Weekly Crop Comments:Cotton, soybeans, and wheat were up and corn was down for the week.

Weekly Crop Comments

By Dr. Aaron Smith

Cotton, soybeans, and wheat were up and corn was down for the week. Issues between Russia and Ukraine continue to provide volatility in grain markets. While much has been made over the potential disruptions in planting and shipping, to date there is little evidence that either has occurred in any significant way. That being said, uncertainty over the resolution of the situation and potential ramifications will continue to fuel market reaction for the foreseeable future.

Going forward domestic spring planting intentions will be monitored very closely. Many are speculating as to if the latest rally in corn has potentially shifted planting intentions. From January 2 to March 20 harvest price ratios for soybean/corn decreased 0.04 from 2.52 to 2.48 with a range of 2.40 to 2.52 and an average of 2.46. Whether this relative price increase was enough to move additional acreage into corn remains to be seen.    

Old crop cotton continues to receive domestic support on concerns over lower stocks. Many analysts are now projecting an old crop trading range of 87 to 98 cents. New crop cotton, while able to finally breach the 80 cent, range appears poised to trade in a range of 73 to 83 cents. There is a great deal of uncertainty in cotton at this time but two underlying facts are very hard for the markets to ignore: 1) the large amount of cotton in Chinese reserves and 2) the price gap between polyester and cotton. These two issues will cause markets to continue to react cautiously even when potential bullish news is realized.   

Producers are strongly encouraged to start attending meetings and evaluating program options under the 2014 Farm Bill. Producers will be required to make a onetime decision between Price Loss Coverage (PLC), County Agricultural Risk Coverage (County ARC), and Individual Agricultural Rick Coverage (Individual ARC). While these decisions will not need to be made until later in 2014 the decisions will have an impact on program eligibility and payments from at least 2014-2018. There are many factors and steps that producers will need to consider prior to making these decisions so it is strongly encouraged for all producers to ensure they are adequately informed. Additionally, producers should be aware of potential updates / changes due to the forthcoming regulations. Cotton producers will receive 2014 transition payments based on 2013 base acreage. Beginning in 2015 the cotton safety net will be called Stacked Income Protection Plan (STAX).



Corn

May 2014 corn futures closed at $4.79 down 7 cents from last week with support at $4.73 and resistance at $4.83. Across Tennessee basis (cash price- nearby future price) strengthened in Lower-middle, weakened at Memphis and Northwest Barge Points, and remained unchanged in Upper-middle and Northwest Tennessee. Overall basis for the week ranged from 5 under to 36 over the May futures contract. Corn net sales reported by exporters for the 2013/14 marketing year from March 7th to March 13th were above expectations at 29.4 million bushels. No net sales were reported by exporters for the 2014/15 marketing year. Exports for the same time period were 36.5 million bushels. Corn export sales and commitments are 94% 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 75%. Ethanol production for the week ending March 14th was 891,000 barrels per day up 22,000 barrels per day. Ending ethanol stocks were 15.277 million barrels down 631,000 barrels. July 2014 corn futures were trading at $4.83/bu. May/July and May/Sep future spreads were 4 cents and 2 cents.

 

September 2014 corn futures closed at $4.81 down 7 cents from last week with support at $4.76 and resistance at $4.84. This week September and December 2014 corn futures prices traded between $4.78 and $4.92/bu. This week we started to see a decline in harvest corn futures. For those that are looking to increase their level of production priced prior to planting they are encouraged to do so sooner rather than later as there are many indicators that we have reversed the upward trend of the past two months. Downside price protection could be obtained by purchasing a $4.90 September 2014 Put Option costing 41 cents establishing a $4.49 futures floor.

Soybeans

May 2014 soybean futures closed at $14.08 up 20 cents for the week with support at $14.03 and resistance at $14.71. Nearby soybean to corn price ratio was 2.94 at the end of the week. For the week, average soybean basis strengthened at Memphis and Upper-middle Tennessee and weakened in Northwest, Northwest Barge Points, and Lower-middle Tennessee. Basis ranged from 20 under to 55 over the May futures contract at elevators and barge points. Average basis at the end of the week was 12 over the May futures contract. Net sales reported by exporters for the 2013/14 marketing year from March 7th to March 13th were within expectations at 7.4 million bushels. Net sales reported by exporters for the 2014/15 marketing year were within expectations at 16.1 million bushels. Exports for the same period were 41.1 million bushels. Soybean export sales and commitments are 107% 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 91%. July 2014 soybean futures were trading at $13.82. May/July and May/Nov future spreads were -26 cents and -231 cents.



November 2014 soybean futures closed at $11.77 up 3 cents for the week with support at $11.64 and resistance at $11.94. This week November 2014 soybean futures traded between $11.68 and $11.98/bu. Harvest soybean to corn price ratio was 2.45. Downside price protection could be achieved by purchasing an $11.80 November 2014 Put Option which would cost 67 cents and set an $11.13 futures floor.