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Corn, Soybeans, And Wheat Were Down; And Cotton Was Up For The Week
DR. AARON SMITH
KNOXVILLE, TENN.
March corn futures continue to struggle to gain positive traction. The con-tract low, $3.48 ¾, occurred on November 16, since then the contract has not traded above $3.60 ½, an 11 ¾ cent trading range. January soybean futures set 4-month highs earlier this week before retreating below $10 on Friday. Next week’s USDA WASDE report will determine if prices breakout to the upside or establish a new contract lows for corn. U.S. exports and adjustments to the South American crop will be closely watched for soybeans. Major revisions to the domestic crop on the WASDE report are not expected.
Average Tennessee corn basis is 15 cents weaker than last year. This is in addition to nearby futures trading 6 ½ cents lower. A net reduction in cash prices to producers of 21 ½ cents. Average soybean basis across Tennessee is 16 cents weaker than last year at this time. This is in addition to January soybean futures being 57 cents lower ($9.92 compared to $10.49) than 2016. A total reduction in cash price to the producer of 73 cents compared to 2016. Higher yields will help offset the reduced prices.
March cotton futures continued its 7 week rally (starting at 66.77 cents on October 20) closing at 73.72. The contract high of 75.57 (March 20, 2017) could be challenged next week. Decembers WASDE report is likely to reflect increased export sales. Currently, cotton export commitments are 35 percent higher than last year and are at 73 percent of the total export commitments projected by USDA. Maintaining futures prices above 75 cents could be challenging, so additional sales above 73 cents may be warranted.
Corn
In Tennessee, January 2018 cash forward contracts averaged $3.54 with a range of $3.28 to $3.63. March 2018 corn futures closed at $3.52 down 6 cents since last Friday. For the week, March 2018 corn futures traded between $3.50 and $3.60. Across Tennes-see, average basis (cash price-nearby futures price) strengthened at Memphis, Northwest Barge Points, Northwest, and Lower-middle Tennessee and weakened at Upper-middle Tennessee. Overall, basis for the week ranged from 35 under to 5 over the March futures contract with an average of 9 under at the end of the week. Mar/May and Mar/Dec future spreads were 9 and 33 cents, respectively.
May 2018 corn futures closed at $3.61 down 5 cents since last Friday. Corn net sales reported by exporters from November 24-30 were within expectations with net sales of 34.5 million bushels for the 2017/18 marketing year. Exports for the same time period were down from last week at 23.3 million bushels. Corn export sales and commitments were 47 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 52 percent. Ethanol production for the week ending December 1 was 1.108 million barrels per day up 42,000 from the previous week. Ethanol stocks were 22.544 million barrels, up 500,000 barrels. December 2018 corn futures closed at $3.85 down 4 cents since last Friday. Downside price protection could be obtained by purchasing a $3.90 December 2018 Put Option costing 28 cents establishing a $3.62 futures floor.
Soybeans
In Tennessee, January 2018 soybean cash contracts average $9.94 with a range of $9.65 to $10.17. January 2018 soybean futures closed at $9.89 down 5 cents since last Friday. For the week, January 2018 soybean futures traded between $9.86 and $10.15. Average soybean basis strengthened at Lower-middle and Northwest Tennessee and weakened at Memphis, Northwest Barge Points, and Upper-middle Tennessee. Basis ranged from 40 under to even the January futures contract at elevators and barge points. Average basis at the end of the week was 22 under the January futures contract. January/March soybean-to-corn price ratio was 2.81 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 $10.01 down 5 cents since last Friday. Net sales reported by exporters were above expectations with net sales of 74.1 million bushels for the 2017/18 marketing year and 2.6 million bushels for the 2018/19 marketing year. Exports for the same period were down from last week at 74.2 million bushels. Soybean export sales and commitments were 59 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 76 percent. November 2018 soybean futures closed at $10.04 down 5 cents since last Friday. Downside price protection could be achieved by purchasing a $10.20 November 2018 Put Option which would cost 68 cents and set a $9.52 futures floor. November/December 2018 soybean-to-corn price ratio was 2.61 at the end of the week.
Cotton
Delta upland cotton spot price quotes for December 7 were 73.48 cents/lb (41-4-34) and 75.23 cents/lb (31-3-35). Adjusted world price (AWP) increased 0.81 cents to 65.03 cents per pound. March 2018 cotton futures closed at 73.72 cents up 0.44 cents since last Friday. For the week, March 2018 cotton futures traded between 72.1 and 74.28 cents. Mar/May and Mar/Dec cotton futures spreads were 0.48 cents and -1.64 cents, respectively.
May 2018 cotton futures closed at 74.2 up 0.43 cents since last Friday. Net sales reported by exporters were down from last week with net sales of 186,600 bales for the 2017/18 marketing year and 50,400 bales for the 2018/19 marketing year. Exports for the same period were up from last week at 246,800 bales. Upland cotton export sales were 73 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 60 percent. December 2018 cotton futures closed at 72.08 up 0.87 cents since last Friday. Downside price protection could be obtained by purchasing a 73 cent December 2018 Put Option costing 4.79 cents establishing a 68.21 cent futures floor.
Wheat
In Memphis, old crop cash wheat ranged from $3.69 to $4.01. March 2018 wheat futures closed at $4.19 down 19 cents since last Friday. March 2018 wheat futures traded between $4.17 and $4.43 this week. March wheat-to-corn price ratio was 1.19. Wheat net sales reported by exporters were within expectations with net sales of 11.8 million bushels for the 2017/18 marketing year and 0.06 million bushels for the 2018/19 marketing year. Exports for the week were up from last week at 14.6 million bushels. Wheat export sales were 65 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 72 percent. Mar/May and Mar/Jul future spreads were 13 cents and 26 cents, respectively.
May 2018 wheat futures closed at $4.32 down 19 cents from last Friday. In Tennessee, June/July 2018 cash forward contracts ranged from $4.29 to $4.78 for the week. July 2018 wheat futures closed at $4.45 down 19 cents since last Friday. Downside price protection could be obtained by purchasing a $4.50 July 2018 Put Option costing 26 cents establishing a $4.24 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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