By Dr. Aaron Smith
Corn and soybeans were up; wheat was down; and cotton was mixed for the week. Where is the high on nearby soybeans? Soybeans broke through the $14.00 barrier this week. Soybean exports have been fantastically strong and it seems less and less likely that we will see any significant cancellations of soybean commitments. Recently, new export commitments have diminished however, shipments remained very strong. That being said, South American production will eventually make it to the export market and when it does prices will surely be pulled lower. Due to the lack of cancelations we could see a domestic shortage. Consider if exports are 75 million bushels greater than the USDA current projections for the 2013-14 marketing year, holding all else constant, that leaves 75 million bushels in ending stocks. This is a very tight ending stocks number.
For corn in the 2014/15 marketing year, the USDA projects production up 60 million bushels to 13.985 billion bushels. This is despite a 3.1 million acre drop in estimated harvest acreage. The estimated average yield is very robust at 165.3 bu/acre. Use is estimated at 13.380 billion bushels with small increases in domestic use and a reduction of 50 million bushels in exports. Carry over is estimated to be 2.111 billion bushels for the next marketing year and average farm price is projected at $3.90/bu. For soybeans in the 2014/15 marketing year, the USDA projects production up 261 million bushels on higher harvested acreage and improved yield. Total production is estimated at 3.55 billion bushels. Total use is estimated at 3.43 billion bushels up due to strong domestic crush numbers and exports. Ending stocks and prices are estimated at 285 million bushels and $9.65/bu. For cotton in the 2014/15 marketing year, the USDA has projected production of 16.3 million bales up 23% from last year. This increase is largely based on increased planted acreage and significantly reduced abandonment acreage. Use is projected up 600,000 bales. Domestic ending stocks and farm price are estimated at 4.6 million bales and $0.68/lb. For wheat in the 2014/15 marketing year, the USDA has projected production of 2.16 billion bushels up 30 million bushels from 2013/14. Total use is projected down 178 million bushels primarily due to a 60 million bushel reduction in feed and residual use and a decrease in exports of 125 million bushels. The projected farm price for the 2014/15 marketing year is $5.30/bu.
March 2014 corn futures closed at $4.57 up 2 cents from last week with support at $4.43 and resistance at $4.65. Across Tennessee basis (cash price- nearby future price) strengthened in Northwest and Lower-middle Tennessee and weakened at Memphis, Northwest Barge Points, and Upper-middle Tennessee. Overall basis for the week ranged from 1 under to 42 over the March futures contract. Corn net sales reported by exporters for the 2013/14 marketing year from February 14th to 20th were above expectations at 33.1 million bushels, primarily to Japan, Columbia, Peru, the Dominican Republic, and Egypt. Net sales reported by exporters for the 2014/15 marketing year were 0.06 million bushels, primarily to Honduras. Exports for the same time period were 33.6 million bushels primarily to Japan, Mexico, Peru, Columbia, and South Korea. Corn export sales and commitments are 89% 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 71%. Ethanol production for the week ending February 21st was 905,000 barrels per day up 2,000 barrels per day. Ending ethanol stocks were 17.024 million barrels down 179,000 barrels. May 2014 corn futures were trading at $4.63 up 1 cent from last week. Mar/May and Mar/Sep future spreads were 6 cents and 11 cents.
September 2014 corn futures closed at $4.68 up 2 cents from last week with support at $4.53 and resistance at $4.75. This week September and December 2014 corn futures prices traded between $4.56 and $4.72/bu. A great deal of uncertainty exists regarding the 2014 corn crop however more downside price risk exists at this time than upside price potential. Downside price protection could be obtained by purchasing a $4.70 September 2014 Put Option costing 39 cents establishing a $4.31 futures floor.
March 2014 soybean futures closed at $14.14 up 56 cents for the week with support at $13.74 and resistance at $14.34. Soybean to corn price ratio was 3.09 at the end of the week. For the week, average soybean basis weakened or remained the same in all five locations. Basis ranged from 1 under to 67 over the March futures contract at elevators and barge points. Average basis at the end of the week was 29 over the March futures contract. Net sales reported by exporters for the 2013/14 marketing year from February 14th to 20th were slightly below expectations at 12 million bushels, primarily to China, Mexico, Germany, and Spain. Net sales reported by exporters for the 2014/15 marketing year were 11.6 million bushels, primarily to China, Canada, and Mexico. Exports for the same period were 66 million bushels primarily to China, the Netherlands, Germany, Saudi Arabia, and Spain. Soybean export sales and commitments are 106% 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 88%. May 2014 soybean futures were trading at $14.14. Mar/May and Mar/Nov future spreads were 0 cents and -245 cents.
November 2014 soybean futures closed at $11.69 up 24 cents for the week with support at $11.39 and resistance at $11.84. This week November 2014 soybean futures traded between $11.50 and $11.82/bu. The rise in nearby soybean futures over the past month and a half has finally drug 2014 harvest prices up near $12.00/bu, pricing some production prior to planting should be strongly considered. Downside price protection could be achieved by purchasing an $11.80 November 2014 Put Option which would cost 73 cents and set a $11.07 futures floor.
March 2014 wheat futures closed at $5.99 down 17 cents for the week with support at $5.75 and resistance at $6.13. Net sales reported by exporters for the 2013/14 marketing year from February 14th to 20th were within expectations at 13.4 million bushels, primarily to the Philippines, Thailand, Brazil, and Mexico. Net sales reported by exporters for the 2014/15 marketing year were 7.3 million bushels primarily to Venezuela, South Korea, and Nigeria. Exports for the same period were 20.1 million bushels primarily to Nigeria, Peru, Brazil, South Korea, and the Philippines. Wheat export sales are 88% 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 90%. In Tennessee, old crop wheat was trading between $6.08 and $6.73. May 2014 wheat futures are trading at $6.02 down 11cents from last week. Mar/May and Mar/Jul future spreads were 3 cents and 9 cents.
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July 2014 wheat futures closed at $6.08 down 9 cents from last week with support at $5.88 and resistance at $6.20. July wheat futures traded between $5.94 and $6.24 this week. In Tennessee, June/July cash forward contracts averaged $6.02/bu with a range of $5.36/bu to $6.35/bu at elevators and barge points. Wheat prices have rallied substantially from the lows in late January however futures prices appear to have peaked and may start to decline. For those with little to no wheat priced at this point, pricing some 2014 production while wheat futures are above $6.00/bu is strongly encouraged. Downside price protection could be obtained by purchasing a $6.10 July 2014 Put Option costing 36 cents establishing a $5.74 futures floor.