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Markets Still Skeptical Until Final Trade Deal Is Reached
DR. AARON SMITH
KNOXVILLE, TENN.
Weather and trade continue to dominate markets. Reports indicate that progress has been made on a trade deal with China, however there are still numerous issues yet to be resolved that could derail the progress made. Until a final deal is reached markets will continue to be skeptical. Spring weather continues to provide a great deal of uncertainty for planted acreage both nationally and in Tennessee.
Nationally, the USDA currently projects corn acres up 3.66 million acres form last year; upland cotton down 325,000 acres; soybeans down 4.58 million acres; and all wheat down 2.05 million acres. Wet field conditions and spring storms could reduce corn and spring wheat acres in the northern Corn Belt. Cotton acres in the mid-south could be reduced if wet fields prevent plantings into May.
In Tennessee, USDA projected 2019 corn acres up 110,000 at 850,000 acres; soybeans down 200,000 at 1.5 million acres; upland cotton unchanged at 360,000 acres; and wheat down 80,000 at 300,000 acres. Wheat acres were lowered due to poor planting conditions in the fall. Additionally, harvested acreage could be lower due to poor quality stands due to the excessive moisture this winter.
Since the March 29 Prospective Plantings report, December corn has traded sideways between $3.84 and $3.94; November soybeans have traded between $9.18 to $9.40; July wheat between $4.59 and $4.80; December cotton has increased from 74.45 to 77.75. Cotton prices above 77 cents represents a good price to consider sales for those that have yet to price 2019 cotton production. For corn, soybeans, and wheat waiting may be the best course of action at this time.
Corn
Ethanol production for the week ending April 5 was 1.002 million barrels per day, up 3,000 from the previous week. Ethanol stocks were 23.193 million barrels, down 799,000 barrels. Corn net sales reported by exporters from March 29-April 4 were down from last week at 21.6 million bushels for the 2018/19 marketing year. Exports for the same time period were down 22 percent from last week at 38.7 million bushels. Corn export sales and commitments were 75 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 84 percent. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened at Northwest Tennessee and weakened at Memphis, Northwest Barge Points, and Upper-middle Tennessee. Overall, basis for the week ranged from 10 under to 15 over with an average of 4 over the May futures at the end of the week. May 2019 corn futures closed at $3.61, down 1 cent since last Friday. For the week, May 2019 corn futures traded between $3.55 and $3.63. July 2019 corn futures closed at $3.69, down 2 cents since last Friday. May/Jul and May/Dec future spreads were 8 and 28 cents.
In Tennessee, September 2019 corn cash forward contracts averaged $3.65 with a range of $3.49 to $3.78. December 2019 corn futures closed at $3.89, down 1 cent since last Friday. Downside price protection could be obtained by purchasing a $3.90 December 2019 Put Option costing 24 cents establishing a $3.66 futures floor.
Soybeans
Net sales reported by exporters were down compared to last week at 9.9 million bushels for the 2018/19 marketing year and 0.4 million bushels for the 2019/20 marketing year. Exports for the same period were up 16 percent compared to last week at 32.7 million bushels. Soybean export sales and commitments were 86 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 95 percent. Average soybean basis weakened at Northwest and Upper-middle Tennessee and strengthened at Memphis and Northwest Barge Points. Basis ranged from 52 under to 12 under the May futures contract at elevators and barge points. Average basis at the end of the week was 29 under the May futures contract. May 2019 soybean futures closed at $8.95, down 4 cents since last Friday. For the week, May 2019 soybean futures traded between $8.93 and $9.04. May soybean-to-corn price ratio was 2.48 at the end of the week. July 2019 soybean futures closed at $9.08, down 4 cents since last Friday. May/Jul and May/Nov future spreads were 13 and 32 cents.
In Tennessee, October/November 2019 soybean cash contracts average $8.94 with a range of $8.64 to $9.19. November 2019 soybean futures closed at $9.27, down 5 cents since last Friday. Downside price protection could be achieved by purchasing a $9.40 November 2019 Put Option which would cost 48 cents and set an $8.92 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 compared to last week at 289,000 bales for the 2018/19 marketing year and 205,900 bales for the 2019/20 marketing year. Exports for the same time period were down 7 percent compared to last week at 383,300 bales. Upland cotton export sales were 95 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 95 percent. Delta upland cotton spot price quotes for April 11 were 72.48 cents/lb (41-4-34) and 74.23 cents/lb (31-3-35). Adjusted World Price (AWP) increased 0.99 cents to 69.21 cents. May 2019 cotton futures closed at 78.11, down 0.14 cents since last Friday. For the week, May 2019 cotton futures traded between 76.86 and 79.31 cents. May/Jul and May/Dec cotton futures spreads were 0.75 cents and -0.92 cents. July 2019 cotton futures closed at 78.86, up 0.27 cents since last Friday.
December 2019 cotton futures closed at 77.19, down 0.3 cents since last Friday. Downside price protection could be obtained by purchasing a 78 cent December 2019 Put Option costing 4.8 cents establishing a 73.2 cent futures floor.
Wheat
Wheat net sales reported by exporters were down compared to last week at 10.0 million bushels for the 2018/19 marketing year and 7.4 million bushels for the 2019/20 marketing year. Exports for the same time period were up 41 percent from last week at 21.6 million bushels. Wheat export sales were 96 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 102 percent. May 2019 wheat futures closed at $4.64, down 3 cents since last Friday. May 2019 wheat futures traded between $4.55 and $4.71 this week. May wheat-to-corn price ratio was 1.29. May/Jul and May/Sep future spreads were 4 cents and 11 cents.
In Tennessee, June/July 2019 wheat cash contracts ranged from $4.51 to $4.94 for the week. July 2019 wheat futures closed at $4.68, down 1 cent since last Friday. Downside price protection could be obtained by purchasing a $4.70 July 2019 Put Option costing 18 cents establishing a $4.52 futures floor. September 2019 wheat futures closed at $4.75, down 2 cents since last Friday. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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