent last year, and a 5-year average of 17 percent. In Tennessee, winter wheat planted was estimated at 8 percent compared to 1 percent last week, 8 percent last year, and a 5-year average of 7 percent; and winter wheat emerged at 1 percent compared to 0 percent last year and a 5-year average of 0 percent. In Tennessee, June/July 2017 cash wheat ranged from $4.11 to $4.46. July 2017 wheat futures closed at $4.40 down 7 cents since last Friday. Downside price protection could be obtained by purchasing a $4.50 July 2017 Put Option costing 37 cents establishing a $4.13 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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