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Weekly Crop Comments : Corn And Wheat Were Down, Cotton Was Up

By Dr. Aaron Smith

Corn and wheat were down; cotton was up; and soybeans were mixed for the week. The December WASDE report was largely uneventful the only production change was decreasing average U.S. cotton yield 2 lbs per acre to 806 lbs acre (Tennessee was left unchanged at 878 lbs/acre). Corn exports and ethanol use were both increased 50 million bushels. Soybean crushing and exports were raised 5 million and 25 million bushels respectively, below many projections, attributed to strong year-to-date export sales. Wheat imports were increased 10 million bushels due to increased Canadian wheat production estimates. Foreign ending stocks were revised up for all four commodities while domestic stocks were increased for wheat, held constant for cotton, and decreased for soybeans and corn. January’s WASDE report will most likely provide additional production and export adjustments and provide revised ending stock numbers. The existing Farm Bill will most likely be extended to the end of January to allow for a vote on a new Farm Bill sometime in January when Congress returns from the holiday break.



Corn

March 2014 corn futures closed at $4.25 down 9 cents from last week with support at $4.18 and resistance at $4.38. Across Tennessee basis (cash price- nearby future price) strengthened in many regions. Overall basis at the end of the week was between 5 under to 25 over the December Futures Contract. Corn net sales reported by exporters for the 2013/14 marketing year from November 29th to December 5th were 27.4 million bushels, primarily to Mexico, Japan, China, Peru, Venezuela, and Guatemala. Net sales reported by exporters for the 2014/15 marketing year for the week were 4.3 million bushels to Mexico. Exports for the same time period were 38.5 million bushels primarily to China, Mexico, Japan, Peru, and Venezuela. Corn export sales and commitments are 72% 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 52%. Exports are well ahead of projections however this week China rejected over 4.8 million bushels of U.S. corn due to an unapproved GMO variety (MIR 162 or Agrisure Viptera) being found. This will most likely lead to additional scrutiny of American exports and could potentially result in cancelations bound for China. Any reduction in Chinese imports of U.S. corn could have profound price implications for U.S. producers. Ethanol production for the week ending December 6th was 944,000 barrels per day up 31,000 barrels per day, the highest level since January 6, 2012. Ending ethanol stocks were 15.448 million barrels up 324,000 barrels. May 2014 corn futures were trading at $4.33 down 9 cents from last week. Mar/May and Mar/Sep future spreads were 8 cents and 21 cents.

Historical September Corn Futures Prices

Nearby and Harvest Corn Futures Prices

September 2014 corn futures closed at $4.46 down 10 cents from last week with support at $4.39 and resistance at $4.58. Harvest 2014 corn prices have traded between $4.40 and $4.70/bu since the middle of November. USDA December 10th estimated ending stocks are 1.79 billion bushels for the U.S. and 4.60 billion bushels of total foreign stocks. The U.S. stocks represent a doubling from last year’s ending stocks. If 2014 production is close to the nearly 14 billion bushels produced in 2013 prices will fall dramatically. Protecting against the potential for dramatic price declines for harvest 2014 is strongly encouraged for all producers. Downside price protection could be obtained by purchasing a $4.50 September 2014 Put Option costing 36 cents establishing a $4.14 futures floor.

Soybeans

January 2014 soybean futures closed at $13.27 up 2 cents for the week with support at $13.01 and resistance at $13.58. Soybean to corn price ratio was 3.12 at the end of the week. In Tennessee, soybean basis at the end of the week was between 14 under and 60 over the January futures contract at elevators and barge points. Average basis was 22 over the January futures contract. Net sales reported by exporters for the 2013/14 marketing year from November 29th December 5th were 40.7 million bushels, primarily to China, Mexico, Germany, Saudi Arabia, and South Korea. Net sales reported by exporters for the 2014/15 marketing year were 15.2 million bushels, primarily to China and Japan. Exports for the same period were 62.9 million bushels primarily to China, Germany, Mexico, Saudi Arabia, South Korea, and the United Kingdom. Soybean 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 71%. Export sales have continued to exceed expectations however concerns over potential Chinese cancellations contributed to futures price declines at the end of the week. March 2014 soybean futures were trading at $13.13. Jan/Mar and Jan/Nov future spreads were -14 cents and -170 cents.

Historical November Soybean Futures Prices

Nearby and Harvest Soybean Futures Prices

November 2014 soybean futures closed at $11.57 down 7 cents for the week with support at $11.45 and resistance at $11.74.  November 2014 soybean futures have traded between $11.40 and $11.80/bu since October 11th, substantially lower than nearby futures contracts. Domestic planting intentions and South American production will continue to have negative price implications if corn prices continue to fall and weather remains good to excellent in South America. Pricing some 2014 production prior to planting is strongly encouraged. Downside price protection could be achieved by purchasing an $11.60 November 2014 Put Option which would cost 73 cents and set a $10.87 futures floor.

Wheat

March 2014 wheat futures closed at $6.28 down 23 cents for the week with support at $6.23 and resistance at $6.48. Wheat prices made 52 week lows this Friday trading below $6.27/bu. Net sales reported by exporters for the 2013/14 marketing year from November 29th to December 5th were above last week at 13.7 million bushels, primarily to Nigeria, Brazil, Mexico, Japan, and Taiwan. Exports for the same period were 13.6 million bushels primarily to China, Brazil, the Philippines, Japan, and South Korea. Wheat export sales are 77% of the USDA estimated total annual exports for the 2013/14 marketing year (June 1 to May 31), slightly above the 5-year average of 71%. May 2014 wheat futures are trading at $6.34 down 22 cents from last week. Mar/May and Mar/Jul future spreads were 6 cents and 9 cents.

Historical July Wheat Futures Prices

Nearby and Fall Wheat Futures Prices

July 2014 wheat futures closed at $6.37 down 17 cents for the week with support at $6.33 and resistance at $6.52. In Tennessee, June/July cash forward contracts averaged $6.28/bu with a range of $5.72/bu to $6.48/bu at elevators and barge points. Prices have declined substantially from late October highs. Near record wheat production in Canada and other key production regions continue to pull prices lower. With the current decline in wheat prices producers may want to consider waiting to price wheat in early spring. Downside price protection could be obtained by purchasing a $6.40 July 2014 Put Option costing 38 cents establishing a $6.02 futures floor.

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