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USDA Extends The Market Facilitation Program (MFP) Signup To February 14
DR. AARON SMITH
KNOXVILLE, TENN.
In January, December 2019 corn futures prices moved sideways opening the month at $3.97 ½ and closing at $4.00, up 2 ½ cents for the month. The January trading range was $3.96 ½ to $4.06. November 2019 soybean futures prices increased, opening the month at $9.36 and closing at $9.55 ½, up 19 ½ cents for the month. The January trading range was $9.35 to $9.65. December 2019 cotton futures prices moved mostly sideways opening the month at 73.38 and closing at 74.20, up 0.82 cents for the month. The January trading range was 72.24 to 75.20. July 2019 wheat futures prices moved sideways, opening the month at $5.18 and closing at $5.27, up 9 cents for the month. The January trading range was $5.17 to $5.40 ¼.
Next week will be the start of the projected (spring) price determination period for corn, soybean, and cotton crop insurance policies. A simple average of the daily closing price for the harvest contract in the month of February is used to determine the price for crop insurance guarantees.
Due to the partial government shutdown, the USDA extended the Market Facilitation Program (MFP) signup to February 14, 2019. The deadline to report production for the MFP payments is May 1, 2019. The MFP payments are made to producers to assist in mitigating the adverse effect of retaliatory tariffs on agricultural commodity prices. Payment rates are: $1.65/bu for soybeans; $0.14/bu for wheat; $0.06/lb for cotton; and $0.01/bu for corn. Payments are for 2018 production only.
USDA provided additional information this week regarding the schedule of report releases that were postponed due to the government shutdown. Export sales reports will be released January 31 through February 22, after which reports will resume on a regular schedule. Grain Stocks, Crop Production, Winter Wheat Seedings, and WASDE reports will be released February 8.
Corn
Ethanol production for the week ending January 25 was 1.012 million barrels per day, down 19,000 from the previous week. Ethanol stocks were 23.980 million barrels, up 479,000 barrels. Corn net sales reported by exporters from December 14-20 were down from the previous week with net sales of 66.9 million bushels for the 2018/19 marketing year and 2.1 million bushels for the 2019/20 marketing year. Exports for the same time period were down 8 percent compared to the previous week at 35.4 million bushels. Corn export sales and commitments were 50 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 54 percent. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened at Memphis, Northwest Barge Points, Northwest, and Upper-middle Tennessee. Overall, basis for the week ranged from 15 under to 20 over the March futures contract with an average of even the March futures at the end of the week. March 2019 corn futures closed at $3.78 down 2 cents since last Friday. For the week, March 2019 corn futures traded between $3.75 and $3.81. May 2019 corn futures closed at $3.87, down 1 cent since last Friday. Mar/May and Mar/Dec future spreads were 9 and 24 cents.
In Tennessee, September 2019 corn cash forward contracts averaged $3.87 with a range of $3.76 to $4.04. December 2019 corn futures closed at $4.02, down 1 cent 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
Net sales reported by exporters were down from the previous week with net sales of 87.9 million bushels for the 2018/19 marketing year and 0.5 million bushels for the 2019/20 marketing year. Exports for the same period were down 54 percent compared to the previous week at 22.5 million bushels. Soybean export sales and commitments were 58 percent of the USDA estimated total annual ex-ports for the 2018/19 marketing year (September 1 to August 31), compared to a 5-year average of 80 percent. Average soybean basis strengthened at Northwest Barge Points, Memphis, Northwest, and Upper-middle Tennessee. Basis ranged from 61 under to 14 under the March futures contract at elevators and barge points. Average basis at the end of the week was 38 under the March futures contract. March 2019 soybean futures closed at $9.17, down 8 cents since last Friday. For the week, March 2019 soybean futures traded between $9.13 and $9.31. March soybean-to-corn price ratio was 2.43 at the end of the week. May 2019 soybean futures closed at $9.31, down 8 cents since last Friday. Mar/May and Mar/Nov future spreads were 14 and 40 cents.
In Tennessee, October/November 2019 soybean cash contracts average $9.19 with a range of $8.96 to $9.39. November 2019 soy-bean futures closed at $9.57, down 7 cents since last Friday. Downside price protection could be achieved by purchasing a $9.60 November 2019 Put Option which would cost 51 cents and set a $9.09 futures floor. Nov/Dec 2019 soybean-to-corn price ratio was 2.38 at the end of the week.
Cotton
Net sales reported by exporters were up from last week with net sales of 373,100 bales for the 2018/19 marketing year and 4,000 bales for the 2019/20 marketing year. Exports for the same time period were 207,100 bales, up 34 percent from last week. Upland cotton export sales were 74 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 66 percent. Delta upland cotton spot price quotes for January 31 were 71.15 cents/lb (41-4-34) and 72.90 cents/lb (31-3-35). Adjusted World Price (AWP) increased 0.17 cents to 65.07 cents. March 2019 cotton futures closed at 73.64, down 0.49 cents since last Friday. For the week, March 2019 cotton futures traded between 73.15 and 74.85 cents. Mar/May and Mar/Dec cotton futures spreads were 1.29 cents and 0.48 cents. May 2019 cotton futures closed at 74.93, down 0.64 cents since last Friday.
December 2019 cotton futures closed at 74.12, down 0.31 cents since last Friday. Downside price protection could be obtained by purchasing a 75 cent December 2019 Put Option costing 4.81 cents establishing a 70.19 cent futures floor.
Wheat
Wheat net sales reported by exporters were down from the previous week with net sales of 19.3 million bushels for the 2018/19 marketing year and 2.8 million bushels for the 2019/20 marketing year. Exports for the week were down 22 percent compared to the previous week at 18.8 million bushels. Wheat export sales were 64 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 81 percent. March 2019 wheat futures closed at $5.24, up 4 cents since last Friday. March 2019 wheat futures traded between $5.10 and $5.26 this week. March wheat-to-corn price ratio was 1.39. Mar/May and Mar/Jul future spreads were 4 cents and 8 cents. May 2019 wheat futures closed at $5.28, up 1 cent since last Friday.
In Tennessee, June/July 2019 wheat cash contracts ranged from $5.10 to $5.51 for the week. July 2019 wheat futures closed at $5.32, down 1 cent since last Friday. Downside price protection could be obtained by purchasing a $5.40 July 2019 Put Option costing 32 cents establishing a $5.08 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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