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Corn, Soybeans, And Wheat Were Up – Cotton Mixed For The Week
DR. AARON SMITH
KNOXVILLE, TENN.
December corn futures got very close to the psychological barrier of $4.00 bushel on Friday. If $4.00 is breached early next week, the markets will likely encounter increased producer selling. The long term trend for the December 2017 contract remains up but for how long remains to be seen.
November soybeans finished up after last week’s pull back. Similar to corn the long term trend remains up, however since December, the November soybean contract has traded flat – between $9.75 and $10.43.
Nearby cotton futures dropped this week while harvest futures advanced. The March contract will likely see continued volatility as contract expiration approaches – 80 cents is not completely out of the question but now appears less likely. The December contract will have significant resistance to overcome if it is to exceed 75 cents.
Wheat was the lone commodity to get a substantial boost out of the WASDE report as global stock estimates were decreased from last month. Stocks remain up from the previous marketing year and are record large, so it is likely that wheat will continue to trade below $5 as we enter spring.
This week’s increase in prices has increased the current projected crop insurance prices for Tennessee to: $3.96 for corn; $10.20 for soybeans; and $0.74 for cotton. There is still over half of February to go before final crop insurance prices are set but all three commodities are well above last year’s projected prices ($3.86, $8.85, and $0.60).
On Thursday the USDA released its monthly World Agricultural Supply and Demand Estimates (WASDE) report. Overall, the report could be considered neutral-to-bullish for wheat and cotton and neutral-to bearish for corn and soybeans. The report contained no major surprises and limited revisions for corn, soybeans, cotton, and wheat. Analysis of the report and market reaction for corn, soybeans, cotton, and wheat can be found on our Crop Outlook page.
Corn
March 2017 corn futures closed at $3.74 up 9 cents since last Friday. For the week, March 2017 corn futures traded between $3.62 and $3.75. 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 at Lower-middle Tennessee. Overall, basis for the week ranged from 10 under to 40 over the March futures contract with an average of 14 over at the end of the week. Corn net sales reported by exporters from January 27-February 2 were above expectations with net sales of 38.3 million bushels for the 2016/17 marketing year and 1.4 million bushels for the 2017/18 marketing year. Exports for the same time period were up from last week at 44.3 million bushels. Corn export sales and commitments were 73 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 68 percent. Ethanol production for the week ending February 3 was 1.055 million barrels per day down 6,000 from last week. Ethanol stocks were 22.085 million barrels, up 215,000 barrels. Mar/May and Mar/Dec future spreads were 8 and 25 cents, respectively. May 2017 corn futures closed at $3.82 up 10 cents since last Friday.
In Tennessee, September 2017 cash forward contracts averaged $3.81 with a range of $3.67 to $4.01. December 2017 corn futures closed at $3.99 up 7 cents since last Friday. Downside price protection could be obtained by purchasing a $4.00 December 2017 Put Option costing 32 cents establishing a $3.68 futures floor.
Soybeans
March 2017 soybean futures closed at $10.59 up 32 cents since last Friday. For the week, March 2017 soybean futures traded between $10.26 and $10.63. Average soybean basis strengthened or remained unchanged at Memphis, Northwest Barge Points, Northwest, Upper-middle, and Lower-middle Tennessee. Basis ranged from 30 under to 10 over the March futures contract at elevators and barge points. Average basis at the end of the week was 5 under the March futures contract. Net sales reported by exporters were within expectations with net sales of 19.7 million bushels for the 2016/17 marketing year and 4.8 million bushels for the 2017/18 marketing year. Exports for the same period were up from last week at 60.3 million bushels. Soybean export sales and commitments were 91% 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 88 percent. March soybean-to-corn futures price ratio was 2.83 at the end of the week. Mar/May and Mar/Nov future spreads were 11 cents and -29 cents, respectively. May 2017 soybean futures closed at $10.70 up 33 cents since last Friday.
In Tennessee, October / November 2017 cash contracts average $10.16 with a range of $9.87 to $10.41. November/December 2017 soybean-to-corn price ratio was 2.58 at the end of the week. November 2017 soybean futures closed at $10.30 up 21 cents since last Friday. Downside price protection could be achieved by purchasing a $10.40 November 2017 Put Option which would cost 70 cents and set a $9.70 futures floor.
Cotton
March 2017 cotton futures closed at 75.82 down 0.59 cents since last Friday. For the week, March 2017 cotton futures traded between 75.05 and 76.5 cents. Delta upland cotton spot price quotes for February 9 were 74.83 cents/lb (41-4-34) and 76.08 cents/lb (31-3-35). Adjusted world price (AWP) increased 1.07 cents to 66.45 cents per pound. Net sales reported by exporters were down from last week with net sales of 208,100 bales for the 2016/17 marketing year and 46,000 bales for the 2017/18 marketing year. Exports for the same period were up from last week at 452,100 bales. Upland cotton export sales were 86 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 85 percent. May 2017 cotton futures closed at 77.09 up 0.02 cents since last Friday. Mar/May and Mar/Dec cotton futures spreads were 1.27 cents and -1.72 cents, respectively.
December 2017 cotton futures closed at 74.1 up 0.11 cents since last Friday. Downside price protection could be obtained by purchasing a 75 cent December 2017 Put Option costing 5.18 cents establishing a 69.82 cent futures floor.
Wheat
March 2017 wheat futures closed at $4.49 up 19 cents since last Friday. March 2017 wheat futures traded between $4.19 and $4.50 this week. March wheat-to-corn price ratio was 1.20.Wheat net sales reported by exporters were above expectations with net sales of 19.4 million bushels for the 2016/17 marketing year and 4.8 million bushels for the 2017/18 marketing year. Exports for the week were up from last week at 22.3 million bushels. Wheat export sales were 89 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 86 percent. In Memphis, old crop cash wheat ranged from $4.30 to $4.51. Mar/May and Mar/Jul future spreads were 14 cents and 25 cents, respectively. May 2017 wheat futures closed at $4.63 up 20 cents since last Friday. May 2017 wheat-to-corn price ratio was 1.21.
In Tennessee, June/July 2017 cash wheat ranged from $4.27 to $4.92. July 2017 wheat futures closed at $4.74 up 18 cents since last Friday. Downside price protection could be obtained by purchasing a $4.80 July 2017 Put Option costing 35 cents establishing a $4.45 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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