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Grain Stocks Reports Spur Rise In Futures
DR. AARON SMITH
KNOXVILLE, TENN.
This week all four commodities were up; largely due to a positive reaction to Friday’s USDA Acreage and Quarterly Grain Stocks reports. For Friday, 2017 corn futures contracts were up 10 ¾ to 12 cents; 2017 soybean futures were up 26 ¼ to 30 cents; cotton futures were up 1.31 to 1.35 cents; and wheat futures were up 29 ½ to 30 ¾ cents.
The USDA estimated 2017 corn planted acreage at 90 million acres (down 4 percent from last year); soybeans at a record 89.5 million acres (up 7 percent from last year); cotton at 12.2 million acres (up 21 percent from last year); and all wheat planted area at 46.1 million acres (the lowest US recorded planted acreage; winter wheat was down 9 percent from last year and spring wheat down 3 percent).
In Tennessee, corn acres planted were estimated down 40,000 from last year, at 840,000 acres; soybean acres planted were estimated up 90,000 from last year, at 1.75 million acres; cotton acres planted were up 45,000 from last year, at 300,000; and wheat acres planted were down 10,000 from last year, at 390,000.
The June 1 Grain Stocks report indicated stocks of 5.23 billion bushels of corn (up 11 percent from last year); 963 million bushels of soybeans (up 11 percent from last year); and 1.18 billion bushels of wheat (up 21 percent from last year).
A detailed summary of the report will be available next week online at: http://economics.ag.utk.edu/crop.html.
Dry conditions, that have fueled the rally in wheat the past two weeks, have started to creep into Nebraska and Iowa (68 percent and 45 percent abnormally dry, respectively). Currently, NOAA estimates 25 percent of Montana, 47 percent of North Dakota, and 31 percent of South Dakota to be in a severe drought. It will be important for prices if dry areas continue to expand in July.
Corn
July 2017 corn futures closed at $3.70 up 13 cents since last Friday. For the week, July 2017 corn futures traded between $3.56 and $3.72. Across Tennessee, average basis (cash price-nearby futures price) strengthened at Memphis, Northwest, and Lower-middle Tennessee and weakened at Northwest Barge Points and Upper-middle Tennessee. Overall, basis for the week ranged from 16 under to 40 over the July futures contract with an average of 3 over the July futures contract at the end of the week. Corn net sales reported by exporters from June 16-22 were below expectations with net sales of 12.4 million bushels for the 2016/17 marketing year and 2.7 million bushels for the 2017/18 marketing year. Exports for the same time period were down from last week at 40.2 million bushels. Corn export sales and commitments were 98 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. Ethanol production for the week ending June 23 was 1.015 million barrels per day up 25,000 from last week. Ethanol stocks were 21.838 million barrels, down 442,000 barrels. Jul/Sep and Jul/Dec future spreads were 11 and 22 cents, respectively. September 2017 corn futures closed at $3.81 up 16 cents since last Friday.
Nationally, the Crop Progress report estimated corn silking at 4 percent compared to 5 percent last year and a 5-year average of 5 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 87 percent good-to-excellent 1 percent poor-to-very poor; and corn silking at 38 percent compared to12 percent last week, 21 percent last year, and a 5-year average of 28 percent. In Tennessee, September 2017 cash forward contracts averaged $3.59 with a range of $3.51 to $3.79. December 2017 corn futures closed at $3.92 up 17 cents since last Friday. Downside price protection could be obtained by purchasing a $4.00 December 2017 Put Option costing 29 cents establishing a $3.71 futures floor.
Soybeans
July 2017 soybean futures closed at $9.42 up 38 cents since last Friday. For the week, July 2017 soybean futures traded between $9.03 and $9.45. Average soybean basis strengthened or remained unchanged at Memphis, Northwest Barge Points, Lower-middle, Upper-middle, and Northwest Tennessee. Basis ranged from 36 under to 12 over the July futures contract at elevators and barge points. Average basis at the end of the week was 8 under the July futures contract. Net sales reported by exporters were within expectations with net sales of 11.5 million bushels for the 2016/17 marketing year and 0.07 million bushels for the 2017/18 marketing year. Exports for the same period were up from last week at 12.6 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 101 percent. July soybean-to-corn futures price ratio was 2.55 at the end of the week. Jul/Aug and Jul/Nov future spreads were 5 cents and 12 cents, respectively. August 2017 soybean futures closed at $9.47 up 39 cents since last Friday.
Nationally, the Crop Progress report estimated soybeans emerged at 94 percent compared to 89 percent last week, 94 percent last year, and a 5-year average of 91 percent; soybeans blooming at 9 percent compared to 8 percent last year and a 5-year average of 7 percent; and soybean condition at 66 percent good-to-excellent and 8 percent poor-to-very poor. In Tennessee, the Crop Progress report estimated soybean condition at 87 percent good-to-excellent and 1 percent poor-to-very poor; soybeans planted at 89 percent compared to 86 percent last week, 85 percent last year, and a 5-year average of 86 percent; soybeans emerged at 80 percent compared to 69 percent last week, 77 percent last year, and a 5-year average of 73 percent; and soybeans blooming at 6 percent compared to 2 percent last week, 5 percent last year, and a 5-year average of 6 percent. In Tennessee, October / November 2017 soybean cash contracts average $9.08 with a range of $8.74 to $9.31. November/December 2017 soybean-to-corn price ratio was 2.43 at the end of the week. November 2017 soybean futures closed at $9.54 up 43 cents since last Friday. Downside price protection could be achieved by purchasing a $9.60 November 2017 Put Option which would cost 47 cents and set a $9.13 futures floor.
Cotton
July 2017 cotton futures closed at 75.31 cents up 2.22 cents since last Friday. For the week, July 2017 cotton futures traded between 71.46 and 75.31 cents. Delta upland cotton spot price quotes for June 29 were 67.55 cents/lb (41-4-34) and 68.8 cents/lb (31-3-35). Adjusted world price (AWP) increased 0.19 cents to 64.79 cents per pound. Net sales reported by exporters were down from last week with net sales of 261,300 bales for the 2016/17 marketing year and 317,700 bales for the 2017/18 marketing year. Exports for the same period were up from last week at 249,600 bales. Upland cotton export sales were 107 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 70.36 up 2.36 cents since last Friday. Jul/Oct and Jul/Dec cotton futures spreads were -4.95 cents and -6.72 cents, respectively.
Nationally, the Crop Progress report estimated cotton planted at 98 percent compared to 94 percent last week, 98 percent last year, and a 5-year average of 99 percent; cotton squaring at 34 percent compared to 22 percent last week, 28 percent last year, and a 5-year average of 30 percent; cotton setting bolls at 7 percent compared to 6 percent last year and a 5-year average 5 percent; and cotton condition at 57 percent good-to-excellent and 10 percent poor-to-very poor. In Tennessee, cotton condition was estimated at 90 percent good-to-excellent and 2 percent poor-to-very poor; cotton squaring at 36 percent compared to 23 percent last week, 38 percent last year, and a 5-year average of 35 percent; and cotton setting bolls at 2 percent compared to 1 percent last year and a 5-year average of 1 percent. December 2017 cotton futures closed at 68.59 up 1.33 cents since last Friday. Downside price protection could be obtained by purchasing a 69 cent December 2017 Put Option costing 3.92 cents establishing a 65.08 cent futures floor.
Wheat
July 2017 wheat futures closed at $5.11 up 52 cents since last Friday. July 2017 wheat futures traded between $4.49 and $5.11 this week. July wheat-to-corn price ratio was 1.38.Wheat net sales reported by exporters were within expectations with net sales of 18.1 million bushels for the 2017/18 marketing year. Exports for the week were up from last week at 27.6 million bushels. Wheat export sales were 30 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 29 percent. Jul/Sep and Jul/Dec future spreads were 15 cents and 34 cents, respectively. In Tennessee, June/July 2017 cash wheat ranged from $4.35 to $5.05.
Nationally, the Crop Progress report estimated winter wheat condition at 49 percent good-to-excellent and 16 percent poor-to-very-poor; winter wheat harvested at 41 percent compared to 28 percent last week, 42 percent last year, and a 5-year average of 39 percent; spring wheat headed at 36 percent compared to 15 percent last week, 42 percent last year, and a 5-year average of 35 percent; and spring wheat condition at 40 percent good-to-excellent and 28 percent poor-to-very poor. In Tennessee, winter wheat condition was reported at 74 percent good-to-excellent and 5 percent poor-to-very poor; and winter wheat harvested at 90 percent compared to 75 percent last week, 79 percent last year, and a 5-year average of 69 percent. September 2017 wheat futures closed at $5.26 up 53 cents from last Friday. July 2018 wheat futures closed at $5.70 up 42 cents since last Friday. Downside price protection could be obtained by purchasing a $5.80 July 2018 Put Option costing 68 cents establishing a $5.12 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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