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Rebound, Retreat Mark Soybean Futures Prices This Week
DR. AARON SMITH
KNOXVILLE, TENN.
After setting a new contract low of $3.63 ¾ on Monday, December corn re-bounded 34 ½ cents closing on Friday at $3.98 ¼. Wet planting conditions which may cause some producers to switch from corn to soybeans and funds short-covering positions drove the abrupt improvement in corn futures prices. Prices near $4.00 on the harvest contract require consideration for pricing 2019 production.
November soybeans set a contract low of $8.15 ½ on Monday, gained 56 cents mid-week then retreated 17 ½ cents on Friday to close at $8.47 ¼. Trade uncertainty, Brazilian exports to China, and the potential for increased U.S. planted acres due to wet conditions caused dramatic swings in futures prices this week.
July wheat set a new contract low on Monday of $4.18 ½, then gained 46 ½ cents to close the week at $4.65. Spring wheat planting issues, due to wet conditions in the Northern plains, fund short-coverings, and reduced production estimates for Europe fueled this week’s rally.
Unlike harvest contracts for corn, soybean, and wheat, December cotton moved sideways after setting a new contract low of 65.25 cents on Tuesday. Cotton’s decline has been dramatic in the last month moving from 77 cents to 66 cents in just over three weeks.
The likelihood of another round of USDA payments to farmers, which have been adversely affected by the trade war with China, has increased substantially the past two weeks. Previously, the administration was adamant that Market Facilitation Payments (MFP) were a one-time occurrence. However, given the retraction of progress in trade talks with China the previous two weeks, it appears likely that payments will be once again issued to producers. No details exist on how much payments will be or how payments will be triggered. As such, producers should continue to implement management and marketing plans based on the assumption that payments will not materialize.
Compared to one year ago, December corn is 20 cents lower, November soybeans 149 cents lower, December cotton 14.87 cents lower, and July wheat 28 cents lower.
Corn
Ethanol production for the week ending May 10 was 1.051 million barrels per day, up 15,000 from the previous week. Ethanol stocks were 22.25 million barrels, down 218,000 barrels. Corn net sales reported by exporters from May 3-9 were up from last week at 21.8 million bushels for the 2018/19 marketing year and 3.2 million bushels for the 2019/20 marketing year. Exports for the same time period were down 15 percent from last week at 38.7 million bushels. Corn export sales and commitments were 80 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 92 percent. Across Tennessee, average corn basis (cash price-nearby futures price) weakened at Memphis, Northwest, and Upper-middle Tennessee and strengthened at Northwest Barge Points. Overall, basis for the week ranged from 12 under to 14 over with an average of 1 over the July futures at elevators and barge points at the end of the week. July 2019 corn futures closed at $3.83, up 32 cents since last Friday. For the week, July 2019 corn futures traded between $3.43 and $3.84. Jul/Sep and Jul/Dec future spreads were 7 and 15 cents.
Nationally, the Crop Progress report estimated corn planted at 30 percent compared to 23 percent last week, 59 percent last year, and a 5-year average of 66 percent; and corn emerged at 10 percent compared to 6 percent last week, 25 percent last year, and a 5-year average of 29 percent. In Tennessee, the Crop Progress report estimated corn planted at 79 percent compared to 65 percent last week, 83 percent last year, and a 5-year average of 87 percent; and corn emerged at 57 percent compared to 36 percent last week, 55 percent last year, and a 5-year average of 61 percent. In Tennessee, September 2019 corn cash forward contracts averaged $3.65 with a range of $3.30 to $3.82. September 2019 corn futures closed at $3.90, up 29 cents since last Friday. December 2019 corn futures closed at $3.98, up 26 cents since last Friday. Downside price protection could be obtained by purchasing a $4.00 December 2019 Put Option costing 28 cents establishing a $3.72 futures floor.
Soybeans
Net sales reported by exporters were up compared to last week with net sales of 13.6 million bushels for the 2018/19 marketing year and 11.1 million bushels for the 2019/20 marketing year. Exports for the same period were up 12 percent compared to last week at 22.6 million bushels. Soybean export sales and commitments were 94 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 98 percent. Average soybean basis weakened at Memphis, Northwest Barge Points, Northwest, and Upper-middle Tennessee. Basis ranged from 56 under to 3 over the July futures contract at elevators and barge points. Average basis at the end of the week was 26 under the July futures contract. July 2019 soybean futures closed at $8.21, up 12 cents since last Friday. For the week, July 2019 soybean futures traded between $7.91 and $8.48. July soybean-to-corn price ratio was 2.14 at the end of the week. August 2019 soybean futures closed at $8.28, up 13 cents since last Friday. Jul/Aug and Jul/Nov future spreads were 7 and 26 cents.
Nationally, the Crop Progress report estimated soybeans planted at 9 percent compared to 6 percent last week, 32 percent last year, and a 5-year average of 29 percent. In Tennessee, the Crop Progress report estimated soybeans planted at 20 percent compared to 9 percent last week, 23 percent last year, and a 5-year average of 22 percent. In Tennessee, October/November 2019 soybean cash contracts average $8.13 with a range of $7.60 to $8.40. November 2019 soybean futures closed at $8.47, up 14 cents since last Friday. Downside price protection could be achieved by purchasing an $8.60 November 2019 Put Option which would cost 47 cents and set an $8.13 futures floor. Nov/Dec 2019 soybean-to-corn price ratio was 2.13 at the end of the week.
Cotton
Net sales reported by exporters were up compared to last week at 226,900 bales for the 2018/19 marketing year and 176,400 bales for the 2019/20 marketing year. Exports for the same time period were down 6 percent compared to last week at 362,800 bales. Upland cotton export sales were 104 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 100 percent. Delta upland cotton spot price quotes for May 16 were 62.3 cents/lb (41-4-34) and 64.55 cents/lb (31-3-35). Adjusted World Price (AWP) decreased 5.14 cents to 59.51 cents. July 2019 cotton futures closed at 65.99, down 2.46 cents since last Friday. For the week, July 2019 cotton futures traded between 64.5 and 68.59 cents. Jul/Oct and Jul/Dec cotton futures spreads were 0.4 cents and 0.39 cents. October 2019 cotton futures closed at 66.39, down 3.26 cents since last Friday.
Nationally, the Crop Progress report estimated cotton planted at 26 percent compared to 18 percent last week, 34 percent last year, and a 5-year average of 32 percent. In Tennessee, the Crop Progress report estimated cotton planted at 35 percent compared to 12 percent last week, 43 percent last year, and a 5-year average of 34 percent. December 2019 cotton futures closed at 66.38, down 3.02 cents since last Friday. Downside price protection could be obtained by purchasing a 67 cent December 2019 Put Option costing 3.63 cents establishing a 63.37 cent futures floor.
Wheat
Wheat net sales reported by exporters were up compared to last week at 4.2 million bushels for the 2018/19 marketing year and 15.4 million bushels for the 2019/20 marketing year. Exports for the same time period were up 36 percent from last week at 30.7 million bushels. Wheat export sales were 103 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 105 percent. Nationally, the Crop Progress report estimated winter wheat condition at 64 percent good-to-excellent and 8 percent poor-to-very-poor; winter wheat headed at 42 percent compared to 29 percent last week, 43 percent last year, and a 5-year average of 54 percent; spring wheat planted at 45 percent compared to 22 percent last week, 54 percent last year, and a 5-year average of 67 percent; and spring wheat emerged at 10 percent compared to 4 percent last week, 13 percent last year, and a 5-year average of 34 percent. In Tennessee, winter wheat condition was estimated at 69 percent good-to-excellent and 11 percent poor-to-very poor; winter wheat jointing at 99 percent compared to 97 percent last week; winter wheat headed at 93 percent compared to 78 percent last week, 87 percent last year, and a 5-year average of 86 percent; and winter wheat coloring at 4 percent. In Tennessee, June/July 2019 wheat cash contracts ranged from $4.14 to $4.94 for the week. July 2019 wheat futures closed at $4.65, up 41 cents since last Friday. July 2019 wheat futures traded between $4.18 and $4.73 this week. Downside price protection could be obtained by purchasing a $4.65 July 2019 Put Option costing 16 cents establishing a $4.49 futures floor. July wheat-to-corn price ratio was 1.21. Jul/Sep and Jul/Jul future spreads were 6 and 38 cents.
September 2019 wheat futures closed at $4.71, up 38 cents since last Friday. July 2020 wheat futures closed at $5.03, up 29 cents since last Friday. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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