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Knowing Typical Market Swings Can Help Farmers Gain Higher Average Prices
DR. AARON SMITH
KNOXVILLE, TENN.
Cash corn prices moved lower this week. In Tennessee, cash corn prices typically achieve the marketing year low in August or September. In eight of the last eleven years, the lowest monthly average price occurred in August or September (four times each). From 2006 to 2016, monthly average corn prices were 48 cents lower than the marketing year average (the corn marketing year is Sept 1 to Aug 31). In Tennessee, the monthly average high typically occurs in July – on average 58 cents per bushel more than the final marketing year average price. From September to January, average monthly prices typically strengthen, relative to the marketing year average (Sept -$0.48, Oct -$0.44, Nov -$0.24, Dec -$0.18, & Jan -$0.13). On farm or commercial storage allows producers to take advantage of “typical” price improvements.
Similar to corn, soybeans follow a seasonal price pattern. In Tennessee, soybean cash prices typically achieve the marketing year average monthly low price in September or October – an average (2007-2016) of 89 and 90 cents below the marketing year average price, respectively. Unlike corn, cash soybean prices in August, on average, are above the marketing year average price (16 cents above). Cash soybean prices, on average reach its highest price (relative the marketing year average price, 2007-2016) in June or July, 91 and 98 cents above, respectively. From September to January, average monthly prices typically strengthen, relative to the marketing year average (Sept -$0.89, Oct -$0.90, Nov -$0.56, Dec -$0.36, & Jan -$0.34).
Knowing and utilizing local market tendencies can allow producers to achieve a higher season average price for their commodities. For example, taking advantage of early harvest price premiums in August can increase the average price received for corn or soybeans. Additionally, utilizing storage in your marketing plan can provide flexibility and extend the marketing period allowing producers to seek beneficial pricing scenarios outside of the harvest period.
Corn
September 2017 corn futures closed at $3.52 down 8 cents since last Friday. For the week, September 2017 corn futures traded between $3.49 and $3.63. Across Tennessee, average basis (cash price-nearby futures price) strengthened or remained unchanged at Memphis, Northwest Barge Points, Northwest, and Lower-Middle Tennessee and weakened at Upper-middle Tennessee. Overall, basis for the week ranged from 25 under to 16 over the September futures contract with an average of 5 under the September futures contract at the end of the week. Corn net sales reported by exporters from August 4-10 were within expectations with net sales of 2.5 million bushels for the 2016/17 marketing year and 26.4 million bushels for the 2017/18 marketing year. Exports for the same time period were down from last week at 27.5 million bushels. Corn export sales and commitments were 100 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 104 percent. Ethanol production for the week ending August 11 was 1.059 million barrels per day up 47,000 from the previous week. Ethanol stocks were 21.828 million barrels, up 481,000 barrels. Sep/Dec and Sep/Mar future spreads were 13 and 25 cents, respectively.
Nationally, the Crop Progress report estimated corn silking at 97 percent compared to 93 percent last week, 99 percent last year, and a 5-year average of 98 percent; corn dough or beyond at 61 percent compared to 42 percent last week, 70 percent last year, and a 5-year average of 62 percent; corn dented at 16 percent compared to 7 percent last week, 19 percent last year, and a 5-year average of 20 percent; and corn condition at 62 percent good-to-excellent and 12 percent poor-to-very poor. In Tennessee, the Crop Progress report estimated corn condition at 84 percent good-to-excellent 5 percent poor-to-very poor; corn silking at 100 percent compared to 99 percent last week, 99 percent last year, and a 5-year average of 100 percent; corn dough or beyond at 90 percent compared to 83 percent last week, 93 percent last year, and a 5-year average of 91 percent; and corn dented at 52 percent compared to 30 percent last week, 52 percent last year, and a 5-year average of 56 percent. In Tennessee, September 2017 cash forward contracts averaged $3.46 with a range of $3.32 to $3.72. December 2017 corn futures closed at $3.65 down 9 cents since last Friday. Downside price protection could be obtained by purchasing a $3.70 December 2017 Put Option costing 16 cents establishing a $3.54 futures floor. March 2018 corn futures closed at $3.77 down 9 cents since last Friday.
Soybeans
September 2017 soybean futures closed at $9.37 down 1 cent since last Friday. For the week, September 2017 soybean futures traded between $9.17 and $9.39. Average soybean basis strengthened at North West Barge Points and weakened at Memphis, Lower-middle, Upper-middle, and Northwest Tennessee. Basis ranged from 37 under to 24 over the September futures contract at elevators and barge points. Average basis at the end of the week was 1 under the September futures contract. Net sales reported by exporters were above expectations with net sales of 16.7 million bushels for the 2016/17 marketing year and 33.0 million bushels for the 2017/18 marketing year. Exports for the same period were up from last week at 27.3 million bushels. Soybean export sales and commitments were 105 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 103 percent. September soybean-to-corn futures price ratio was 2.68 at the end of the week. Sep/Nov and Sep/Jan future spreads were 0 cents and 8 cents, respectively.
Nationally, the Crop Progress report estimated soybeans blooming at 94 percent compared to 90 percent last week, 94 percent last year, and a 5-year average of 93 percent; soybeans setting pods at 79 percent compared to 65 percent last week, 78 percent last year, and a 5-year average of 75 percent; and soybean condition at 59 percent good-to-excellent and 12 percent poor-to-very poor. In Tennessee, the Crop Progress report estimated soybean condition at 77 percent good-to-excellent and 8 percent poor-to-very poor; soybeans blooming at 92 percent compared to 89 percent last week, 93 percent last year, and a 5-year average of 86 percent; and soybeans setting pods at 79 percent compared to 68 percent last week, 78 percent last year, and a 5-year average of 69 percent. In Tennessee, October/November 2017 soybean cash contracts average $9.20 with a range of $8.84 to $9.50. November/December 2017 soybean-to-corn price ratio was 2.57 at the end of the week. November 2017 soybean futures closed at $9.37 down 8 cents since last Friday. Downside price protection could be achieved by purchasing a $9.40 November 2017 Put Option which would cost 22 cents and set a $9.18 futures floor. January 2018 soybean futures closed at $9.45 down 8 cents since last Friday.
Cotton
Delta upland cotton spot price quotes for August 17 were 65.95 cents/lb (41-4-34) and 67.20 cents/lb (31-3-35). Adjusted world price (AWP) decreased 2.76 cents to 59.7 cents per pound. Net sales reported by exporters were up from last week with net sales 186,700 bales for the 2017/18 marketing year and 66,000 for the 2018/19 marketing year. Exports for the same period were down from last week at 200,400 bales. Upland cotton export sales were 49 percent of the USDA estimated total annual exports for the 2017/18 marketing year (August 1 to July 31), compared to a 5-year average of 34 percent. October 2017 cotton futures closed at 67.79 down 1.45 cents since last Friday. Oct/Dec and Dec/Mar cotton futures spreads were -0.51 cents and -0.22 cents, respectively.
Nationally, the Crop Progress report estimated cotton squaring at 98 percent compared to 93 percent last week, 99 percent last year, and a 5-year average of 99 percent; cotton setting bolls at 80 percent compared to 58 percent last week, 85 percent last year, and a 5-year average 81 percent; cotton bolls opening at 10 percent compared to 8 percent last week, 12 percent last year, and a 5-year average of 10 percent; and cotton condition at 61 percent good-to-excellent and 12 percent poor-to-very poor. In Tennessee, cotton condition was estimated at 86 percent good-to-excellent and 7 percent poor-to-very poor; cotton squaring at 99 percent compared to 98 percent last week, 98 percent last year, and a 5-year average of 98 percent; cotton setting bolls at 91 percent compared to 88 percent last week, 89 percent last year, and a 5-year average of 83 percent; and cotton bolls opening at 4 percent compared to 0 percent last week, 4 percent last year, and a 5-year average of 3 percent. December 2017 cotton futures closed at 67.28 cents down 0.97 cents since last Friday. For the week, December 2017 cotton futures traded between 66.64 and 68.54 cents. Downside price protection could be obtained by purchasing a 68 cent December 2017 Put Option costing 2.95 cents establishing a 65.05 cent futures floor. March 2018 cotton futures closed at 67.06 down 0.99 cents since last Friday.
Wheat
In Tennessee this week, cash wheat ranged from $3.74 to $4.48. Wheat net sales reported by exporters were above expectations with net sales of 23.3 million bushels for the 2017/18 marketing year. Exports for the week were down from last week at 20.1 million bushels. Wheat export sales were 42 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 44 percent. Sep/Dec and Sep/Jul future spreads were 26 cents and 77 cents, respectively.
September 2017 wheat futures closed at $4.16 down 23 cents since last Friday. September 2017 wheat futures traded between $4.12 and $4.41 this week. September wheat-to-corn price ratio was 1.18. Nationally, the Crop Progress report estimated winter wheat harvested at 97 percent compared to 94 percent last week, 97 percent last year, and a 5-year average of 96 percent; spring wheat harvested at 40 percent compared to 24 percent last week, 45 percent last year, and a 5-year average of 35 percent; and spring wheat condition at 33 percent good-to-excellent and 42 percent poor-to-very poor. December 2017 wheat futures closed at $4.42 down 20 cents from last Friday. In Memphis, July 2018 cash forward contracts ranged from $5.01 to $5.19 for the week. July 2018 wheat futures closed at $4.93 down 20 cents since last Friday. Downside price protection could be obtained by purchasing a $5.00 July 2018 Put Option costing 39 cents establishing a $4.61 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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