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Compared To Last Year December Corn Futures Are 20-30 Cents Lower
DR. AARON SMITH
KNOXVILLE, TENN.
Corn, cotton, and soybeans were up; wheat was down for the week. Compared to last year at this time December corn futures are 20-30 cents lower, November soybean futures are 80-125 cents higher, December cotton futures are 5-8 cents higher, and July wheat futures are 40-60 cents lower. Global production of corn, soybeans, and wheat are projected to be at all-time highs for the 2016/17 marketing year, however, so is global consumption of all three commodities.
Stocks-to-use (global ending stocks divided by global consumption) provides some insight into why corn and wheat prices are lower and soybean and cotton prices are higher than last year. Comparing the 2015/16 marketing year 2014/15 marketing year stocks-to use is 3 percent higher for wheat, 1 percent higher for corn, 2 percent lower for soybeans, and 13 percent lower for cotton. The simple interpretations of these stocks-to-use numbers are that relative to consumption there is more wheat and corn and less soybeans and cotton than one year ago.
If we examine average stocks-to-use ratios for the past 10-years, the only commodity that has lower projected stocks-to-use ratios than its 10-year average is soybeans, 23.5 percent compared to 23.7 percent. The other three commodities are projected to be significantly higher than their 10-year averages – wheat 34 percent compared to 28 percent, corn 21 percent compared to 17 percent, and cotton 78 percent compared to 68 percent. Stocks-to-use ratios provide some justification for the higher prices for soybeans and cotton compared to last year.
Moving through the 2016/17 marketing year export demand for all four commodities will continue to be important for domestic prices. South American crop progress and currency exchange rates will continue to be too very important factors in the pace of US export sales.
Corn
December 2016 corn futures closed at $3.55 up 3 cents since last Friday. December 2016 corn futures traded between $3.46 and $3.58 for the week. Across Tennessee, average basis (cash price-nearby futures price) strengthened or remained unchanged at Memphis, Northwest Barge Points, Northwest, and Upper-middle Tennessee and weakened in Lower-middle Tennessee. Overall, basis for the week ranged from 26 under to 10 over the December futures contract with an average of 5 under at the end of the week. Ethanol production for the week ending October 21 was 991,000 barrels per day down 7,000 from last week. Ethanol stocks were 19.919 million barrels, up 877,000 barrels. This week’s Crop Progress report estimated corn harvested at 61 percent compared to 46 percent last week, 70 percent last year, and a 5-year average of 62 percent. In Tennessee, this week’s Crop Progress report indicated corn harvested at 98 percent compared to 97 percent last week, 95 percent last year, and a 5-year average of 91 percent. Dec/Mar and Dec/Dec future spreads were 8 and 35 cents, respectively. In Tennessee, January 2017 cash forward contracts averaged $3.68 with a range of $3.33 to $3.86.
Corn net sales reported by exporters from October 14 to 21 were below expectations with net sales of 31.5 million bushels for the 2016/17 marketing year. Exports for the same time period were down from last week at 20.6 million bushels. Corn export sales and commitments were 41 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 40 percent. March 2017 corn futures closed at $3.63 up 1cent since last Friday. December 2017 corn futures closed at $3.90 up 1 cent since last Friday. Downside price protection could be obtained by purchasing a $4.00 December 2017 Put Option costing 37 cents establishing a $3.63 futures floor.
Soybeans
November 2016 soybean futures closed at $10.01 up 18 cents since last Friday. November 2016 soybean futures traded between $9.80 and $10.20. For the week, average soybean basis weakened or remained unchanged at Memphis, Northwest Barge Points, Northwest, Lower-middle, and Upper-middle Tennessee. Basis ranged from 29 under to 9 over the November futures contract at elevators and barge points. Average basis at the end of the week was 11 under the November futures contract. This week’s Crop Progress report estimated soybeans harvested at 76 percent compared to 62 percent last week, 84 percent last year, and a 5-year average of 76 percent. In Tennessee, this week’s Crop Progress report indicated soybean condition at 73 percent good-to-excellent and 6 percent poor-to-very poor; and soybeans harvested at 75 percent compared to 62 percent last week, 64 percent last year, and a 5-year average of 48 percent. November/December 2016 soybean-to-corn price ratio was 2.82 at the end of the week.
Nov/Jan and Nov/Nov future spreads were 11 cents and -7 cents, respectively. Net sales reported by exporters were within expectations with net sales of 75.2 million bushels for the 2016/17 marketing year. Exports for the same period were up from last week at 103.2 million bushels. Soybean export sales and commitments were 61 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 60 percent. January 2017 soybean futures closed at $10.12 up 20 cents since last Friday. In Tennessee, January cash contracts average $10.17 with a range of $9.67 to $10.42. November 2017 soybean futures closed at $9.94 up 9 cents since last Friday. November/December 2017 soybean-to-corn price ratio was 2.55 at the end of the week. Downside price protection could be achieved by purchasing a $10.00 November 2017 Put Option which would cost 69 cents and set a $9.31 futures floor.
Cotton
Delta upland cotton spot price quotes for October 27 were 69.76 cents/lb (41-4-34) and 72.51 cents/lb (31-3-35). Adjusted world price (AWP) decreased 1.41 cents to 59.25 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 93 percent compared to 89 percent last week, 95 percent last year, and a 5-year average of 92 percent; and cotton harvested at 39 percent compared to 30 percent last week, 39 percent last year, and a 5-year average of 37 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 99 percent last week, 97 percent last year, and a 5-year average of 93 percent; and cotton harvested at 61 percent compared to 45 percent last week, 42 percent last year, and a 5-year average of 40 percent. December 2016 cotton futures closed at 70.82 up 1.75 cents since last Friday. December 2016 cotton futures traded between 68.08 and 71.09 cents this week.
Dec/Mar and Dec/May cotton futures spreads were 0.44 cents and -0.92 cents, respectively. Net sales reported by exporters were down from last week with net sales of 129,300 bales for the 2016/17 marketing year. Exports for the same period were down from last week at 127,100 bales. Upland cotton export sales were 53 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 51 percent. March 2017 cotton futures closed at 71.26 up 1.79 cents since last Friday. December 2017 cotton futures closed at 69.9 up 0.82 cents since last Friday. Downside price protection could be obtained by purchasing a 70 cent December 2017 Put Option costing 5 cents establishing a 65 cent futures floor.
Wheat
Wheat net sales reported by exporters were above expectations with net sales of 23.7 million bushels for the 2016/17 marketing year. Exports for the week were down from last week at 9.7 million bushels. Wheat export sales were 61 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 62 percent. December 2016 wheat futures closed at $4.08 down 6 cents since last Friday. December 2016 wheat futures traded between $3.98 and $4.18 this week. December wheat-to-corn price ratio was 1.15.
Dec/Mar and Dec/Jul future spreads were 20 cents and 49 cents, respectively. March 2017 wheat futures closed at $4.28 down 7 cents since last Friday. March 2017 wheat-to-corn price ratio was 1.18. Nationally, the Crop Progress report indicated winter wheat condition at 59 percent good-to-excellent and 7 percent poor-to-very poor; winter wheat planted at 79 percent compared to 72 percent last week, 81 percent last year, and a 5-year average of 82 percent; and winter wheat emerged at 60 percent compared to 47 percent last week, 58 percent last year, and a 5-year average of 58 percent. In Tennessee, winter wheat condition was estimated at 68 percent good-to-excellent and 9 percent poor-to-very poor; winter wheat planted at 58 percent compared to 38 percent last week, 49 percent last year, and a 5-year average of 37 percent; and winter wheat emerged at 20 percent compared to 7 percent last week, 20 percent last year, and a 5-year average of 14 percent. In Tennessee, June/July 2017 cash wheat ranged from $4.23 to $4.61. July 2017 wheat futures closed at $4.57 down 5 cents since last Friday. Downside price protection could be obtained by purchasing a $4.60 July 2017 Put Option costing 33 cents establishing a $4.27 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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