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Before Planting, Seek Corn Price Up To 50 Percent Production
DR. AARON SMITH
KNOXVILLE, TENN.
This week, on Wednesday, December corn peaked at $4.12 the highest offering, for the December 2018 contract, since August 10, 2017. However, prices declined 8 ¼ cents on Thursday and Friday. Futures prices above $4 per bush-el represents a good opportunity to start / increase pricing on the 2018 crop. Securing a price on up to 50 percent (depending on pricing method) of anticipated production should be considered prior to planting.
This week November soybeans continued to exhibit volatility. For the week daily trading ranges on the November contract were: 12 ½ cents, 8 ¾ cents, 17 ¾ cents, 14 ¾ cents, and 8 ¼ cents. In the near future volatility is likely to continue due to uncertainty about the Argentinian crop, U.S. planted acreage, and export sales / trade negotiations.
December 2018 cotton futures established a new contract high this week at 78.94 cents. Nine months ago December 2018 cotton was trading 12 cents lower near 66 cents, a remarkable change in prices. Strong export sales and global demand have drug both the nearby and harvest contracts higher.
July wheat continued its short term down trend. On March 2, July wheat peaked at $5.31 ¾, since then prices have declined 36 ¾ cents. Prices have been supported by drought concerns in the Southern Plains, however large global supplies and expanding domestic stock projections, as a result of tepid export sales, continue to provide fuel for further price declines.
Corn
Across Tennessee, average corn basis (cash price-nearby futures price) weakened or remained unchanged at Memphis, Northwest Barge Points, Northwest, and Upper-middle Tennessee and strengthened at Lower-middle Tennessee. Overall, basis for the week ranged from 12 under to 34 over the May futures contract with an average of 1 over at the end of the week. May 2018 corn futures closed at $3.82 down 8 cents since last Friday. For the week, May 2018 corn futures traded between $3.82 and $3.95. Corn net sales reported by exporters from March 2-8 were above expectations with net sales of 98.6 million bushels for the 2017/18 marketing year and 3.9 million bushels for the 2018/19 marketing year. Exports for the same time period were up from last week at 55.4 million bushels. Corn export sales and commitments were 77 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 77 percent. Ethanol production for the week ending March 9 was 1.025 million barrels per day, down 32,000 from the previous week. Ethanol stocks were 24.281 million barrels, up 1.137 million barrels. May/Jul and May/Dec future spreads were 9 and 21 cents, respectively.
July 2018 corn futures closed at $3.91, down 7 cents since last Friday. In Tennessee, September 2018 corn cash forward contracts averaged $3.90 with a range of $3.80 to $4.14. December 2018 corn futures closed at $4.03, down 4 cents since last Friday. Downside price protection could be obtained by purchasing a $4.10 December 2018 Put Option costing 29 cents establishing a $3.81 futures floor.
Soybeans
Average soybean basis strengthened or remained unchanged at Northwest and Lower-middle Tennessee and weakened at Northwest Barge Points, Memphis, and Upper-middle Tennessee. Basis ranged from 48 under to 3 under the May futures contract at elevators and barge points. Average basis at the end of the week was 24 under the May futures contract. May 2018 soybean futures closed at $10.49, up 10 cents since last Friday. For the week, May 2018 soybean futures traded between $10.27 and $10.54. Net sales reported by exporters were above expectations with net sales of 46.6 million bushels for the 2017/18 marketing year and 2.8 million bushels for the 2018/19 marketing year. Exports for the same period were down from last week at 33.1 million bushels. Soybean export sales and commitments were 88 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 93 percent. May soybean-to-corn price ratio was 2.75 at the end of the week.
May/July and May/Nov future spreads were 11 and -8 cents, respectively. July 2018 soybean futures closed at $10.60, up 12 cents since last Friday. In Tennessee, Oct/Nov 2018 soybean cash contracts average $10.18 with a range of $9.89 to $10.50. November 2018 soybean futures closed at $10.41, up 11 cents since last Friday. Downside price protection could be achieved by purchasing a $10.60 November 2018 Put Option which would cost 68 cents and set a $9.92 futures floor. November/December 2018 soybean-to-corn price ratio was 2.58 at the end of the week.
Cotton
Delta upland cotton spot price quotes for March 15 were 82.53 cents/lb (41-4-34) and 84.28 cents/lb (31-3-35). Adjusted world price (AWP) increased 0.99 cents to 75.12 cents per pound. May 2018 cotton futures closed at 82.85 cents, down 1.67 cents since last Friday. For the week, May 2018 cotton futures traded between 82.04 and 85.03 cents. Net sales reported by exporters were down from last week with net sales of 321,400 bales for the 2017/18 marketing year and 199,200 bales for the 2018/19 marketing year. Exports for the same period were down from last week at 414,400 bales. Upland cotton export sales were 101 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 87 percent. May/Jul and May/Dec cotton futures spreads were 0.13 cents and -4.57 cents, respectively.
July 2018 cotton futures closed at 82.98, down 1.21 cents since last Friday. December 2018 cotton futures closed at 78.28, down 0.44 cents since last Friday. Downside price protection could be obtained by purchasing a 79 cent December 2018 Put Option costing 5 cents establishing a 74 cent futures floor.
Wheat
In Memphis, old crop cash wheat ranged from $4.94 to $5.01. May 2018 wheat futures closed at $4.67, down 22 cents since last Friday. May 2018 wheat futures traded between $4.67 and $4.98 this week. May wheat-to-corn price ratio was 1.22. Wheat net sales reported by exporters were below expectations with net sales of 6.0 million bushels for the 2017/18 marketing year and 2.1 million bushels for the 2018/19 marketing year. Exports for the week were down from last week at 12.3 million bushels. Wheat export sales were 89 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 96 percent. May/Jul and May/Sep future spreads were 18 cents and 35 cents, respectively.
In Tennessee, June/July 2018 cash forward contracts ranged from $4.81 to $5.32 for the week. July wheat-to-corn price ratio was 1.24. July 2018 wheat futures closed at $4.85, down 20 cents since last Friday. Downside price protection could be obtained by purchasing a $4.90 July 2018 Put Option costing 26 cents establishing a $4.64 futures floor. September 2018 wheat futures closed at $5.02, down 20 cents since last Friday. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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