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2020 Corn Futures Established A New Four Week High And Low This Week
DR. AARON SMITH
KNOXVILLE, TENN.
March 2020 corn futures established a new four week high ($3.85 ½) and a new four week low ($3.71) this week. Corn prices were buoyed at the end of the week by strong export sales commitments to Mexico and progress on Phase 1 of a trade agreement with China. Since mid-August, March corn futures have traded in a 46 cent range from $3.65 to $4.11. Corn prices are likely to remain in this range as we move into 2020.
January soybean futures have rallied 49 ½ cents, from $8.67 ½ to $9.17, since December 2. On Friday, reports that China and the U.S. agreed on Phase 1 of a trade agreement created a 17 cent bump before falling back to close the day up 9 ¼ cents. While positive trade news was welcome, markets are likely to wait for further verification before additional increases emerge.
March cotton continues to move toward 70 cents. On August 26, the March cotton contract bottomed at 57.65 cents, since then prices have appreciated 10.15 cents peaking on Friday at 67.8 cents, the highest price since July 8. Cotton futures will still have a difficult time breaching 70 cents due to 20.21 million bales of US production and projected end-ing stocks of 5.5 million bales despite strong projected export sales of 16.5 million bales. Continued trading between 62 and 70 cents remains likely.
Analysis and futures market reaction to the December WASDE report for corn, soybean, cotton, and wheat is available at: https://ag.tennessee.edu/arec/Pages/MonthlyCropComments.aspx .
Corn
Ethanol production for the week ending December 6 was 1.072 million barrels per day, up 12,000 from the previous week. Ethanol stocks were 21.815 million barrels, up 1.176 million barrels compare to last week. Corn net sales reported by exporters for November 29 - December 5 2019 were up compared to last week with net sales of 34.4 million bushels for the 2019/20 marketing year and 0.09 million bushels for the 2020/21 marketing year. Exports for the same time period were up 7 percent from last week at 20.9 million bushels. Corn export sales and commitments were 33 percent of the USDA estimated total annual exports for the 2019/20 marketing year (September 1 to August 31) compared to the previous 5-year average of 50 percent. Nationally, the Crop Progress report estimated corn harvested at 92 percent compared to 89 percent last week, 100 percent last year, and a 5-year average of 100 percent. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened at Northwest Barge Points and Northwest Tennessee and weakened at Memphis and Upper-middle Tennessee. Overall, basis for the week ranged from 16 under to 16 over with an average of 7 over the March futures at elevators and barge points. In Tennessee, January corn cash contracts averaged $3.90 with a range of $3.76 to $3.98. March 2020 corn futures closed at $3.81, up 5 cents since last Friday. For the week, March 2020 corn futures traded between $3.71 and $3.85. Mar/May and Mar/Dec future spreads were 7 and 14 cents. May 2020 corn futures closed at $3.88, up 6 cents since last Friday.
In Memphis, new crop cash corn contracts ranged from $3.72 to $3.84. December 2020 corn futures closed at $3.95, up 5 cents since last Friday. Downside price protection could be obtained by purchasing a $4.00 December 2020 Put Option costing 29 cents establishing a $3.71 futures floor.
Soybeans
Net sales reported by exporters were up compared to last week with net sales of 38.6 million bushels for the 2019/20 marketing year and 4.6 million bushels for the 2020/21 marketing year. Exports for the same period were down 4 percent compared to last week at 53.0 million bushels. Soybean export sales and commitments were 56 percent of the USDA estimated total annual exports for the 2019/20 marketing year (September 1 to August 31), compared to the previous 5-year average of 69 percent. Average soybean basis strengthened or remained unchanged at Memphis, Northwest Barge Points, and Northwest Tennessee and weakened at Upper-middle Tennessee. Basis ranged from 34 under to 30 over the January futures contract at elevators and barge points. Average basis at the end of the week was 6 over the January futures contract. January 2020 soybean futures closed at $9.07, up 18 cents since last Friday. For the week, January 2020 soybean futures traded between $8.88 and $9.17. In Tennessee, January 2020 cash contracts ranged from $8.69 to $9.26. Jan/Mar and Jan/Nov future spreads were 14 and 44 cents. March 2020 soybean futures closed at $9.21, up 18 cents since last Friday. March soybean-to-corn price ratio was 2.42 at the end of the week.
In Memphis, new crop corn cash contracts ranged from $9.21 to $9.32. Nov/Dec 2020 soybean-to-corn price ratio was 2.41 at the end of the week. November 2020 soybean futures closed at $9.51, up 20 cents since last Friday. Downside price protection could be achieved by purchasing a $9.60 November 2020 Put Option which would cost 52 cents and set a $9.08 futures floor.
Cotton
Net sales reported by exporters were up compared to last week with net sales of 277,100 bales for the 2019/20 marketing year and 6,600 bales for the 2020/21 marketing year. Exports for the same time period were up 12 percent compared to last week at 186,300 bales. Upland cotton export sales were 71 percent of the USDA estimated total annual exports for the 2019/20 marketing year (August 1 to July 31), compared to the previous 5-year average of 64 percent. Nationally, the Crop Progress report estimated cotton harvested at 89 percent compared to 83 percent last week. In Tennessee, the Crop Progress report estimated cotton harvested at 97 percent compared to 95 percent last week and 97 percent last year. Delta upland cotton spot price quotes for December 12 were 64.67 cents/lb (41-4-34) and 66.92 cents/lb (31-3-35). Adjusted World Price (AWP) increased 0.69 cents to 56.66 cents. March 2020 cotton futures closed at 66.8 cents, up 0.8 cents since last Friday. For the week, March 2020 cotton futures traded between 64.81 and 67.8 cents. Mar/May and Mar/Dec cotton futures spreads were 1.17 cents and 1.98 cents. May 2020 cotton futures closed at 67.97, up 1.12 cents since last Friday.
December 2020 cotton futures closed at 68.78, up 1.14 cents since last Friday. Downside price protection could be obtained by purchasing a 69 cent December 2020 Put Option costing 4.39 cents establishing a 64.61 cent futures floor.
Wheat
Wheat net sales reported by exporters were up compared to last week with net sales of 18.5 million bushels for the 2019/20 marketing year. Exports for the same time period were up 68 percent from last week at 14.3 million bushels. Wheat export sales were 64 percent of the USDA estimated total annual exports for the 2019/20 marketing year (June 1 to May 31), compared to the previous 5-year average of 75 percent. In Tennessee, December 2019 wheat cash contracts ranged from $5.23 to $5.67 for the week. March 2020 wheat futures closed at $5.32, up 8 cents since last Friday. March 2020 wheat futures traded between $5.16 and $5.36 this week. March wheat-to-corn price ratio was 1.40. Mar/May and Mar/Jul future spreads were 2 and 5 cents. May 2020 wheat futures closed at $5.34, up 7 cents since last Friday. May wheat-to-corn price ratio was 1.38.
In Memphis, June/July 2020 cash contracts ranged from $5.31 to $5.41. July 2020 wheat futures closed at $5.37, up 7 cents since last Friday. Downside price protection could be obtained by purchasing a $5.40 July 2020 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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