Weekly Crop Comments : Soybeans, Wheat Were Up

By Dr. Aaron Smith

Overview

Soybeans, wheat, and cotton were up; corn was down for the week. Futures markets were closed Friday April 18th for the Easter weekend, as such closing numbers for the week are from Thursday. Corn planting progress has been delayed in several regions, however we are still ahead of 2013 planting progress. Corn planting progress will continue to create fluctuations in the futures market but it is important to remember how quickly the crop can be planted. Last year in the U.S. over 75 million acres of corn were planted in about 2 weeks. Soybean markets continue to move higher due to tight old crop supplies. Shipments of soybeans out of South America could help alleviate some of the supply issues but it is unclear when this may occur. Harvest soybean futures prices are approaching $12.50 which represents a very strong pricing opportunity prior to planting. Wheat markets continued to show volatility due to weather concerns and the geopolitical uncertainty in Russia and Ukraine. This past week saw the escalation of the conflict in Eastern Ukraine after a week of subsidence. Grain markets will continue to react as this conflict unfolds. Harvest cotton prices have continued to increase over the past few weeks and are now closing in on 82 cents. Harvest cotton futures prices in the low to mid 80 cent range is a good place to price cotton as we move towards the planting season in Tennessee.

Corn

May 2014 corn futures closed at $4.94 down 4 cents from last week with support at $4.89 and resistance at $5.09. Across Tennessee basis (cash price- nearby future price) strengthened in Northwest Tennessee, remained unchanged at northwest barge points, and weakened in Memphis, upper- and lower-middle Tennessee. Overall basis for the week ranged from 6 under to 35 over the May futures contract with an average of 16 over at the end of the week. Corn net sales reported by exporters from April 4th to April 10th were within expectations at 23.7 million bushels for the 2013/14 marketing year and above expectations at 7.6 million bushels for the 2014/15 marketing year. Exports for the same time period were 43.7 million bushels. Corn export sales and commitments are 96% 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 84%. Ethanol production for the week ending April 11th was 939,000 barrels per day up 43,000 barrels per day. Ending ethanol stocks were 15.952 million barrels down 455,000 barrels. July 2014 corn futures were trading at $5.00. May/July and May/Sep future spreads were 6 cents and 4 cent.

September 2014 corn futures closed at $4.98 down 4 cents from last week with support at $4.96 and resistance at $5.13. Nationally, the April 14th Crop Progress report estimated corn planting at 3% compared to 2% last year and a 5-year average of 6%. In Tennessee, corn planted was estimated at 7% compared to 2% last week, 10% last year, and a 5-year average of 25%. This week September and December 2014 corn futures prices traded between $4.96 and $5.09/bu. September cash forward contracts at elevators and barge points for the week averaged $4.93 with a range of $4.73 to $5.09. Downside price protection could be obtained by purchasing a $5.00 September 2014 Put Option costing 36 cents establishing a $4.64 futures floor.

Soybeans

May 2014 soybean futures closed at $15.14 up 51 cents for the week with support at $14.90 and resistance at $15.36. Nearby soybean to corn price ratio was 3.06 at the end of the week. For the week, average soybean basis strengthened or remained unchanged in all five regions. Basis ranged from 18 under to 40 over the May futures contract at elevators and barge points. Average basis at the end of the week was 3 over the May futures contract. Net sales reported by exporters from April 4th to April 10th were within expectations at 0.7 million bushels for the 2013/14 marketing year and above expectations for the 2014/15 marketing year at 14.7 million bushels. Exports for the same period were 12.5 million bushels. Soybean export sales and commitments are 104% 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 95%. July 2014 soybean futures were trading at $15.02. May/July and May/Nov future spreads were -12 cents and -275 cents.

November 2014 soybean futures closed at $12.39 up 25 cents for the week with support at $12.22 and resistance at $12.45. This week November 2014 soybean futures traded between $12.11 and $12.44. Harvest soybean to corn price ratio was 2.49. November cash forward contracts averaged $12.26 with a range of $11.90 to $12.47. Downside price protection could be achieved by purchasing a $12.40 November 2014 Put Option which would cost 73 cents and set an $11.67 futures floor.

Wheat

May 2014 wheat futures closed at $6.91 up 31 cents for the week with support at $6.67 and resistance at $7.21. Net sales reported by exporters from April 4th to April 10th were above expectations at 16.1 million bushels for the 2013/14 marketing year and within expectations at 13.2 million bushels for the 2014/15 marketing year. Exports for the same period were 20.4 million bushels. Wheat export sales are 96% of the USDA estimated total annual exports for the 2013/14 marketing year (June 1 to May 31), compared to a 5-year average of 100%. May wheat to corn price ratio was 1.40. In Tennessee, old crop wheat was trading between $6.97 and $7.26. May/July and May/September future spreads were 8 cents and 17 cents.

July 2014 wheat futures closed at $6.99 up 31 cents from last week with support at $6.73 and resistance at $7.28. Nationally, the April 14th Crop Progress report estimated winter wheat condition at 34% good to excellent and 32% poor to very poor; and winter wheat headed was 5% compared to 4% last year. In Tennessee, winter wheat condition was estimated at 76% good to excellent and 8% poor to very poor; and winter wheat jointed was estimated at 55% compared to 15% last week, 60% last year, and a 5-year average of 66%. July wheat futures traded between $6.72 and $7.18 this week. July/September wheat to corn price ratio was 1.40. In Tennessee, June/July cash forward contracts averaged $6.83 with a range of $6.37 to $7.12 at elevators and barge points. Downside price protection could be obtained by purchasing a $7.00 July 2014 Put Option costing 35 cents establishing a $6.65 futures floor.