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Corn, Soybeans, And Cotton Were Up; And Wheat Was Mixed For The Week
DR. AARON SMITH
KNOXVILLE, TENN.
November was not a good month for grain futures. December corn closed the month at $3.41 ¾, down 4 cents for the month and December wheat closed at $4.09 ¼, down 9 ½ cents for the month. January soybeans traded flat for the month closing at $9.85 ¾, up 1 cent from the start of the month. Cotton futures had a terrific November. The December contract closed the month at 75.04 cents, up 6.33 cents for the month.
While many factors have influenced futures prices this past month, export sales commitments shed some light on futures market price direction in November. Year-to-date cotton export sales commitments are 9.646 million bales (2.19 million in exports-to-date and 7.456 million in outstanding sales), 41 percent higher than a year ago and 72 percent of the USDA’s marketing year total. By comparison total export sales commitments for: soybeans are 1.264 billion bushels, down 18 percent from last year and 56 percent of the USDA’s marketing year total; corn are 867 million bushels, down 27 percent from last year and 45 percent of the USDA’s marketing year total; and wheat are 634 million bushels, down 9 percent from last year and 63 percent of the USDA’s marketing year total. Strong export demand for cotton was a major driver of improved cotton futures prices.
Exports provide a strong source of demand for all four commodities and help to elevate domestic carryover from one marketing year to the next. Moving through December and into 2018, South American crop progress, global economic growth, and the strength of the USD relative to other currencies will dictate export sales pace for all four commodities.
Corn
December 2017 corn futures closed at $3.44 up 2 cents since last Friday. For the week, December 2017 corn futures traded between $3.35 and $3.45. Across Tennessee, average basis (cash price-nearby futures price) strengthened or remained unchanged at Memphis, Northwest Barge Points, Northwest, Lower-middle, and Upper-middle Tennessee. Overall, basis for the week ranged from 30 under to 15 over the December futures contract with an average of 1 under at the end of the week. Nationally, the Crop Progress report estimated corn harvested at 95 percent compared to 90 percent last week, 98 percent last year, and a 5-year average of 98 percent. Dec/Mar and Dec/Dec future spreads were 14 and 45 cents, respectively.
March 2018 corn futures closed at $3.58 up 3 cents since last Friday. Corn net sales reported by exporters from November 17-23 were below expectations with net sales of 23.6 million bushels for the 2017/18 marketing year. Exports for the same time period were down from last week at 25.6 million bushels. Corn export sales and commitments were 45 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 50 percent. Ethanol production for the week ending November 24 was 1.066 million barrels per day down 8,000 from the previous week. Ethanol stocks were 22.044 million barrels, up 147,000 barrels. In Tennessee, January 2018 cash forward contracts averaged $3.54 with a range of $3.37 to $3.85. December 2018 corn futures closed at $3.89 up 2 cents since last Friday. Downside price protection could be obtained by purchasing a $3.90 December 2018 Put Option costing 27 cents establishing a $3.63 futures floor.
Soybeans
January 2018 soybean futures closed at $9.94 up 1 cent since last Friday. For the week, January 2018 soybean futures traded be-tween $9.85 and $10.01. Average soybean basis strengthened or remained unchanged at Memphis, Northwest Barge Points, Upper-middle, Lower-middle, and Northwest Tennessee. Basis ranged from 72 under to 11 over the January futures contract at elevators and barge points. Average basis at the end of the week was 20 under the January futures contract. In Tennessee, the Crop Progress report estimated soybeans harvested at 91 percent compared to 83 percent last week, 100 percent last year, and a 5-year average of 94 percent. January/December soybean-to-corn price ratio was 2.89 at the end of the week.
Jan/Mar and Jan/Nov future spreads were 12 and 15 cents, respectively. March 2018 soybean futures closed at $10.06 up 2 cents since last Friday. In Tennessee, January 2018 soybean cash contracts average $9.84 with a range of $9.51 to $10.06. Net sales reported by exporters were within expectations with net sales of 34.6 million bushels for the 2017/18 marketing year. Exports for the same period were up from last week at 81.0 million bushels. Soybean export sales and commitments were 56 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 74 percent. November 2018 soybean futures closed at $10.09 up 5 cents since last Friday. Downside price protection could be achieved by purchasing a $10.20 November 2018 Put Option which would cost 65 cents and set a $9.55 futures floor. November/December 2018 soybean-to-corn price ratio was 2.59 at the end of the week.
Cotton
Delta upland cotton spot price quotes for November 30 were 72.06 cents/lb (41-4-34) and 73.81 cents/lb (31-3-35). Adjusted world price (AWP) increased 1.63 cents to 64.22 cents per pound. Nationally, the Crop Progress report estimated cotton harvested at 79 percent compared to 74 percent last week, 76 percent last year, and a 5-year average of 80 percent. In Tennessee, cotton harvested was estimated at 91 percent compared to 81 percent last week, 100 percent last year, and a 5-year average of 90 percent. December 2017 cotton futures closed at 75.43 cents up 3.2 cents since last Friday. For the week, December 2017 cotton futures traded between 71.84 and 75.82 cents. Dec/Mar and Dec/Dec cotton futures spreads were -2.15 cents and -4.22 cents, respectively.
March 2018 cotton futures closed at 73.28 up 1.35 cents since last Friday. Net sales reported by exporters were down from last week with net sales of 276,500 bales for the 2017/18 marketing year and 52,800 bales for the 2018/19 marketing year. Exports for the same period were up from last week at 112,200 bales. Upland cotton export sales were 72 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 57 percent. December 2018 cotton futures closed at 71.21 up 0.1 cents since last Friday. Downside price protection could be obtained by purchasing a 72 cent December 2018 Put Option costing 5.18 cents establishing a 66.82 cent futures floor.
Wheat
In Memphis, old crop cash wheat ranged from $3.84 to $3.92. December 2017 wheat futures closed at $4.14 down 1 cent since last Friday. December 2017 wheat futures traded between $4.05 and $4.17 this week. December wheat-to-corn price ratio was 1.20. Wheat net sales reported by exporters were below expectations with net sales of 6.8 million bushels for the 2017/18 marketing year and 0.1 million bushels for the 2018/19 marketing year. Exports for the week were up from last week at 12.4 million bushels. Wheat export sales were 63 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 71 percent. Dec/Mar and Dec/Jul future spreads were 24 cents and 50 cents, respectively.
March 2018 wheat futures closed at $4.38 up 4 cents from last Friday. Nationally, the Crop Progress report estimated winter wheat emerged at 92 percent compared to 88 percent last week, 92 percent last year, and a 5-year average of 92 percent; and winter wheat condition at 50 percent good-to-excellent and 12 percent poor-to-very poor. In Tennessee, winter wheat planted was estimated at 91 percent compared to 85 percent last week and 94 percent last year; winter wheat emerged at 79 percent compared to 69 percent last week and 75 percent last year; and winter wheat condition at 78 percent good-to-excellent and 1 percent poor-to-very poor. In Tennessee, June/July 2018 cash forward contracts ranged from $4.24 to $4.93 for the week. July 2018 wheat futures closed at $4.64 up 3 cents since last Friday. Downside price protection could be obtained by purchasing a $4.70 July 2018 Put Option costing 31 cents establishing a $4.39 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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