Weekly Crop Comments
December 2, 2013
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Corn was down; cotton and wheat were up; and soybeans were mixed for the week. Due to the Thanksgiving Day holiday the weekly crop comments were completed Monday. The numbers quoted are from market close on Friday in order to maintain consistency with previous weeks. November 25th was the last crop progress report from the USDA for 2013. The first Crop Progress report for 2014 is scheduled to be released April 7, 2014. Soybean and corn exports remain strong for the 2013/14 marketing year.
December 2013 corn futures closed at $4.15 down 7 cents from last week with support at $4.09 and resistance at $4.22. With the expiration of the December futures contract only a couple weeks away focus will shift to the March contract. Nearby corn futures prices appear to be holding above the $4.00/bu level, however if demand softens early in the New Year prices may fall below that threshold. It is likely that producers will provide significantly more corn to the market after the year end has passed and consequently price softening may continue. The November 25th USDA Crop Progress report estimated corn harvested at 95% compared to 100% last year and 91% for a 5-year average. Across Tennessee basis (cash price- nearby future price) strengthened in four out five regions. Change in regional basis was -1 cent and 6 cents. Overall basis at the end of the week averaged between 25 under to 26 over the December Futures Contract. Corn net sales reported by exporters for the 2013/14 marketing year from November 15th to 21st were 39.6 million bushels, primarily to South Korea, China, Peru, Mexico, and Japan. Exports for the same time period were 27.6 million bushels primarily to China, Mexico, and Japan. Ethanol production for the week ending November 22nd was 927,000 barrels per day up 23,000 barrels per day. Ending ethanol stocks were 15.022 million barrels down 61,000 barrels. March 2014 corn futures were trading at $4.24 down 5 cents from last week. Dec/Mar and Dec/Sep future spreads were 9 cents and 31 cents.
September 2014 corn futures closed at $4.46 down 4 cents from last week with support at $4.41 and resistance at $4.51. September and December 2014 corn futures contracts have a significant amount of production risk and acreage uncertainty embedded into prices. 2014 planted corn acreage may be lower than last year, however so will prevented planting numbers, thus harvested acreage may not decrease substantially (unless a weather event occurs). Establishing a price floor for the 2014 production year is strongly encouraged. Downside price protection could be obtained by purchasing a $4.50 September 2014 Put Option costing 36 cents establishing a $4.14 futures floor.
January 2014 soybean futures closed at $13.36 up 17 cents for the week with support at $13.21 and resistance at $13.46. Soybean to corn price ratio was 3.22 at the end of the week. In Tennessee, soybean basis was between 20 under and 59 over the January futures contract at elevators and barge points. In Tennessee, the crop progress report estimated soybeans harvested at 82% compared to 100% last year and 97% for a 5-year average; and soybean condition was 86% good to excellent and 2% poor to very poor. Net sales reported by exporters for the 2013/14 marketing year from November 15th to 21st were above expectations at 51.7 million bushels, primarily to China, Germany, Mexico, Iran, and Japan. Net sales reported by exporters for the 2014/15 marketing year were 13.4 million bushels, primarily to China and Japan. Exports for the same period were 91.4 million bushels primarily to China, Germany, Mexico, Japan, Iran, and Turkey. March 2014 soybean futures were trading at $13.17. Jan/Mar and Jan/Nov future spreads were -19 cents and -189 cents.
November 2014 soybean futures closed at $11.47 down 20 cents for the week with support at $11.40 and resistance at $11.56. Nearby soybean futures prices remain strong however caution needs to be employed when looking at deferred futures prices. Two key factors to watch going forward are: 1) the progress of the estimated recorded planted South American soybean crop; and 2) 2014 domestic planting intentions. 2014 harvest prices dropped 20 cents this week while the nearby futures contracts rose nearly 20 cents. It is likely that volatility in the nearby soybean futures contracts will continue while 2014 harvest futures prices will continue their downward trend. Downside price protection could be achieved by purchasing an $11.60 November 2014 Put Option which would cost 75 cents and set a $10.85 futures floor.
December 2013 cotton futures closed at 78.14 up 2.93 cents for the week with support at 76.69 and resistance at 78.87. The USDA Crop Progress report estimated: cotton harvested at 78% compared to 88% last year and 83% for a 5-year average. In Tennessee, cotton harvested was 68% compared to 99% last year and 96% for a 5-year average; and cotton condition was 65% good to excellent and 10% poor to very poor. Tennessee cotton harvest is still well behind average. Cotton adjusted world price (AWP) increased 0.48 cents to 63.91 cents. Net sales reported by exporters for the 2013/14 marketing year from November 15th to 21st were down from last week at 265,700 bales of upland cotton, primarily to Turkey, China, Vietnam, Mexico, and Indonesia. Net sales reported by exporters for the 2014/15 marketing year were 30,400 bales to El Salvador. Exports for the same period were 96,300 bales primarily to China, Turkey, Mexico, Thailand, and Indonesia. March 2014 cotton futures are trading at 79.35 up 2.12 cents from last week. Dec/Mar and Dec/Dec future spreads were 1.21 cents and -1.18 cents.
December 2014 cotton futures closed at 76.96 up 1.1 cents for the week with support at 75.61 and resistance at 77.67. Wednesday saw a new low established for the December 2014 cotton futures contract at 75.25 cents/lb. Prices have rebounded slightly from the low. It appears we may be seeing a new trading range of 75 to 78 cents being established; however those looking to plant cotton this spring should remain cognizant of the downside price risk. The last four years global cotton production has exceeded use. This surplus cotton is controlled primarily by the Chinese; how they address these massive stocks will guide cotton prices for the foreseeable future. Downside price protection could be obtained by purchasing a 77 cent December 2014 Put Option costing 5.4 cents establishing a 71.6 cent futures floor.
December 2013 wheat futures closed at $6.55 up 6 cents for the week with support at $6.48 and resistance at $6.60. The USDA Crop Progress report estimated: winter wheat emerged at 93% compared to 88% last year and 89% for a 5-year average; and winter wheat condition at 62% good to excellent and 8% poor to very poor. In Tennessee, winter wheat planted was 86% compared to 99% last year and a 5-year average of 93%; winter wheat emerged was 57% compared to 79% last year and a 5-year average of 74%; and wheat condition was 85% good to excellent and 1% poor to very poor. Net sales reported by exporters for the 2013/14 marketing year from November 15th to 21st were below last week at 20.7 million bushels, primarily to Nigeria, Egypt, China, and Mexico. Exports for the same period were 12.2 million bushels primarily to China, Taiwan, Nigeria, Japan, and Mexico. March 2014 wheat futures are trading at $6.68 up 11 cents from last week. Dec/Mar and Dec/Jul future spreads were 13 cents and 15 cents.
July 2014 wheat futures closed at $6.70 up 11 cents for the week with support at $6.63 and resistance at $6.75. In Tennessee, June/July cash forward contracts averaged $6.45/bu with a range of $5.92/bu to $6.90/bu at elevators and barge points. Late harvests for soybeans and cotton have delayed wheat planting; however crop condition to date has not been adversely affected. Downside price protection could be obtained by purchasing a $6.80 July 2014 Put Option costing 47 cents establishing a $6.33 futures floor.
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