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Corn And Soybeans Were Down; Cotton Was Mixed; And Wheat Was Up For The Week
DR. AARON SMITH
KNOXVILLE, TENN.
The partial government shutdown has resulted in several key reports (WASDE, Crop Production, and Grain Stocks being delayed. Reports will be released, however the USDA will determine the release schedule after the government resumes normal operations. An addition consequence of the partial shutdown is the inability for producers to complete paper work at FSA for Market Facilitation Program (MFP) payments. The payments were provided to producers to help mitigate the impact of retaliatory tariffs on commodity prices. The application dead-line was initially set as January 15, 2019, however USDA Secretary of Agriculture Sonny Perdue extended the deadline indicating: “We will therefore extend the application deadline for a period of time equal to the number of business days FSA offices were closed, once the government shutdown ends…". This should allow producers time to complete the required paper work to obtain payments for 2018 production.
Corn prices moved mostly sideways this week maintaining the well-established trading range that has prevailed since the end of September. For example, March futures have maintained a trading range of $3.70 to $3.90, with reasonable consistency, for over three months. Continuation of this trading range seems likely in the absence of new data from the USDA and or production/weather disruptions in South America. As has been the case for almost one year, trade remains a substantial wild card.
Soybeans have been on a consistent uptrend since mid-September. March soybeans had a low of $8.39 ¾ on September 18, since then, prices have appreciated over 70 cents closing on Friday at $9.10 ¼. While prices are still substantially below last year’s levels, the price appreciation has been a positive for those that have been able to store soybeans. Additionally, MFP payments will help improve net price per bushel for soybean producers. The challenge for the 2018 soybean crop was finishing the harvest and getting a high quality soybean seed. In Tennessee, and other areas in the Mid-South, some soybean fields remain unharvested as of January 11.
Cotton markets took it on the chin at the end of December declining from 77-79 cents to 71-74 cents. Currently, bearish concerns continue to dominate the market including, the China US trade war, reduced exports to Turkey, slowing of the Chinese economy, and the increased competiveness of man-made fibers. However, declining world cotton carryover and a relatively small cotton crop in India should help prices stabilize and possibly improve in 2019. U.S. planted acreage will be an important market consideration moving forward.
July 2019 wheat futures have been unsuccessful in attempts to maintain upward price momentum towards $5.50. However, price support has been well established near $5.20, so is seems likely that prices will move sideways to up over the next couple of months.
Corn
Ethanol production for the week ending January 4 was 1.00 million barrels per day, down 11,000 from the previous week. Ethanol stocks were 23.254 million barrels, up 92,000 barrels. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened at Northwest and Upper-middle Tennessee and weakened at Northwest Barge Points and Memphis. Overall, basis for the week ranged from 16 under to 9 over the March futures contract with an average of 3 under at the end of the week. March 2019 corn futures closed at $3.78 down 5 cents since last Friday. For the week, March 2019 corn futures traded between $3.76 and $3.84. May 2019 corn futures closed at $3.86, down 5 cents since last Friday. Mar/May and Mar/Dec future spreads were 8 and 23 cents.
In Tennessee, September 2019 corn cash forward contracts averaged $3.90 with a range of $3.76 to $4.04. December 2019 corn futures closed at $4.01, down 3 cents since last Friday. Downside price protection could be obtained by purchasing a $4.10 December 2019 Put Option costing 30 cents establishing a $3.80 futures floor.
Soybeans
Average soybean basis strengthened at Northwest and Upper-middle Tennessee and weakened at Northwest Barge Points and Memphis. Basis ranged from 56 under to 10 under the March futures contract at elevators and barge points. Average basis at the end of the week was 32 under the March futures contract. March 2019 soybean futures closed at $9.10, down 11 cents since last Friday. For the week, March 2019 soybean futures traded between $9.05 and $9.27. March soybean-to-corn price ratio was 2.41 at the end of the week. May 2019 soybean futures closed at $9.23, down 11 cents since last Friday. Mar/May and Mar/Nov future spreads were 13 and 42 cents.
In Tennessee, October/November 2019 soybean cash contracts average $9.25 with a range of $8.87 to $9.48. November 2019 soybean futures closed at $9.52, down 5 cents since last Friday. Downside price protection could be achieved by purchasing a $9.60 November 2019 Put Option which would cost 53 cents and set a $9.07 futures floor. Nov/Dec 2019 soybean-to-corn price ratio was 2.37 at the end of the week.
Cotton
Delta upland cotton spot price quotes for January 10 were 70.1 cents/lb (41-4-34) and 71.85 cents/lb (31-3-35). March 2019 cotton futures closed at 72.49, down 0.03 cents since last Friday. For the week, March 2019 cotton futures traded between 71.54 and 73.92 cents. Mar/May and Mar/Dec cotton futures spreads were 1.54 cents and 1.15 cents. May 2019 cotton futures closed at 74.03, up 0.09 cents since last Friday.
December 2019 cotton futures closed at 73.64, down 0.2 cents since last Friday. Downside price protection could be obtained by purchasing a 74 cent December 2019 Put Option costing 4.52 cents establishing a 69.48 cent futures floor.
Wheat
March 2019 wheat futures closed at $5.19, up 2 cents since last Friday. March 2019 wheat futures traded between $5.12 and $5.24 this week. March wheat-to-corn price ratio was 1.37. Mar/May and Mar/Jul future spreads were 6 cents and 10 cents. May 2019 wheat futures closed at $5.25, up 3 cents since last Friday.
In Tennessee, June/July 2019 wheat cash contracts ranged from $5.05 to $5.55 for the week. July 2019 wheat futures closed at $5.29, unchanged since last Friday. Downside price protection could be obtained by purchasing a $5.30 July 2019 Put Option costing 28 cents establishing a $5.02 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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