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Corn, Cotton, Wheat, And Soybeans Were Down For The Week
DR. AARON SMITH
KNOXVILLE, TENN.
All four commodities were down across the board for an abbreviated Thanksgiving trading week. Limited news will emerge as we enter the Holiday trading season, however trade news will be closely monitored next week with the highly anticipated G20 summit. Agricultural markets will focus on any news from President Xi or Trump regarding tariffs and/or a resolution to the current trade disruption. As information is revealed anticipate further volatility in soybeans.
Corn basis has improved in Tennessee while soybean basis has remained very weak. Expect continued seasonal improvements in corn basis as we enter 2019. Strong demand from the poultry and livestock sectors will assist in strengthening basis across Tennessee. Those that were able to store a large portion of this year’s crop will benefit from the price appreciation.
Cotton prices continue to fall in spite of a mostly bullish November WASDE report. Look for markets to test the current six month low for the March contract of 76.5 cents. Looking toward 2019 I am cautiously optimistic regarding cotton prices.
Wheat planting has been an issue in Tennessee, with October and November rains slowing planting. Many fields that were intended to be planted were not due to excess moisture. As such, wheat acres will be down across from earlier estimates.
Corn
The Crop Progress report estimated corn harvested at 90 percent compared to 84 percent last week, 89 percent last year, and a 5-year average of 93 percent. In Tennessee, corn harvested was estimated at 100 percent compared to 98 percent last week, 100 percent last year, and a 5-year average of 99 percent. Ethanol production for the week ending November 16 was 1.042 million barrels per day, down 25,000 from the previous week. Ethanol stocks were 22.791 million barrels, down 723,000 barrels. Across Tennessee, average corn basis (cash price-nearby futures price) weakened or remained unchanged at Memphis, Northwest Barge Points, Northwest, Upper-middle, and Lower-middle Tennessee. Overall, basis for the week ranged from 16 under to 9 over the December futures contract with an average of 2 under at the end of the week. December 2018 corn futures closed at $3.59, down 5 cents since last Friday. For the week, December 2018 corn futures traded between $3.58 and $3.66.
Corn net sales reported by exporters from November 9-15 were within expectations with net sales of 34.5 million bushels for the 2018/19 marketing year and 0.2 million bushels for the 2019/20 marketing year. Exports for the same time period were down 25 percent compared to last week at 32.9 million bushels. Corn export sales and commitments were 39 percent of the USDA estimated total annual exports for the 2018/19 marketing year (September 1 to August 31) compared to a 5-year average of 43 percent. Dec/Mar and Dec/Dec future spreads were 11 and 36 cents, respectively. In Tennessee, January 2019 corn cash forward contracts averaged $3.76 with a range of $3.62 to $3.91. March 2019 corn futures closed at $3.70, down 5 cents since last Friday. December 2019 corn futures closed at $3.95, down 3 cents since last Friday. Downside price protection could be obtained by purchasing a $4.00 December 2019 Put Option costing 27 cents establishing a $3.73 futures floor.
Soybeans
The Crop Progress report estimated soybeans harvested at 91 percent compared to 88 percent last week, 96 percent last year, and a 5-year average of 96 percent. In Tennessee, soybeans harvested were estimated at 74 percent compared to 72 percent last week, 82 percent last year, and a 5-year average of 86 percent. Average soybean basis strengthened or remained unchanged at Memphis, Northwest, Lower-middle, and Upper-middle Tennessee and weakened at Northwest Barge Points. Basis ranged from 68 under to 16 under the January futures contract at elevators and barge points. Average basis at the end of the week was 33 under the January futures contract. January 2019 soybean futures closed at $8.81, down 11 cent since last Friday. For the week, January 2019 soybean futures traded between $8.70 and $8.92. In Tennessee, January 2019 soybean cash contracts average $8.69 with a range of $8.41 to $9.06.
Net sales reported by exporters were within expectations with net sales of 25 million bushels for the 2018/19 marketing year and 0.1 million bushels for the 2019/20 marketing year. Exports for the same period were up 4 percent compared to last week at 46.8 million bushels. Soybean export sales and commitments were 44 percent of the USDA estimated total annual exports for the 2018/19 marketing year (September 1 to August 31), compared to a 5-year average of 68 percent. Jan/Mar and Jan/Nov future spreads were 13 and 49 cents, respectively. March 2019 soybean futures closed at $8.94, down 11 cents since last Friday. November 2019 soybean futures closed at $9.30, down 7 cents since last Friday. Downside price protection could be achieved by purchasing a $9.40 November 2019 Put Option which would cost 60 cents and set an $8.80 futures floor. Nov/Dec 2019 soybean-to-corn price ratio was 2.35 at the end of the week.
Cotton
The Crop Progress report estimated cotton harvested at 59 percent compared to 54 percent last week, 73 percent last year, and a 5-year average of 69 percent. In Tennessee, cotton harvested was estimated at 87 percent compared to 80 percent last week, 80 percent last year, and a 5-year average of 79 percent. Delta upland cotton spot price quotes for November 23 were 74.47 cents/lb (41-4-34) and 76.22 cents/lb (31-3-35). Adjusted World Price (AWP) decreased 0.59 cents to 67.89 cents. December 2018 cotton futures closed at 74.92, down 1.2 cents since last Friday. For the week, December 2018 cotton futures traded between 74.86 and 77.2 cents.
Net sales reported by exporters were up from last week with net sales of 210,500 bales for the 2018/19 marketing year and 31,700 bales for the 2019/20 marketing year. Exports for the same time period were 150,800 bales, up 34 percent from last week. Upland cotton export sales were 68% 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 56 percent. Dec/Mar and Dec/Dec cotton futures spreads were 2.3 cents and 1.63 cents, respectively. March 2019 cotton futures closed at 77.22, down 1.07 cents since last Friday. December 2019 cotton futures closed at 76.55, down 0.66 cents since last Friday. Downside price protection could be obtained by purchasing a 77 cent December 2019 Put Option costing 4.93 cents establishing a 72.07 cent futures floor.
Wheat
Wheat net sales reported by exporters were within expectations with net sales of 12.1 million bushels for the 2018/19 marketing year. Exports for the week were up 92 percent compared to last week at 18.5 million bushels. Wheat export sales were 52 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 72 percent. December 2018 wheat futures closed at $4.99, down 7 cents since last Friday. December 2018 wheat futures traded between $4.95 and $5.07 this week. December wheat-to-corn price ratio was 1.39. Dec/Mar and Dec/Jul future spreads were 8 cents and 21 cents, respectively. March 2019 wheat futures closed at $5.07, down 8 cents since last Friday.
The Crop Progress report estimated winter wheat condition at 56 percent good-to-excellent and 11 percent poor-to-very poor; winter wheat planted at 93 percent compared to 89 percent last week, 97 percent last year, and a 5-year average of 97 percent; and winter wheat emerged at 81 percent compared to 77 percent last week, 87 percent last year, and a 5-year average of 88 percent. In Tennessee, winter wheat condition was estimated 55 percent good-to-excellent and 14 percent poor-to-very poor; winter wheat planted at 74 percent compared to 66 percent last week, 84 percent last year, and a 5-year average of 85 percent; and winter wheat emerged at 59 percent compared to 47 percent last week, 68 percent last year, and a 5-year average of 62 percent. In Tennessee, June/July 2019 wheat cash contracts ranged from $5.06 to $5.39 for the week. July 2019 wheat futures closed at $5.20, down 10 cents since last Friday. Downside price protection could be obtained by purchasing a $5.30 July 2019 Put Option costing 36 cents establishing a $4.94 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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