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Exports Boost Soybean Prices
DR. AARON SMITH
KNOXVILLE, TENN.
Corn, cotton, and wheat were down; soybeans were up for the week. December corn traded mostly sideways for the week in a 10 cent range ($3.50-$3.60). Since the contract low of $3.14 3/4 on August 31, corn prices are up almost 40 cents. Strong global demand and reduced yield estimates (the national average will still be a record) have helped to provide support for corn prices. As we move through the remainder of harvest, futures prices will likely trade between $3.40 and $3.70. Local cash prices will vary across the state, with higher prices in Southern Middle Tennessee and Lower Prices in West and Upper middle Tennessee.
Soybean prices received a boost from greater than expected weekly export sales – 73.8 million bushels and exports – 98.2 million bushels. Exports will have to maintain the existing pace to meet USDA projections. On the supply side, yields continue to be excellent across most of the major soybean producing states and a record national yield is likely. Tennessee is no exception as yields will be close to a record. January cash soybean prices in West Tennessee are now over $10.00 at several locations.
After last week’s 3 cent/lb increase cotton took a 1.5 cent/lb step back this week. Prices have had a difficult time holding above 70 cents and it seems likely we will continue to see harvest futures prices trade between 66 and 72 cents/lb. In Tennessee, the cotton crop is in excellent condition and yield should be close to a state record.
Wheat prices may have set a bottom after trading between $3.85 and $4.15 for over a month. Last week, wheat futures broke out of the trading range moving 20 cents higher before giving back 5-10 cents this week. Wheat still suffers from large global stocks and a strengthening USD so a major rally is not anticipated. Nearby futures prices above $4.50 likely won’t occur in the next couple of months.
Corn
December 2016 corn futures closed at $3.52 down 2 cents since last Friday. December 2016 corn futures traded between $3.49 and $3.59 for the week. Across Tennessee, average basis (cash price-nearby futures price) strengthened at Memphis, Northwest Barge Points, Northwest, Upper-middle, and Lower-middle Tennessee. Overall, basis for the week ranged from 26 under to 11 over the December futures contract with an average of 5 under at the end of the week. Ethanol production for the week ending October 14 was 998,000 barrels per day up 36,000 from last week. Ethanol stocks were 19.042 million barrels, down 351,000 barrels. This week’s Crop Progress report estimated corn condition at 74 percent good-to-excellent and 7 percent poor-to-very poor; corn mature at 97 percent compared to 93 percent last week, 97 percent last year, and a 5-year average of 94 percent; and corn harvested at 46 percent compared to 35 percent last week, 54 percent last year, and a 5-year average of 49 percent. In Tennessee, this week’s Crop Progress report indicated corn condition at 62 percent good-to-excellent and 10 percent poor-to-very poor; corn mature at 100 percent compared to 99 percent last week, 99 percent last year, and a 5-year average of 99 percent; and corn harvested at 97 percent compared to 94 percent last week, 91 percent last year, and a 5-year average of 86 percent. Downside price protection could be obtained by purchasing a $3.55 December 2016 Put Option costing 10 cents establishing a $3.45 futures floor.
Corn net sales reported by exporters from October 7 to 13 were above expectations with net sales of 40.3 million bushels for the 2016/17 marketing year. Exports for the same time period were down from last week at 33.5 million bushels. Corn export sales and commitments were 40 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 39 percent. Dec/Mar and Dec/Dec future spreads were 10 and 37 cents, respectively. In Tennessee, January 2017 cash forward contracts averaged $3.70 with a range of $3.36 to $3.92. March 2017 corn futures closed at $3.62 down 1cent since last Friday. December 2017 corn futures closed at $3.89 down 2 cents since last Friday.
Soybeans
November 2016 soybean futures closed at $9.83 up 21 cents since last Friday. November 2016 soybean futures traded between $9.61 and $9.89. For the week, average soybean basis strengthened at Memphis, Northwest Barge Points, Lower-middle, and Upper-middle Tennessee and weakened at Northwest Tennessee. Basis ranged from 24 under to 10 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 74 percent good-to-excellent and 7 percent poor-to-very-poor; soybeans dropping leaves at 96 percent compared to 91 percent last week, 95 percent last year, and a 5-year average of 94 percent; and soybeans harvested at 62 percent compared to 44 percent last week, 73 percent last year, and a 5-year average of 63 percent. In Tennessee, this week’s Crop Progress report indicated soybean condition at 75 percent good-to-excellent and 6 percent poor-to-very poor; soybeans dropping leaves at 95 percent compared to 91 percent last week, 92 percent last year, and a 5-year average of 86 percent; and soybeans harvested at 62 percent compared to 44 percent last week, 46 percent last year, and a 5-year average of 35 percent. November/December 2016 soybean-to-corn price ratio was 2.79 at the end of the week.
Nov/Jan and Nov/Nov future spreads were 9 cents and 2 cents, respectively. Net sales reported by exporters were above expectations with net sales of 73.8 million bushels for the 2016/17 marketing year and 0.01 million bushels for the 2017/2018 marketing year. Exports for the same period were up from last week at 98.2 million bushels. Soybean export sales and commitments were 58 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 59 percent. January 2017 soybean futures closed at $9.92 up 22 cents since last Friday. In Tennessee, January cash contracts average $9.95 with a range of $9.46 to $10.12. November 2017 soybean futures closed at $9.85 up 17 cents since last Friday. November/December 2017 soybean-to-corn price ratio was 2.53 at the end of the week. Downside price protection could be achieved by purchasing a $10.00 November 2017 Put Option which would cost 74 cents and set a $9.26 futures floor.
Cotton
Delta upland cotton spot price quotes for October 20 were 69.3 cents/lb (41-4-34) and 72.05 cents/lb (31-3-35). Adjusted world price (AWP) increased 2.76 cents to 60.66 cents per pound. This week’s Crop Progress report estimated cotton condition at 47 percent good-to-excellent and 17 percent poor-to-very poor; cotton bolls opening at 89 percent compared to 80 percent last week, 93 percent last year, and a 5-year average of 88 percent; and cotton harvested at 30 percent compared to 22 percent last week, 28 percent last year, and a 5-year average of 27 percent. In Tennessee, this week’s Crop Progress report indicated cotton condition at 79 percent good-to-excellent and 3 percent poor-to-very poor; cotton bolls opening at 99 percent compared to 95 percent last week, 91 percent last year, and a 5-year average of 89 percent; and cotton harvested at 45 percent compared to 27 percent last week, 20 percent last year, and a 5-year average of 29 percent. December 2016 cotton futures closed at 69.07 down 1.5 cents since last Friday. December 2016 cotton futures traded between 68.61 and 71.79 cents this week. Downside price protection could be obtained by purchasing a 70 cent December 2016 Put Option costing 1.58 cents establishing a 68.42 cent futures floor.
Dec/Mar and Dec/May cotton futures spreads were 0.4 cents and 0.9 cents, respectively. Net sales reported by exporters were up from last week with net sales of 340,200 bales for the 2016/17 marketing year. Exports for the same period were down from last week at 128,400 bales. Upland cotton export sales were 52 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 50 percent. March 2017 cotton futures closed at 69.47 down 1.42 cents since last Friday.
Wheat
Wheat net sales reported by exporters were above expectations with net sales of 18.9 million bushels for the 2016/17 marketing year. Exports for the week were down from last week at 17 million bushels. Wheat export sales were 59 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 60 percent. December 2016 wheat futures closed at $4.14 down 7 cents since last Friday. December 2016 wheat futures traded between $4.13 and $4.25 this week. December wheat-to-corn price ratio was 1.18.
Dec/Mar and Dec/Jul future spreads were 21 cents and 48 cents, respectively. March 2017 wheat futures closed at $4.35 cents since last Friday. March 2017 wheat-to-corn price ratio was 1.20. Nationally, the Crop Progress report indicated winter wheat planted at 72 percent compared to 59 percent last week, 73 percent last year, and a 5-year average of 73 percent; and winter wheat emerged at 47 percent compared to 34 percent last week, 44 percent last year, and a 5-year average of 45 percent. In Tennessee, winter wheat planted was estimated at 38 percent compared to 26 percent last week, 32 percent last year, and a 5-year average of 23 percent; and winter wheat emerged at 7 percent compared to 2 percent last week, 8 percent last year, and a 5-year average of 5 percent. In Tennessee, June/July 2017 cash wheat ranged from $4.35 to $4.67. July 2017 wheat futures closed at $4.62 down 1 cent since last Friday. Downside price protection could be obtained by purchasing a $4.70 July 2017 Put Option costing 36 cents establishing a $4.34 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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