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Corn And Cotton Were Down; Soybeans Were Mixed; And Wheat Was Up For The Week
DR. AARON SMITH
KNOXVILLE, TENN.
U.S. corn and soybean planting is all but complete. As such, focus will turn to the critical pollination period for corn (June-July) and pod filling stage for soybeans (July-August). The past two years the futures market has provided short lived rallies that offered opportunities to price corn near $4.50 for the December contract. Weather will be the driving factor in determining if the market can produce a similar opportunity this summer. Any rallies, in the futures markets, should be viewed as opportunities to price additional production (with the caveat that projected production is sufficient to meet the additional pricing commitment). Do not trade price risk for production risk!
December cotton futures have continued to slide from the 12-month high on March 20 of 75.72. Support lies near 68 cents. If prices are not able to hold 68 cents a move below the 12-month low of 65.5 on August 31, 2016 may occur. Global stocks are projected below 90 million bales (87.71 million bales) and global production is projected to be below global use, however a large domestic cotton crop could be enough to tip the scales to a stock building scenario.
Wheat futures continued there rise and have now added over 30 cents since June 1 (closing on Friday at $4.65 ¼). Moderate to severe drought in North Dakota, South Dakota, and Montana decreased national spring wheat crop condition ratings by 10 percent this week. Given the reduction in total wheat acres this year a major production disruption could provide fuel for increased domestic prices, however record large global stocks will continue to limit advances in prices.
Corn
July 2017 corn futures closed at $3.84 down 3 cents since last Friday. For the week, July 2017 corn futures traded between $3.70 and $3.85. Across Tennessee, average basis (cash price-nearby futures price) strengthened or remained unchanged at Memphis, Northwest Barge Points, and Lower-middle Tennessee and weakened at Northwest and Upper-middle Tennessee. Overall, basis for the week ranged from 18 under to 25 over the July futures contract with an average of 1 over the July futures contract at the end of the week. Corn net sales reported by exporters from June 2-8 were within expectations with net sales of 23.6 million bushels for the 2016/17 marketing year and 0.5 million bushels for the 2017/18 marketing year. Exports for the same time period were down from last week at 39.1 million bushels. Corn export sales and commitments were 97 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 98 percent. Ethanol production for the week ending June 9 was 1.002 million barrels per day up 3,000 from last week. Ethanol stocks were 22.542 million barrels, up 560,000 barrels. Jul/Sep and Jul/Dec future spreads were 8 and 18 cents, respectively. September 2017 corn futures closed at $3.92 down 3 cents since last Friday.
Nationally, the Crop Progress report estimated corn emerged at 94 percent compared to 86 percent last week, 95 percent last year, and a 5-year average of 94 percent; and corn condition at 67 percent good-to-excellent and 8 percent poor-to-very poor. In Tennessee, the Crop Progress report estimated corn condition at 83 percent good-to-excellent 3 percent poor-to-very poor; corn planted at 99 percent compared to 98 percent last week, 99 percent last year, and a 5-year average of 99 percent; corn emerged at 97 percent compared to 95 percent last week, 99 percent last year, and a 5-year average of 98 percent; and corn silking at 1 percent compared to 1 percent last year and a 5-year average of 5 percent. In Tennessee, September 2017 cash forward contracts averaged $3.77 with a range of $3.70 to $3.98. December 2017 corn futures closed at $4.02 down 4 cents since last Friday. Downside price protection could be obtained by purchasing a $4.10 December 2017 Put Option costing 31 cents establishing a $3.79 futures floor.
Soybeans
July 2017 soybean futures closed at $9.39 down 2 cents since last Friday. For the week, July 2017 soybean futures traded between $9.25 and $9.43. Average soybean basis weakened or remained unchanged at Memphis, Northwest Barge Points, and Lower-middle Tennessee and strengthened at Upper-middle and Northwest Tennessee. Basis ranged from 36 under to 7 over the July futures contract at elevators and barge points. Average basis at the end of the week was 11 under the July futures contract. Net sales reported by exporters were within expectations with net sales of 12.5 million bushels for the 2016/17 marketing year and 11.5 million bushels for the 2017/18 marketing year. Exports for the same period were up from last week at 18 million bushels. Soybean export sales and commitments were 106 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 100 percent. July soybean-to-corn futures price ratio was 2.45 at the end of the week. Jul/Aug and Jul/Nov future spreads were 4 cents and 11 cents, respectively. August 2017 soybean futures closed at $9.43 down 2 cents since last Friday.
Nationally, the Crop Progress report estimated soybeans planted at 92 percent compared to 83 percent last week, 91 percent last year, and a 5-year average of 87 percent; soybeans emerged at 77 percent compared to 58 percent last week, 77 percent last year, and a 5-year average of 73 percent; and soybean condition at 66 percent good-to-excellent and 6 percent poor-to-very poor. In Tennessee, the Crop Progress report estimated soybean condition at 82 percent good-to-excellent and 3 percent poor-to-very poor; soybeans planted at 74 percent compared to 62 percent last week, 73 percent last year, and a 5-year average of 69 percent; and soybeans emerged at 59 percent compared to 45 percent last week, 58 percent last year, and a 5-year average of 52 percent. In Tennessee, October/November 2017 soybean cash contracts average $9.29 with a range of $8.98 to $9.52. November/December 2017 soybean-to-corn price ratio was 2.36 at the end of the week. November 2017 soybean futures closed at $9.50 up 2 cents since last Friday. Downside price protection could be achieved by purchasing a $9.60 November 2017 Put Option which would cost 49 cents and set a $9.11 futures floor.
Cotton
July 2017 cotton futures closed at 71.88 cents down 3.81 cents since last Friday. For the week, July 2017 cotton futures traded between 70.9 and 75.75 cents. Delta upland cotton spot price quotes for June 15 were 70.41 cents/lb (41-4-34) and 71.66 cents/lb (31-3-35). Adjusted world price (AWP) decreased 0.72 cents to 67.31 cents per pound. Net sales reported by exporters were down from last week with net sales of 69,400 bales for the 2016/17 marketing year and 197,600 bales for the 2017/18 marketing year. Exports for the same period were down from last week at 233,300 bales. Upland cotton export sales were 103 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 105 percent. October 2017 cotton futures closed at 70.86 down 3.47 cents since last Friday. Jul/Oct and Jul/Dec cotton futures spreads were -1.02 cents and -2.52 cents, respectively.
Nationally, the Crop Progress report estimated cotton planted at 92 percent compared to 80 percent last week, 87 percent last year, and a 5-year average of 90 percent; cotton squaring at 15 percent compared to 11 percent last week, 12 percent last year, and a 5-year average of 12 percent; and cotton condition at 66 percent good-to-excellent and 5 percent poor-to-very poor. In Tennessee, cotton condition was estimated at 83 percent good-to-excellent and 6 percent poor-to-very poor; cotton planted at 98 percent compared to 97 percent last week, 99 percent last year, and a 5-year average of 96 percent; and cotton squaring at 18 percent compared to 10 percent last week, 13 percent last year, and a 5-year average of 9 percent. December 2017 cotton futures closed at 69.36 down 3.13 cents since last Friday. Downside price protection could be obtained by purchasing a 70 cent December 2017 Put Option costing 3.82 cents establishing a 66.18 cent futures floor.
Wheat
July 2017 wheat futures closed at $4.65 up 20 cents since last Friday. July 2017 wheat futures traded between $4.31 and $4.68 this week. July wheat-to-corn price ratio was 1.21.Wheat net sales reported by exporters were within expectations with net sales of 13.7 million bushels for the 2017/18 marketing year. Exports for the week were up from last week at 22.9 million bushels. Wheat export sales were 26 percent of the USDA estimated total annual exports for the 2017/18 marketing year (June 1 to May 31), compared to a 5-year average of 25 percent. Jul/Sep and Jul/Dec future spreads were 16 cents and 37 cents, respectively. In Tennessee, June/July 2017 cash wheat ranged from $4.09 to $4.84.
Nationally, the Crop Progress report estimated winter wheat condition at 50 percent good-to-excellent and 16 percent poor-to-very-poor; winter wheat headed at 92 percent compared to 87 percent last week, 95 percent last year, and a 5-year average of 91 percent; winter wheat harvested at 17 percent compared to 10 percent last week, 10 percent last year and a 5-year average of 15 percent; spring wheat emerged at 95 percent compared to 90 percent last week, 99 percent last year, and a 5-year average of 92 percent; and spring wheat condition at 45 percent good-to-excellent and 20 percent poor-to-very poor. In Tennessee, winter wheat condition was reported at 65 percent good-to-excellent and 8 percent poor-to-very poor; winter wheat coloring at 97 percent compared to 94 percent last week, 96 percent last year, and a 5-year average of 93 percent; winter wheat mature at 87 percent; and winter wheat harvested at 32 percent compared to 7 percent last week and 18 percent last year. September 2017 wheat futures closed at $4.81 up 21 cents from last Friday. July 2018 wheat futures closed at $5.38 up 20 cents since last Friday. Downside price protection could be obtained by purchasing a $5.40 July 2018 Put Option costing 45 cents establishing a $4.95 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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