By Dr. Aaron Smith
Overview
Soybeans, wheat, and cotton were up; corn was mixed for the week. Corn prices traded mostly sideways for a second straight week. The Crop Production and WASDE reports on August 12th will be watched very closely for any yield adjustments. Many are anticipating average yields of greater than 170 bu/acre for corn. Soybeans have traded between $10.50 and $11.20 for the past 4-weeks. Producers who do not have soybeans priced or have very little priced at this time should strongly consider pricing some production in this range. Given the estimated acreage and good growing conditions this far into the season there is substantially more downside risk in the market than upward potential. December cotton traded sideways this week. On May 8th December cotton futures traded at a high of 84.74, since then cotton futures have drop over 20 cents or approximately a 25% decrease in price. Improved moisture conditions in Texas and the Southern plains have increased yield expectations and reduced abandonment acres. The quality of the U.S. cotton crop this harvest will be very important to producers. Global cotton stocks continue to grow providing downward price pressure however good quality cotton is in shorter supply and should fetch a premium. Wheat quality concerns have led futures prices back near $5.50 this past week from lows of $5.18 two weeks ago. Rallies should continue to be looked at as pricing opportunities as these quality concerns are unlikely to overshadow global supplies over the long term that will continue to provide downward price pressure. Low test weights and high vomotoxin have been a major issue in West Tennessee and Eastern Kentucky. Substantial discounts have occurred for producers’ further deteriorating prices at the farm level.
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 $3.51 down 1 cent from last week with support at $3.45 and resistance at $3.62. Across Tennessee average basis (cash price- nearby future price) strengthened in Memphis and Lower-middle Tennessee and weakened at Northwest Barge Points, Northwest and Upper-Middle Tennessee. Overall basis for the week ranged from 3 under to 31 over the September futures contract with an average of 10 over at the end of the week. Corn net sales reported by exporters from July 25th to 31st were within expectations at 4.8 million bushels for the 2013/14 marketing year and below expectations at 30 million bushels for the 2014/15 marketing year. Exports for the same time period were up from last week at 42.2 million bushels. Corn export sales and commitments are 101% 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 105%. Ethanol production for the week ending August 1st was 902,000 barrels per day down 52,000 barrels per day. Ending ethanol stocks were 18.26 million barrels down 327,000 barrels. Nationally, the August 4th Crop Progress report estimated corn silking at 90% compared to 78% last week, 84% last year, and a 5-year average of 88%; corn dough or beyond at 36% compared to 17% last week, 17% last year, and a 5-year average of 29%; and corn condition at 73% good to excellent 7% poor to very poor. In Tennessee, corn silking was estimated at 99% compared to 96% last week, 95% last year, and a 5-year average of 98%; corn dough or beyond at 71% compared to 46% last week, 71% last year, and a 5-year average of 78%; and corn condition at 76% good to excellent and 5% poor to very poor. This week September and December 2014 corn futures prices traded between $3.51 and $3.74. September cash forward contracts at elevators and barge points for the week averaged $3.45 with a range of $3.26 to $3.69. Sep/Dec and Sep/Mar future spreads were 12 cents and 25 cents, respectively.
December 2014 corn futures closed at $3.63 up 1 cent from last week with support at $3.57 and resistance at $3.73. March futures closed at $3.76. Downside price protection could be obtained by purchasing a $4.00 September 2015 Put Option costing 36 cents establishing a $3.64 futures floor.
Soybeans
September 2014 soybean futures closed at $11.13 up 40 cents for the week with support at $10.91 and resistance at $11.25. September soybean to corn price ratio was 3.17 at the end of the week. For the week, average soybean basis weakened at Northwest, Northwest Barge Points, Lower-middle, and Upper-middle Tennessee and strengthened at Memphis. Basis ranged from 157 under to 101 over the August futures contract at elevators and barge points. Average basis at the end of the week was 65 under the August futures contract. August futures closed at $12.84. Net sales reported by exporters were below expectations with net sales of 3.5 million bushels for the 2013/14 marketing year and within expectations for the 2014/15 marketing year with net sales of 40.5 million bushels. Exports for the same period were the same as last week at 3.9 million bushels. Soybean export sales and commitments are 105% 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 -29 cents and -20 cents.
November 2014 soybean futures closed at $10.84 up 26 cents from last week with support at $10.67 and resistance at $10.93. The Crop Progress report estimated soybeans blooming at 85% compared to 76% last week, 77% last year, and a 5-year average of 83%; soybeans setting pods at 57% compared to 38% last week, 36% last year, and a 5-year average of 48%; and soybean condition at 71% good to excellent 6% poor to very poor. In Tennessee, the report estimated, soybeans blooming at 75% compared to 64% last week, 54% last year, and a 5-year average of 77%; soybeans setting pods at 47% compared to 32% last week, 29% last year, and a 5-year average of 52%; and soybean condition at 75% good to excellent 5% poor to very poor. This week November 2014 soybean futures traded between $10.54 and $10.84. Harvest soybean to corn price ratio was 2.93. November cash forward contracts averaged $10.75 with a range of $10.36 to $11.05. Downside price protection could be achieved by purchasing a $10.90 November 2014 Put Option which would cost 44 cents and set a $10.46 futures floor. January 2015 soybean futures were trading at $10.93.
Cotton
December 2014 cotton futures closed at 64.21 up 0.94 cents for the week with support at 63.24 and resistance at 65.22. Net sales reported by exporters were down from last week at a reduction of 1,300 bales of upland cotton for the 2013/14 marketing year and down from last week at 251,000 bales for the 2014/15 marketing year. Exports for the same period were up from last week at 145,100 bales. Cotton export sales and commitments finished the marketing year at 107% of the USDA estimated total annual exports for the 2013/14 marketing year (August 1 to July 31). Oct 2014 cotton futures are trading at 63.81. The Crop Progress report estimated cotton squaring at 95% compared to 87% last week, 93% last year, and a 5-year average of 95%; cotton setting bolls at 68% compared to 49% last week, 51% last year, and a 5-year average 66%; and cotton condition at 53% good to excellent, 14% poor to very poor. In Tennessee, cotton squaring was estimated at 98% compared to 95% last week, 86% last year, and a 5-year average of 97%; cotton setting bolls at 69% compared to 55% last week, 45% last year, and a 5-year average of 72%; and cotton condition at 68% good to excellent 7% poor to very poor. December cotton futures traded between 63.27 and 65.08 cents this week. Downside price protection could be obtained by purchasing a 65 cent December 2014 Put Option costing 3 cents establishing a 62 cent futures floor.
March 2014 cotton futures closed at 65.03 up 1.12 cents for the week with support at 63.98 and resistance at 66.06. Cotton adjusted world price (AWP) decreased 6.79 cents to 52.61 cents. Oct/Dec and Dec/Mar future spreads were 0.40 cents and 0.82 cents.
Wheat
September 2014 wheat futures closed at $5.49 up 15 cents from last week with support at $5.38 and resistance at $5.67. Net sales reported by exporters were below expectations at 21.7 million bushels for the 2014/15 marketing year. Exports for the same period were up from last week at 15.3 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 36%. The Crop Progress report estimated winter wheat harvested at 90% compared to 83% last week, 86% last year, and a 5-year average of 85%. In Tennessee, winter wheat harvested was estimated at 96% compared to 94% last week, 100% last year, and a 5-year average of 100%. September wheat futures traded between $5.34 and $5.72 this week. September wheat to corn price ratio was 1.56. In Tennessee, August cash contracts averaged $5.20 with a range of $4.84 to $5.58 at elevators and barge points. Sep/Dec and Sep/July future spreads were 17 cents and 55 cents.
December 2014 wheat futures closed at $5.66 up 13 cents from last week with support at $5.54 and resistance at $5.84. The Crop Progress report estimated spring wheat headed at 97% compared to 93% last week, 97% last year, and a 5-year average of 97%; and spring wheat condition at 70% good to excellent 5% poor to very poor. December wheat to corn price ratio was 1.56. June/July 2015 cash forward contracts averaged $5.83 with a range of $5.54 to $6.09 at elevators and barge points. July 2015 wheat futures closed at $6.04. Downside price protection could be obtained by purchasing a $6.10 July 2015 Put Option costing 48 cents establishing a $5.62 futures floor.
Source : uky.edu