Weekly Crop Comments : December Corn And November Soybean Futures Closed Up

By Dr. Aaron Smith

Overview

Corn, soybeans, and wheat were up; cotton was down for the week. December corn and November soybean futures closed up for the third consecutive week. Harvest delays have resulted in the USDA estimating that 40% of the soybean harvest and less than a quarter of the corn crop had been harvested as of October 12. The next 10 days has drier conditions in the forecast for many areas, this will allow producers to get back into the fields and continue with the estimated record harvest. Currently, December corn and November soybean futures had lows, on October 1st, of $3.18 ¼ and $9.04. Improved harvest conditions will fill up on and off farm storage and create additional logistical issues; this will likely provide downward pressure on cash and futures prices. Pricing additional production at this time should be considered. Cotton futures currently have an inverted spread between December and March futures contracts. Relatively strong nearby demand and continued concerns over excessive global stocks are contributing factors to the development of this spread. The USDA adjusted average farm prices, for the current marketing year, down 3 cents on the lower end of the range and 5 cents on the upper end to 55-65 cents per pound. Currently, cotton futures prices have limited upside due to uncertainty of Chinese import and domestic policy and large global stocks. December wheat futures are up 50 cents since the contract low of $4.66 ¼ on September 25. Global wheat stocks were projected down on the latest USDA-WASDE report, however if corn prices drop wheat prices will be pulled lower.

Corn

December 2014 corn futures closed at $3.48 up 14 cents a bushel since last week with support at $3.40 and resistance at $3.59. Across Tennessee average basis (cash price- nearby future price) strengthened or remained unchanged in all five regions. Overall basis for the week ranged from 62 under to 6 over the December futures contract with an average of 24 under at the end of the week. Ethanol production for the week ending October 10th was 885,000 barrels per day down 16,000 barrels per day from last week. Ending ethanol stocks were 18.356 million barrels down 295,000 barrels from last week. Nationally, the October 14th Crop Progress report estimated corn mature at 87% compared to 77% last week and a 5-year average of 89%; corn harvested at 24% compared to 17% last week and a 5-year average of 43%; and corn condition at 74% good to excellent 7% poor to very poor. In Tennessee, the Crop Progress report estimated, corn mature at 99% compared to 97% last week and a 5-year average of 98%; corn harvested at 82% compared to 71% last week and a 5-year average of 80%; and corn condition at 86% good to excellent and 2% poor to very poor. This week December 2014 corn futures prices traded between $3.30 and $3.58. Dec/Mar and Dec/Sep future spreads were 13 cents and 36 cents, respectively.

January cash forward contracts at elevators and barge points for the week averaged $3.41 with a range of $2.91 to $3.70. March 2015 corn futures closed at $3.61 up 15 cents from last week with support at $3.54 and resistance at $3.71. Corn net sales reported by exporters from October 2nd to 9th were above expectations with net sales of 75.7 million bushels for the 2014/15 marketing year and 20.1 million bushels for the 2015/16 marketing year. Exports for the same time period were down from last week at 35.5 million bushels. Corn export sales and commitments were 39% of the USDA estimated total annual exports for the 2014/15 marketing year (September 1 to August 31) compared to a 5-year average of 41%. September 2015 futures closed at $3.84. Downside price protection could be obtained by purchasing a $3.90 September 2015 Put Option costing 35 cents establishing a $3.55 futures floor.

Soybeans

November 2014 soybean futures closed at $9.51 up 29 cents for the week with support at $9.37 and resistance at $9.80. Nov/Dec soybean to corn price ratio was 2.73 at the end of the week. For the week, average soybean basis weakened in Northwest and Lower-middle Tennessee and strengthened at Northwest Barge Points, Memphis, and Upper-middle Tennessee. Basis ranged from 36 under to 60 over the November futures contract at elevators and barge points. Average basis at the end of the week was 12 over the November futures contract. The Crop Progress report estimated soybeans dropping leaves at 91% compared to 83% last week and a 5-year average of 91%; soybeans harvested at 40% compared to 20% last week and a 5-year average of 53%; and soybean condition at 73% good to excellent 6% poor to very poor. In Tennessee, the Crop Progress report estimated soybeans dropping leaves at 84% compared to 71% last week and a 5-year average of 83%; soybeans harvested at 24% compared to 17% last week and a 5-year average of 33%; and soybean condition at 82% good to excellent 3% poor to very poor. This week November 2014 soybean futures traded between $9.38 and $9.91. January cash forward contracts averaged $9.80 with a range of $9.40 to $10.09.

January 2015 soybean futures closed at $9.59 up 29 cents from last week with support at $9.44 and resistance at $9.87. Net sales reported by exporters were within expectations with net sales of 34.4 million bushels for the 2014/15 marketing year and 0.2 million bushels for the 2015/16 marketing year. Exports for the same period were up from last week at 56.2 million bushels. Soybean export sales and commitments were 66% of the USDA estimated total annual exports for the 2014/15 marketing year (September 1 to August 31), compared to a 5-year average of 58%. Nov/Jan and Nov/Nov future spreads were 8 cents and 16 cents. November 2015 futures closed at $9.67. Downside price protection could be achieved by purchasing a $9.80 November 2015 Put Option which would cost 76 cents and set a $9.04 futures floor.

Cotton

December 2014 cotton futures closed at 63 cents down 1.1 cents for the week with support at 63 and resistance at 66.47. Cotton adjusted world price (AWP) increased 0.12 cents to 49.83 cents. The Crop Progress report estimated cotton bolls opening at 77% compared to 73% last week and a 5-year average of 85%; cotton harvested at 22% compared to 15% last week and a 5-year average of 24%; and cotton condition at 47% good to excellent 19% poor to very poor. In Tennessee, the Crop Progress report estimated cotton bolls opening at 90% compared to 85% last week and a 5-year average of 88%; cotton harvested at 13% compared to 6% last week and a 5-year average of 32%; and cotton condition at 71% good to excellent 5% poor to very poor. December cotton futures traded between 62.96 and 65.65 cents this week. Downside price protection could be obtained by purchasing a 63 cent December 2014 Put Option costing 1.48 cents establishing a 61.52 cent futures floor.

March 2014 cotton futures closed at 61.73 down 0.11 cents for the week with support at 61.06 and resistance at 62.44. Net sales reported by exporters were down from last week at 7,000 bales for the 2014/15 marketing year and 10,300 bales for the 2015/16 marketing year. Exports for the same period were down from last week at 65,900 bales. Cotton export sales were 60% 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 52%. Dec/Mar future spread was -1.27 cents. December 2015 cotton futures closed at 65.11.

Wheat

December 2014 wheat futures closed at $5.16 up 18 cents from last week with support at $4.97 and resistance at $5.28. In Memphis, old crop cash wheat traded between $4.61 and $4.72 for the week. December wheat futures traded between $4.95 and $5.22 this week. December wheat to corn price ratio was 1.48. Dec/Mar and Dec/July future spreads were 12 cents and 25 cents.

March 2015 wheat futures closed at $5.28 up 19 cents from last week with support at $5.20 and resistance at $5.37. Net sales reported by exporters were within expectations at 16.7 million bushels for the 2014/15 marketing year and 1.5 million bushels for the 2015/16 marketing year. Exports for the same period were down from last week at 17.8 million bushels. Wheat export sales were 57% 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 57%. The Crop Progress report estimated winter wheat planted at 68% compared to 56% last week and a 5-year average of 67%; and winter wheat emerged at 43% compared to 28% last year and a 5-year average of 37%. In Tennessee, winter wheat planting was estimated at 20% compared to 13% last week and a 5-year average of 16%; and winter wheat emerged at 6% compared to 2% last week and a 5-year average of 1%. June/July 2015 cash forward contracts averaged $5.07 with a range of $4.70 to $5.33 at elevators and barge points. July 2015 wheat futures closed at $5.41. Downside price protection could be obtained by purchasing a $5.50 July 2015 Put Option costing 44 cents establishing a $5.06 futures floor.

Source : ukt.edu