Weekly Crop Comments : Corn And Cotton Were Up

By Dr. Aaron Smith

Overview

Corn and cotton were up, wheat was mixed, and soybeans were down for the week. The August WASDE, released on Tuesday, contained anticipated upward yield revisions for corn and soybeans. However, the estimated average national yields of 167.4 bu/acre for corn and 45.4 bu/acre for soybeans were below many analysts’ expectations. It is likely that future increases in yields, particularly for corn, will be forthcoming in future WASDE reports. Baring a weather event, as we move closer to harvest we will likely see corn and soybean futures prices establish new lows as an anticipated record crop is brought to market. Pricing additional bushels during pre-harvest rallies is strongly advisable for both the 2014 and 2015 crop as downside price risk still exceeds upside potential. Cotton markets continued their sideways trend after establishing contract lows at the beginning of August. As we move closer to harvest the quality of the domestic cotton crop will be important for producers to receive higher prices. The large reserves of cotton held in China will need to be blended with higher quality cotton to improve overall yarn quality. Wheat prices have been buoyed by quality concerns. Pricing remaining wheat with futures prices above $5.50 is strongly encouraged as wheat prices will likely be pulled down should corn and soybean prices decline this fall.

The University of Tennessee, Farm Credit Mid-America, Tennessee Soybean Promotion Board, and Tennessee Farm Bureau are holding informational meetings about the 2014 Farm Bill August 18th to 21st at Jackson, Dyersburg, Fayetteville, and Knoxville. Times, locations, and additional details can be found on our Crops Economics page.

Corn

September 2014 corn futures closed at $3.65 up 14 cents from last week with support at $3.57 and resistance at $3.72. Across Tennessee average basis (cash price- nearby future price) strengthened in Lower-middle Tennessee and weakened at Memphis, Northwest Barge Points, Northwest, and Upper-Middle Tennessee. Overall basis for the week ranged from 8 under to 31 over the September futures contract with an average of 8 over at the end of the week. Corn net sales reported by exporters from August 1st to 7th were below expectations with net cancelations of 4.68 million bushels for the 2013/14 marketing year and above expectations at 26.4 million bushels for the 2014/15 marketing year. Exports for the same time period were down from last week at 28.4 million bushels. Corn export sales and commitments are 100% of the USDA estimated total annual exports for the 2013/14 marketing year (September 1 to August 31) compared to a 5-year average of 106%. Ethanol production for the week ending August 8th was 931,000 barrels per day up 29,000 barrels per day. Ending ethanol stocks were 17.76 million barrels down 500,000 barrels. Nationally, the August 11th Crop Progress report estimated corn silking at 96% compared to 90% last week, 93% last year, and a 5-year average of 95%; corn dough or beyond at 54% compared to 36% last week, 30% last year, and a 5-year average of 46%; corn dented or beyond at 11% compared to 5% last year and a 5-year average of 16%; and corn condition at 73% good to excellent 7% poor to very poor. In Tennessee, corn silking was estimated at 99% compared to 99% last week, 99% last year, and a 5-year average of 100%; corn dough or beyond at 85% compared to 71% last week, 83% last year, and a 5-year average of 88%; corn dented or beyond at 22% compared to 46% last year and a 5-year average of 59%; and corn condition at 77% good to excellent and 4% poor to very poor. This week September and December 2014 corn futures prices traded between $3.47 and $3.79. September cash forward contracts at elevators and barge points for the week averaged $3.43 with a range of $3.24 to $3.64. Sep/Dec and Sep/Mar future spreads were 12 cents and 25 cents, respectively.

December 2014 corn futures closed at $3.77 up 14 cents from last week with support at $3.68 and resistance at $3.84. March futures closed at $3.90. Downside price protection could be obtained by purchasing a $4.20 September 2015 Put Option costing 42 cents establishing a $3.78 futures floor.

Soybeans

September 2014 soybean futures closed at $11.02 down 11 cents for the week with support at $10.791 and resistance at $11.25. September soybean to corn price ratio was 3.02 at the end of the week. For the week, average soybean basis weakened in all five regions. Basis ranged from 27 under to 143 over the September futures contract at elevators and barge points. Average basis at the end of the week was 35 over the September futures contract. Net sales reported by exporters were within expectations with net sales of 2.3 million bushels for the 2013/14 marketing year and above expectations for the 2014/15 marketing year with net sales of 42 million bushels. Exports for the same period were up from last week at 5.4 million bushels. Soybean export sales and commitments are 103% of the USDA estimated total annual exports for the 2013/14 marketing year (September 1 to August 31), compared to a 5-year average of 104%. Sep/Nov and Sep/Jan future spreads were -50 cents and -41 cents.

November 2014 soybean futures closed at $10.52 down 32 cents from last week with support at $10.34 and resistance at $10.77. The Crop Progress report estimated soybeans blooming at 92% compared to 85% last week, 87% last year, and a 5-year average of 91%; soybeans setting pods at 72% compared to 57% last week, 55% last year, and a 5-year average of 65%; and soybean condition at 70% good to excellent 7% poor to very poor. In Tennessee, the Crop Progress report estimated, soybeans blooming at 83% compared to 75% last week, 65% last year, and a 5-year average of 85%; soybeans setting pods at 62% compared to 47% last week, 43% last year, and a 5-year average of 64%; and soybean condition at 74% good to excellent 5% poor to very poor. This week November 2014 soybean futures traded between $10.38 and $10.89. Harvest soybean to corn price ratio was 2.79. November cash forward contracts averaged $10.58 with a range of $10.17 to $10.96. Downside price protection could be achieved by purchasing a $10.60 November 2014 Put Option which would cost 38 cents and set a $10.22 futures floor. January 2015 soybean futures were trading at $10.61.

Cotton

December 2014 cotton futures closed at 64.35 up 0.14 cents for the week with support at 63.66 and resistance at 65.32. Net sales reported by exporters were down from last week at 176,400 bales for the 2014/15 marketing year and 8,100 bales for the 2015/2016 marketing year. Exports for the same period were down from last week at 94,500 bales. Cotton export sales are 46% of the USDA estimated total annual exports for the 2014/15 marketing year (August 1 to July 31), compared to a 5-year average of 39%. Oct 2014 cotton futures are trading at 63.60. The Crop Progress report estimated cotton setting bolls at 83% compared to 68% last week, 70% last year, and a 5-year average 80%; cotton bolls opening at 7% compared to 5% last year and a 5-year average of 9%; and cotton condition at 52% good to excellent 14% poor to very poor. In Tennessee, the Crop Progress report estimated cotton setting bolls at 82% compared to 69% last week, 66% last year, and a 5-year average of 85%; cotton bolls opening at 2% compared to 0% last year and a 5-year average of 1%; and cotton condition at 68% good to excellent 7% poor to very poor. December cotton futures traded between 63.29 and 65.27 cents this week. Downside price protection could be obtained by purchasing a 65 cent December 2014 Put Option costing 2.60 cents establishing a 62.4 cent futures floor.

March 2014 cotton futures closed at 65.25 up 0.22 cents for the week with support at 64.68 and resistance at 65.98. Cotton adjusted world price (AWP) increased 0.57 cents to 53.18 cents. Oct/Dec and Dec/Mar future spreads were 0.75 cents and 0.90 cents.

Wheat

September 2014 wheat futures closed at $5.51 up 2 cents from last week with support at $5.24 and resistance at $5.69. Net sales reported by exporters were below expectations at 12.4 million bushels for the 2014/15 marketing year. Exports for the same period were up from last week at 18.4 million bushels. Wheat export sales are 42% of the USDA estimated total annual exports for the 2014/15 marketing year (June 1 to May 31), compared to a 5-year average of 38%. The Crop Progress report estimated winter wheat harvested at 95% compared to 90% last week, 91% last year, and a 5-year average of 90%. In Tennessee, winter wheat harvested was estimated at 97% compared to 96% last week, 100% last year, and a 5-year average of 100%. September wheat futures traded between $5.27 and $5.56 this week. September wheat to corn price ratio was 1.51. In Tennessee, August cash contracts averaged $4.80 with a range of $3.78 to $5.80 at elevators and barge points. Sep/Dec and Sep/July future spreads were 12 cents and 52 cents.

December 2014 wheat futures closed at $5.63 down 3 cents from last week with support at $5.63 and resistance at $5.83. The Crop Progress report estimated spring wheat harvested at 6% compared to 5% last year and a 5-year average of 21%; and spring wheat condition at 70% good to excellent 5% poor to very poor. December wheat to corn price ratio was 1.49. June/July 2015 cash forward contracts averaged $5.62 with a range of $5.12 to $5.88 at elevators and barge points. July 2015 wheat futures closed at $6.03. Downside price protection could be obtained by purchasing a $6.10 July 2015 Put Option costing 51 cents establishing a $5.59 futures floor.

Source : utk.edu