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Corn, Cotton, Soybeans, And Wheat Were Down For The Week
DR. AARON SMITH
KNOXVILLE, TENN.
Basis in Tennessee has continued to decline as record state average yields for corn and soybeans maintain downward pressure on local markets. In September 2016, soybean basis across the state averaged 8 over the November futures contract. This year average basis, in September, was 20 under the November contract, a 28 cent decrease in average monthly basis. Soybean basis in Tennessee typically bottoms out in October or November, so basis will likely continue to deteriorate as the record Tennessee harvest enters the market. Currently, October basis across Tennessee averages 34 under the Novem-ber futures contract.
In the month of September, November soybean futures averaged $9.61/bu in 2016 and $9.67/bu this year, 6 cents higher. However, when factoring in basis, the average net cash price to the producer was $9.69/bu ($9.61 + $0.08) in 2016, compared to $9.47/bu ($9.67 – $0.20) in 2017.
Similar to soybeans, corn basis, in Tennessee, is substantially lower in 2017 than 2016. 2016 state average basis was 8 under the December futures contract compared to 21 under this year. In Tennessee, corn basis typically bottoms in September or October, or about a month earlier than soybeans. Currently, average corn basis in Tennessee, for the month of October, is 25 under the December futures contract.
December corn futures, for the month of September averaged $3.34/bu last year, compared to $3.54/bu this year. However, when factoring in basis, the average net cash price to the producer was $3.26/bu ($3.34 – $0.08) in 2016, compared to $3.33/bu ($3.54 – $0.21) in 2017.
So, in Tennessee, in September, average cash soybean prices to producers were 22 cents lower and average corn prices were 7 cents higher this year compared to 2016. This is an average for the state and significant regional variation will occur. However, this does highlight the importance of considering both futures prices and basis when marketing crops.
Corn
December 2017 corn futures closed at $3.44 down 8 cents since last Friday. For the week, December 2017 corn futures traded between $3.44 and $3.53. 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 41 under to 15 over the December futures contract with an average of 18 under at the end of the week. Nationally, the Crop Progress report estimated corn mature at 90 percent compared to 82 percent last week, 96 percent last year, and a 5-year average of 94 percent; corn harvested at 28 percent compared to 22 percent last week, 44 percent last year, and a 5-year average of 47 percent; and corn condition at 65 percent good-to-excellent and 11 percent poor-to-very poor. In Tennessee, the Crop Progress report estimated corn mature at 99 percent compared to 97 percent last week, 100 percent last year, and a 5-year average of 99 percent; and corn harvested at 91 percent compared to 85 percent last week, 97 percent last year, and a 5-year average of 87 percent. Dec/Mar and Dec/Dec future spreads were 14 and 47 cents, respectively.
Corn net sales reported by exporters from October 6-12 were above expectations with net sales of 49.4 million bushels for the 2017/18 marketing year and 0.6 million bushels for the 2018/19 marketing year. Exports for the same time period were down from last week at 13.4 million bushels. Corn 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 37 percent. Ethanol production for the week ending October 13 was 1.019 million barrels per day up 52,000 from the previous week. Ethanol stocks were 21.48 million barrels, down 43,000 barrels. In Tennessee, January 2018 cash forward contracts averaged $3.59 with a range of $3.45 to $3.74. March 2018 corn futures closed at $3.58 down 8 cents since last Friday. December 2018 corn futures closed at $3.91 down 7 cents since last Friday. Downside price protection could be obtained by purchasing a $4.00 December 2018 Put Option costing 31 cents establishing a $3.69 futures floor.
Soybeans
November 2017 soybean futures closed at $9.78 down 22 cents since last Friday. For the week, November 2017 soybean futures traded between $9.78 and $9.99. Average soybean basis strengthened at Northwest Tennessee and weakened or remained un-changed at Memphis, Northwest Barge Points, Upper-middle, and Lower-middle Tennessee. Basis ranged from 41 under to 8 under the November futures contract at elevators and barge points. Average basis at the end of the week was 27 under the November futures contract. Nationally, the Crop Progress report estimated soybeans dropping leaves at 94 percent compared to 89 percent last week, 95 percent last year, and a 5-year average of 93 percent; soybeans harvested at 49 percent compared to 36 percent last week, 59 percent last year, and a 5-year average of 60 percent; and soybean condition at 61 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 6 percent poor-to-very poor; soybeans dropping leaves at 90 percent compared to 83 percent last week, 94 percent last year, and a 5-year average of 87 percent; and soybeans harvested at 38 percent compared to 29 percent last week, 59 percent last year, and a 5-year average of 37 percent. November/December 2017 soybean-to-corn price ratio was 2.84 at the end of the week.
Nov/Jan and Nov/Nov future spreads were 11 cents and 20 cents, respectively. In Tennessee, January 2018 soybean cash contracts average $9.86 with a range of $9.59 to $10.08. Net sales reported by exporters were below expectations with net sales of 46.9 million bushels for the 2017/18 marketing year. Exports for the same period were up from last week at 68.0 million bushels. Soybean export sales and commitments were 43 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 58 percent. January 2018 soybean futures closed at $9.89 down 21 cents since last Friday. November 2018 soybean futures closed at $9.98 down 12 cents since last Friday. Downside price protection could be achieved by purchasing a $10.00 November 2018 Put Option which would cost 63 cents and set a $9.37 futures floor. Novem-ber/December 2018 soybean-to-corn price ratio was 2.55 at the end of the week.
Cotton
Delta upland cotton spot price quotes for October 19 were 67.31 cents/lb (41-4-34) and 68.56 cents/lb (31-3-35). Adjusted world price (AWP) decreased 0.71 cents to 59.73 cents per pound. Net sales reported by exporters were up from last week with net sales of 253,200 bales for the 2017/18 marketing year and 8,800 bales for the 2018/19 marketing year. Exports for the same period were down from last week at 86,100 bales. Upland cotton export sales were 58 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 45 percent. Dec/Mar and Dec/Dec cotton futures spreads were -0.11 cents and 0.88 cents, respectively.
Nationally, the Crop Progress report estimated cotton bolls opening at 82 percent compared to 72 percent last week, 88 percent last year, and a 5-year average of 86 percent; cotton harvested at 31 percent compared to 25 percent last week, 29 percent last year, and a 5-year average of 26 percent; and cotton condition at 58 percent good-to-excellent and 13 percent poor-to-very poor. In Tennessee, cotton condition was estimated at 81 percent good-to-excellent and 6 percent poor-to-very poor; cotton bolls opening at 98 percent compared to 93 percent last week, 98 percent last year, and a 5-year average of 88 percent; and cotton harvested at 39 percent compared to 24 percent last week, 42 percent last year, and a 5-year average of 27 percent. December 2017 cotton futures closed at 66.88 cents down 1.74 cents since last Friday. For the week, December 2017 cotton futures traded between 66.84 and 68.88 cents. March 2018 cotton futures closed at 66.77 down 1.39 cents since last Friday. December 2018 cotton futures closed at 67.76 down 0.76 cents since last Friday. Downside price protection could be obtained by purchasing a 68 cent December 2018 Put Option costing 4.48 cents establishing a 63.52 cent futures floor.
Wheat
In Memphis, old crop cash wheat ranged from $4.05 to $4.12. Wheat net sales reported by exporters were above expectations with net sales of 22.6 million bushels for the 2017/18 marketing year. Exports for the week were down from last week at 11.6 million bushels. Wheat export sales were 56 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 60 percent. Dec/Mar and Dec/Jul future spreads were 18 cents and 46 cents, respectively.
December 2017 wheat futures closed at $4.26 down 13 cents since last Friday. December 2017 wheat futures traded between $4.25 and $4.42 this week. December wheat-to-corn price ratio was 1.24. Nationally, the Crop Progress report estimated winter wheat planted at 60 percent compared to 48 percent last week, 70 percent last year, and a 5-year average of 71 percent; and winter wheat emerged at 37 percent compared to 25 percent last week, 45 percent last year, and a 5-year average of 43 percent. In Tennessee, winter wheat planted was estimated at 29 percent compared to 18 percent last week, 36 percent last year, and a 5-year average of 23 percent; and winter wheat emerged at 8 percent compared to 3 percent last week, 6 percent last year, and a 5-year average of 5 percent. March 2018 wheat futures closed at $4.44 down 14 cents from last Friday. June/July 2018 cash forward contracts ranged from $4.47 to $4.91 for the week. July 2018 wheat futures closed at $4.72 down 12 cents since last Friday. Downside price protection could be obtained by purchasing a $4.80 July 2018 Put Option costing 31 cents establishing a $4.49 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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