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Corn Prices Likely To Set A Bottom This Month
DR. AARON SMITH
KNOXVILLE, TENN.
December corn futures prices have moved sideways since the contract low on August 31 of $3.44 ¼, closing at $3.50 ¼ on Thursday. Mixed yield reports across the Corn Belt continue to provide some production uncertainty. Further complicating the supply picture are USDA’s projections of 2.335 billion bushels of domestic stocks versus an almost 1 billion bushel projected decrease (8.935 billion bushels to 7.971 billion bushels, an 11 percent year-over-year reduction) in global corn stocks from the 2016/17 marketing year end to the 2017/18 marketing year end. Corn prices are likely to establish (if the low hasn’t already been set) a bottom this month.
Soybean prices have crept off early August lows ($9.21 on August 16) and are now in a short term up trend, closing Thursday at $9.70 ¾. To maintain upward price movement, markets will look for either USDA to reduce US average yield or export sales pace will need to accelerate to catch up to the five year average pace. Currently, total export commitments as a percent of total USDA marketing year exports are 32 percent compared to a 5-year average of 47 percent. Two wild cards exist for soybean markets 1) trade (trade agreements/disruptions) and 2) South American plantings. Both have the potential to move markets substantially in either direction.
Cotton markets have retreated from hurricane driven highs. The December contract peaked at 75.75 on September 8, since then prices have retreated 7.5 cents closing at 68.25. In the next month, cotton prices could test the December contract low of 66.15 on June 26. In Tennessee, quality premiums for cotton will be a producer’s best path towards obtaining a higher price.
***This week’s futures contract numbers are as of Thursday market close***
Corn
December 2017 corn futures closed at $3.50 down 4 cents since last Friday. For the week, December 2017 corn futures traded between $3.46 and $3.55. Across Tennessee, average basis (cash price-nearby futures price) weakened or remained unchanged at Memphis, Northwest Barge Points, Northwest, Lower-Middle, and Upper-middle Tennessee. Overall, basis for the week ranged from 36 under to 13 over the December futures contract with an average of 26 under at the end of the week. Nationally, the Crop Progress report estimated corn dented at 86 percent compared to 75 percent last week, 92 percent last year, and a 5-year average of 90 percent; corn mature at 47 percent compared to 34 percent last week, 21 percent last year, and a 5-year average of 50 percent; corn harvested at 7 percent compared to 5 percent last week, 8 percent last year, and a 5-year average of 11 percent; and corn condition at 61 percent good-to-excellent and 13 percent poor-to-very poor. In Tennessee, the Crop Progress report estimated corn condition at 87 percent good-to-excellent and 3 percent poor-to-very poor; corn dented at 97 percent compared to 95 percent last week, 99 percent last year, and a 5-year average of 98 percent; corn mature at 88 percent compared to 79 percent last week, 92 percent last year, and a 5-year average of 83 percent; and corn harvested at 46 percent compared to 26 percent last week, 65 percent last year, and a 5-year average of 54 percent. Downside price protection could be obtained by purchasing a $3.55 December 2017 Put Option costing 12 cents establishing a $3.43 futures floor. Dec/Mar and Dec/Dec future spreads were 13 and 43 cents, respectively.
Corn net sales reported by exporters from September 8-14 were below expectations with net sales of 20.7 million bushels for the 2017/18 marketing year. Exports for the same time period were down from last week at 27.7 million bushels. Corn export sales and commitments were 23 percent of the USDA estimated total annual exports for the 2017/18 marketing year (September 1 to August 31) compared to a 5-year average of 30 percent. Ethanol production for the week ending September 15 was 1.033 million barrels per day down 14,000 from the previous week. Ethanol stocks were 21.138 million barrels, up 6,000 barrels. In Tennessee, January 2018 cash forward contracts averaged $3.61 with a range of $3.45 to $3.74. March 2018 corn futures closed at $3.63 down 4 cents since last Friday. December 2018 corn futures closed at $3.93 down 4 cents since last Friday.
Soybeans
November 2017 soybean futures closed at $9.70 up 2 cents since last Friday. For the week, November 2017 soybean futures traded between $9.58 and $9.76. Average soybean basis weakened or remained unchanged at Memphis, Northwest Barge Points, Lower-middle, Upper-middle, and Northwest Tennessee. Basis ranged from 40 under to 8 over the November futures contract at elevators and barge points. Average basis at the end of the week was 15 under the November futures contract. Nationally, the Crop Progress report estimated soybeans dropping leaves at 41 percent compared to 22 percent last week, 43 percent last year, and a 5-year average of 43 percent; soybeans harvested at 4 percent compared to 4 percent last year and a 5-year average of 5 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 80 percent good-to-excellent and 5 percent poor-to-very poor; soybeans dropping leaves at 37 percent compared to 23 percent last week, 51 percent last year, and a 5-year average of 39 percent; and soybeans harvested at 3 percent compared to 4 percent last year and a 5-year average of 4 percent. In Tennessee, October/November 2017 soybean cash contracts average $9.47 with a range of $9.26 to $9.65. November/December 2017 soybean-to-corn price ratio was 2.77 at the end of the week. Downside price protection could be achieved by purchasing a $9.80 November 2017 Put Option which would cost 23 cents and set a $9.57 futures floor.
Nov/Jan and Nov/Nov future spreads were 11 cents and 18 cents, respectively. Net sales reported by exporters were above expectations with net sales of 85.9 million bushels for the 2017/18 marketing year. Exports for the same period were down from last week at 34.7 million bushels. Soybean export sales and commitments were 32 percent of the USDA estimated total annual exports for the 2017/18 marketing year (September 1 to August 31), compared to a 5-year average of 47 percent. January 2018 soybean futures closed at $9.81 up 2 cents since last Friday. November 2018 soybean futures closed at $9.88 up 3 cents since last Friday.
Cotton
Delta upland cotton spot price quotes for September 20 were 69.25 cents/lb (41-4-34) and 70.50 cents/lb (31-3-35). Adjusted world price (AWP) decreased 2.36 cents to 60.91 cents per pound. Net sales reported by exporters were up from last week with net sales of 219,900 bales for the 2017/18 marketing year and 37,100 for the 2018/19 marketing year. Exports for the same period were up from last week at 175,700 bales. Upland cotton export sales were 51 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 40 percent. October 2017 cotton futures closed at 69.04 down 1.09 cents since last Friday. Oct/Dec and Dec/Mar cotton futures spreads were -0.79 cent and -0.67 cents, respectively.
Nationally, the Crop Progress report estimated cotton bolls opening at 44 percent compared to 34 percent last week, 47 percent last year, and a 5-year average of 51 percent; cotton harvested at 11 percent compared to 9 percent last week, 6 percent last year, and a 5-year average of 6 percent; and cotton condition at 61 percent good-to-excellent and 14 percent poor-to-very poor. In Tennessee, cotton condition was estimated at 86 percent good-to-excellent and 5 percent poor-to-very poor; and cotton bolls opening at 50 percent compared to 32 percent last week, 65 percent last year, and a 5-year average of 54 percent. December 2017 cotton futures closed at 68.25 cents down 0.82 cents since last Friday. For the week, December 2017 cotton futures traded between 68.18 and 69.95 cents. Downside price protection could be obtained by purchasing a 69 cent December 2017 Put Option costing 2.02 cents establishing a 66.98 cent futures floor. March 2018 cotton futures closed at 67.58 down 0.41 cents since last Friday.
Wheat
In Memphis, old crop cash wheat ranged from $4.18 to $4.25. Wheat net sales reported by exporters were within expectations with net sales of 11.3 million bushels for the 2017/18 marketing year. Exports for the week were down from last week at 15.7 mil-lion bushels. Wheat export sales were 50 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 53 percent. Dec/Mar and Dec/Jul future spreads were 20 cents and 44 cents, respectively.
December 2017 wheat futures closed at $4.52 up 3 cents since last Friday. December 2017 wheat futures traded between $4.35 and $4.54 this week. December wheat-to-corn price ratio was 1.29. Nationally, the Crop Progress report estimated winter wheat planted at 13 percent compared to 5 percent last week, 15 percent last year, and a 5-year average of 15 percent. March 2018 wheat futures closed at $4.72 up 4 cents from last Friday. June/July 2018 cash forward contracts ranged from $4.58 to $5.04 for the week. July 2018 wheat futures closed at $4.96 up 4 cents since last Friday. Downside price protection could be obtained by purchasing a $5.00 July 2018 Put Option costing 35 cents establishing a $4.65 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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