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Foreign Ending Stocks Projected To Rise
DR. AARON SMITH
KNOXVILLE, TENN.
Corn, soybeans, and wheat were up; cotton was down for the week. On Friday, the USDA released the December World Agricultural Supply and Demand Estimates (WASDE) report. Overall the report was pretty benign. No changes were made to the domestic balance sheets for corn, soybeans, and wheat. Only minor changes to yield - increased 18 lbs/acre, domestic use – decreased 200,000 bales, and exports – increased 200,000 bales were made for cotton.
Internationally, compared to the November WASDE report, all four commodities were projected to have small increases in projected foreign ending stocks - corn up 160 million bushels; soybean stocks up 49 million bushels; wheat up 106 million bushels; and cotton up 540,000 bales.
A summary of the December WASDE report can be found on our Monthly Outlook page.
The December USDA Crop Production Report estimated Tennessee cotton yield at 1,085 lbs/acre, up 10 lbs from last month’s estimate. If realized it would be an all-time record. National cotton yield was also revised up, from 791 to 810 lbs/acre.
With the December USDA reports out of the way, markets will now focus on South American crop progress. To date no major disruptions or issues have occurred to production. Crop progress in Brazil and Argentina will have a direct impact on U.S. soybean and corn exports and price direction in the New Year.
Corn
March 2017 corn futures closed at $3.59 up 12 cents since last Friday. March 2017 corn futures traded between $3.47 and $3.64 for the week. Across Tennessee, average basis (cash price-nearby futures price) strengthened or remained unchanged at Memphis, Northwest Barge Points, Northwest, Upper-middle, and Lower-middle Tennessee. Overall, basis for the week ranged from 21 under to 25 over the March futures contract with an average of 5 over at the end of the week. Ethanol production for the week ending December 2 was 1,023,000 barrels per day up 11,000 from last week. Ethanol stocks were 18.53 million barrels, up 82,000 barrels. Mar/May and Mar/Dec future spreads were 7 and 29 cents, respectively. In Tennessee, January 2017 cash forward contracts averaged $3.67 with a range of $3.57 to $3.79.
May 2017 corn futures closed at $3.66 up 12 cents since last Friday. Corn net sales reported by exporters from November 25-December 1were above expectations with net sales of 58.9 million bushels for the 2016/17 marketing year and 0.04 million bushels for the 207/18 marketing year. Exports for the same time period were up from last week at 53.8 million bushels. Corn export sales and commitments were 56 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. December 2017 corn futures closed at $3.88 up 11 cents since last Friday. Downside price protection could be obtained by purchasing a $3.90 December 2017 Put Option costing 32 cents establishing a $3.58 futures floor.
Soybeans
January 2017 soybean futures closed at $10.37 up 10 cents since last Friday. January 2017 soybean futures traded between $10.21 and $10.61. For the week, average soybean basis weakened or remained unchanged at Memphis, Northwest Barge Points, Northwest, Upper-middle, and Lower-middle Tennessee. Basis ranged from 39 under to 8 over the January futures contract at elevators and barge points. Average basis at the end of the week was 5 under the January futures contract. March soybean-to-corn futures price ratio was 2.92 at the end of the week. In Tennessee, January cash contracts average $10.14 with a range of $9.76 to $10.38.
Jan/Mar and Jan/Nov future spreads were 11 cents and -12 cents, respectively. March 2017 soybean futures closed at $10.48 up 11 cents since last Friday. Net sales reported by exporters were above expectations with net sales of 53.7 million bushels for the 2016/17 marketing year and 0.2 million bushels for the 2017/18 marketing year. Exports for the same period were down from last week at 68.7 million bushels. Soybean export sales and commitments were 77 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 74 percent. November 2017 soybean futures closed at $10.25 up 10 cents since last Friday. November/December 2017 soybean-to-corn price ratio was 2.64 at the end of the week. Downside price protection could be achieved by purchasing a $10.40 November 2017 Put Option which would cost 73 cents and set a $9.67 futures floor.
Cotton
March 2017 cotton futures closed at 70.8 down 0.24 cents since last Friday. March 2017 cotton futures traded between 70.3 and 71.95 cents this week. Delta upland cotton spot price quotes for December 8 were 71.92 cents/lb (41-4-34) and 74.17 cents/lb (31-3-35). Adjusted world price (AWP) decreased 0.44 cents to 60.22 cents per pound. May 2017 cotton futures closed at 7111 down 0.42 cents since last Friday.
Mar/May and Mar/Dec cotton futures spreads were 0.31 cents and -1.45 cents, respectively. Net sales reported by exporters were up from last week with net sales of 405,200 bales for the 2016/17 marketing year. Exports for the same period were up from last week at 201,000 bales. Upland cotton export sales were 65 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 68 percent. December 2017 cotton futures closed at 69.35 down 0.58 cents since last Friday. Downside price protection could be obtained by purchasing a 70 cent December 2017 Put Option costing 5.02 cents establishing a 64.98 cent futures floor.
Wheat
March 2017 wheat futures closed at $4.16 up 12cents since last Friday. March 2017 wheat futures traded between $3.99 and $4.17 this week. Wheat net sales reported by exporters were above expectations with net sales of 18.5 million bushels for the 2016/17 marketing year and 0.9 million bushels for the 2017/18 marketing year. Exports for the week were up from last week at 20.4 million bushels. Wheat export sales were 74 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 71 percent. March wheat-to-corn price ratio was 1.16. In Memphis, old crop cash wheat ranged from $3.87 to $4.08.
Mar/May and Mar/Jul future spreads were 10 cents and 22 cents, respectively. May 2017 wheat futures closed at $4.26 up 9 cents since last Friday. May 2017 wheat-to-corn price ratio was 1.16. In Tennessee, June/July 2017 cash wheat ranged from $3.95 to $4.48. July 2017 wheat futures closed at $4.38 up 7 cents since last Friday. Downside price protection could be obtained by purchasing a $4.40 July 2017 Put Option costing 29 cents establishing a $4.11 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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