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Corn, Bean Markets Move Sideways; Cotton May Breakout Next Month
DR. AARON SMITH
KNOXVILLE, TENN.
This week corn and soybean prices moved mostly sideways as markets are awaiting the next round of USDA yield and production estimates. National and Tennessee yields are anticipated to be record high for both corn and soybeans. Current national average yield estimates from private companies are 177-182 bu/acre for corn and 50-54 bu/acre for soy-beans. Current USDA estimates are national average yield of 178.4 bu/acre and 51.6 bu/acre and for Tennessee 174 bu/acre and 49 bu/acre. A one bushel increase or decrease in national average yield will add or subtract about 82 million bushels of corn or 89 million bushels of soybeans from total domestic production. The USDA releases the September WASDE on Wednesday (September 12).
December cotton futures have been able to successfully hold the 80½ to 84½ cent trading range. A breakout up or down is likely in the next month based on how the U.S. harvest (and weather) progress. As usual, the market will closely watch production estimates out of Texas and weather moving through the Gulf of Mexico during the harvest season. Trade/tariffs remain a wild card for cotton and other agricultural commodities with the potential to dramatically move prices in either direction.
December wheat futures have decreased dramatically since the contract high of $6.13 on August 2 - closing today at $5.11 ¼, a decrease of $1.01 ¾ in one month. Prices have been volatile due mostly to international forces. Reduced Russian wheat production led to fears that export restrictions could be imposed by the Russian government. Political uncertainty and changes to export taxes on agricultural commodities has increased uncertainty in Argentina. Global wheat production will be down, however stocks remain high.
The signup period for USDA payments to producers to help mitigate the decrease in commodity prices, as a result of retaliatory tariffs, is now open. Signup will occur at your local Farm Service Agency (FSA) Service Center. Payments will be based on 2018 production. Producers are strongly encouraged to keep detailed, accurate, harvest production records for corn, soybeans, cotton, and wheat in order to obtain the Market Facilitation Program (MFP) payments that they are eligible for in a timely interval. Details of the MFP signup for Tennessee producers are available at: https://extension.tennessee.edu/publications/Documents/W776.pdf.
Corn
Across Tennessee, average corn basis (cash price-nearby futures price) weakened or remained unchanged at Northwest Barge Points, Upper-middle, and Lower-middle Tennessee and strengthened at Memphis and Northwest Tennessee. Overall, basis for the week ranged from 40 under to 8 under the December futures contract with an average of 25 under at the end of the week. December 2018 corn futures closed at $3.65, up 2 cents since last Friday. For the week, December 2018 corn futures traded between $3.61 and $3.69. Corn net sales reported by exporters from August 24-30, 2018 were within expectations with net sales of 1.2 million bushels for the 2017/18 marketing year and 40.7 million bushels for the 2018/19 marketing year. Exports for the same time period were down 10 percent compared to last week at 47.6 million bushels. Corn export sales and commitments were 99 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 103 percent. Ethanol production for the week ending August 31 was 1.087 million barrels per day, up 17,000 from the previous week. Ethanol stocks were 22.703 million barrels, up 358,000 barrels. Dec/Mar and Dec/Dec future spreads were 12 and 29 cents, respectively.
The Crop Progress report estimated corn condition at 67 percent good-to-excellent and 12 percent poor-to-very poor; corn dough at 96 percent compared to 92 percent last week, 91 percent last year, and a 5-year average of 91 percent; corn dented at 75 percent compared to 61 percent last week, 58 percent last year, and a 5-year average of 60 percent; and corn mature at 22 percent compared to 10 percent last week, 11 percent last year, and a 5-year average of 11 percent. In Tennessee, corn condition was estimated at 74 percent good-to-excellent and 7 percent poor-to-very poor; corn dented at 93 percent compared to 85 percent last week, 91 percent last year, and a 5-year average of 90 percent; corn mature at 47 percent compared to 27 percent last week, 57 percent last year, and a 5-year average of 42 percent; and corn harvested at 9 percent compared to 1 percent last week, 7 percent last year, and a 5-year average of 5 percent. In Tennessee, January 2019 corn cash forward contracts averaged $3.67 with a range of $3.35 to $3.87. March 2019 corn futures closed at $3.79, up 2 cents since last Friday. December 2019 corn futures closed at $3.96, up 2 cents since last Friday. Downside price protection could be obtained by purchasing a $4.00 December 2019 Put Option costing 30 cents establishing a $3.70 futures floor.
Soybeans
Average soybean basis weakened or remained unchanged at Northwest Barge Points, Lower-middle, Upper-middle, and Northwest Tennessee and strengthened at Memphis. Basis ranged from 76 under to 48 under the November futures contract at elevators and barge points. Average basis at the end of the week was 57 under the November futures contract. November 2018 soybean futures closed at $8.44, up 1 cent since last Friday. For the week, November 2018 soybean futures traded between $8.34 and $8.51. Net sales reported by exporters were within expectations with net sales of 0.02 million bushels for the 2017/18 marketing year and 24.7 million bushels for the 2018/19 marketing year. Exports for the same period were down 26 percent compared to last week at 26.6 million bushels. Soybean export sales and commitments were 103 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 103 percent. Nov/Dec 2018 soybean-to-corn price ratio was 2.30 at the end of the week.
Nov/Jan and Nov/Nov future spreads were 13 and 55 cents, respectively. The Crop Progress report estimated soybean condition at 66 percent good-to-excellent and 11 percent poor-to-very poor; and soybeans dropping leaves at 16 percent compared to 7 percent last week, 10 percent last year, and a 5-year average of 9 percent. In Tennessee, soybean condition was estimated at 73 percent good-to-excellent and 5 percent poor-to-very poor; and soybeans dropping leaves at 9 percent compared to 3 percent last week, 11 percent last year, and a 5-year average of 8 percent. In Tennessee, Oct/Nov 2018 soybean cash contracts average $7.81 with a range of $7.58 to $8.00. January 2019 soybean futures closed at $8.57, up 1 cent since last Friday. November 2019 soybean futures closed at $8.99, up 1 cent since last Friday. Downside price protection could be achieved by purchasing a $9.00 November 2019 Put Option which would cost 57 cents and set an $8.43 futures floor. Nov/Dec 2019 soybean-to-corn price ratio was 2.27 at the end of the week.
Cotton
Delta upland cotton spot price quotes for September 6 were 79.88 cents/lb (41-4-34) and 81.63 cents/lb (31-3-35). Adjusted World Price (AWP) decreased 0.49 cents to 73.77 cents. Net sales reported by exporters were down from last week at 92,200 bales for the 2018/19 marketing year. Exports for the same time period were 177,300 bales, up 3 percent from last week. Upland cotton export sales were 61 percent of the USDA estimated total annual exports for the 2018/19 marketing year (August 1 to July 31), compared to a 5-year average of 40 percent.
The Crop Progress report estimated cotton condition at 41 percent good-to-excellent and 33 percent poor-to-very poor; cotton setting bolls at 96 percent compared to 91 percent last week, 96 percent last year, and a 5-year average of 96 percent; and cotton opening bolls at 29 percent compared to 21 percent last week, 24 percent last year, and a 5-year average of 26 percent. In Tennessee, cotton condition was estimated at 89 percent good-to-excellent and 1 percent poor-to-very poor; and cotton bolls opening at 52 percent compared to 23 percent last week, 13 percent last year, and a 5-year average of 18 percent. December 2018 cotton futures closed at 81.99, down 0.23 cents since last Friday. For the week, December 2018 cotton futures traded between 81.2 and 83.4 cents. Dec/Mar and Dec/Dec cotton futures spreads were 0.41 cents and -4.26 cents, respectively. March 2019 cotton futures closed at 82.4, down 0.18 cents since last Friday. December 2019 cotton futures closed at 77.73, down 0.53 cents since last Friday. Downside price protection could be obtained by purchasing a 78 cent December 2019 Put Option costing 5.46 cents establishing a 72.54 cent futures floor.
Wheat
In Tennessee, September 2018 cash wheat ranged from $5.15 to $5.67 for the week. Wheat net sales reported by exporters were within expectations with net sales of 14.0 million bushels for the 2018/19 marketing year. Exports for the week were down 29 percent compared to last week at 10.5 million bushels. Wheat export sales were 34 percent of the USDA estimated total annual exports for the 2018/19 marketing year (June 1 to May 31), compared to a 5-year average of 51 percent. The Crop Progress report estimated spring wheat harvested at 87 percent compared to 77 percent last week, 87 percent last year, and a 5-year average of 75 percent.
December 2018 wheat futures closed at $5.11, down 34 cents since last Friday. December 2018 wheat futures traded between $5.07 and $5.42 this week. December wheat-to-corn price ratio was 1.39. Dec/Mar and Dec/Jul future spreads were 20 cents and 31 cents, respectively. March 2019 wheat futures closed at $5.31, down 34 cents since last Friday. In Tennessee, June/July 2019 wheat cash contracts ranged from $5.47 to $5.67 for the week. July 2019 wheat futures closed at $5.42, down 28 cents since last Friday. Downside price protection could be obtained by purchasing a $5.50 July 2019 Put Option costing 45 cents establishing a $5.05 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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