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The University of Tennessee | Institute of Agriculture

Department of Agricultural and Resource Economics

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Weekly Crop Comments

By Dr. Aaron Smith

May 20, 2016


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Overview

Corn and cotton were up; soybeans were mixed; and wheat was down for the week. Since May 3rd the USD index has appreciated 3.8%. A stronger USD is detrimental to US agricultural exports because it makes our products more expensive to foreign buyers (simply put, it takes more of the foreign currency to buy a USD). The USD index is still down 3.5% from the beginning of the year (98.76 to 95.343). The value of the USD will be an important factor if corn, soybean, wheat, and cotton exports are to meet the USDA’s recent projections for the upcoming marketing year. On Wednesday, the EPA announced the proposed RFS volume requirements for 2017, they are: cellulosic biofuel 312 million gallons; biomass based diesel 2 billion gallons; advanced biofuels 4 billion gallons; and total renewable fuel of 18.8 billion gallons. This implies 14.8 billion gallons of conventional biofuels (corn based ethanol). Corn markets reacted positively to the EPA announcement.

After last week’s WASDE report attention will now turn primarily to weather, planting progress, and crop conditions. The next major USDA reports will be the June 30 Acreage and Grain Stocks reports. Both reports have the potential to move the market. The Acreage report will provide confirmation or rebuttal of the anticipated increase in soybean acreage due to the favorable price relationship for soybeans, in favor of corn, for most of the planting season. Some early estimates have as many as 3 million acres moving into soybeans from corn and spring wheat, compared to the Prospective Plantings report. The Grain Stocks report will provide implied use numbers for corn and soybeans that will be extrapolated into projected ending stocks for the 2016-17 marketing year. This should provide some insight into the pace of domestic use and exports for major commodities.

 

 

 

 

 

Corn

July 2016 corn futures closed at $3.94 up 4 cents since last Friday. July 2016 corn futures traded between $3.85 and $4.00 for the week. Across Tennessee, average basis (cash price-nearby futures price) weakened or remained unchanged at Memphis, Northwest Barge Points, Northwest, Lower-middle, and Upper-middle Tennessee. Overall, basis for the week ranged from 8 under to 41 over the July futures contract with an average of 8 over at the end of the week. Ethanol production for the week ending May 13 was 948,000 barrels per day down 14,000 from last week. Ethanol stocks were 21.103 million barrels, down 149,000 barrels. Corn net sales reported by exporters from May 6-12 were above expectations with net sales of 58 million bushels for the 2015/16 marketing year and 21.3 million bushels for the 2016/17 marketing year. Exports for the same time period were up from last week at 46.3 million bushels. Corn export sales and commitments were 92% of the USDA estimated total annual exports for the 2015/16 marketing year (September 1 to August 31) compared to a 5-year average of 95%.

Historical September Corn Futures Prices

 

 


 


 

September 2016 corn futures closed at $3.96 up 3 cents since last Friday. Jul/Sep and Jul/Dec future spreads were 2 and 5 cents, respectively. This week’s Crop Progress report estimated corn planted at 75% compared to 64% last week, 82% last year, and a 5-year average of 70%; and corn emerged at 43% compared to 27% last week, 48% last year, and a 5-year average of 34%. In Tennessee, this week’s Crop Progress report indicated corn planting at 94% compared to 89% last week, 90% last year, and a 5-year average of 83%; and corn emerged at 81% compared to 69% last week, 60% last year, and a 5-year average of 63%. In Tennessee, September 2016 cash forward contracts averaged $3.90 with a range of $3.67 to $4.17. December 2016 corn futures closed at $3.99 up 1 cent since last Friday. Downside price protection could be obtained by purchasing a $4.00 December 2016 Put Option costing 31 cents establishing a $3.69 futures floor.



Nearby and Harvest Corn Futures Prices

 

 

 

 

 

 

 

 

Soybeans

July 2016 soybean futures closed at $10.74 up 9 cents since last Friday. July 2016 soybean futures traded between $10.51 and $10.88. For the week, average soybean basis weakened at Northwest Barge Points and Memphis and strengthened or remained unchanged at Northwest, Upper-middle, and Lower-middle Tennessee. Basis ranged from 52 under to 20 over the July futures contract at elevators and barge points. Average basis at the end of the week was 15 under the July futures contract. Net sales reported by exporters were within expectations with net sales of 20.4 million bushels for the 2015/16 marketing year and net sales of 5.8 million bushels for the 2016/17 marketing year. Exports for the same period were up from last week at 8.4 million bushels. Soybean export sales and commitments were 99% of the USDA estimated total annual exports for the 2015/16 marketing year (September 1 to August 31), compared to a 5-year average of 100%. July soybean-to-corn price ratio was 2.73 at the end of the week.


Historical November Soybean Futures Prices

 

 

 

 

 



August 2016 soybean futures closed at $10.73 up 6 cents since last Friday.  Jul/Aug and Jul/Nov future spreads were -1 cent and -25 cents, respectively. This week’s Crop Progress report estimated soybeans planted at 36% compared to 23% last week, 41% last year, and a 5-year average of 32%; and soybeans emerged at 10% compared to 11% last year and a 5-year average of 9%. In Tennessee, this week’s Crop Progress report indicated soybean planting at 35% compared to 22% last week, 32% last year, and a 5-year average of 22%; and soybeans emerged at 7% compared to 9% last year and a 5-year average of 8%. November/September 2016 soybean-to-corn price ratio was 2.65 at the end of the week. In Tennessee, October/November 2016 cash forward contracts averaged $10.47 with a range of $10.14 to $10.77 at elevators and barge points. November 2016 soybean futures closed at $10.49 down 5 cents since last Friday. Downside price protection could be achieved by purchasing a $10.60 November 2016 Put Option which would cost 74 cents and set a $9.86 futures floor.

Nearby and Harvest Soybean Futures Prices

 

 

 

 

 

 

 

Cotton

July 2016 cotton futures closed at 61.67 up 1.05 cents since last Friday. July 2016 cotton futures traded between 60.6 and 62.88 cents this week. Adjusted world price (AWP) increased 0.23 cents to 50.42 cents per pound. Delta upland cotton spot price quotes for May 12th were 61.32 cents/lb (41-4-34) and 64.07 cents/lb (31-3-35). Net sales reported by exporters were up from last week with net sales of 189,400 bales for the 2015/16 marketing year and 50,200 bales for the 2016/17 marketing year. Exports for the same period were up from last week at 232,900 bales. Upland cotton export sales were 97% of the USDA estimated total annual exports for the 2015/16 marketing year (August 1 to July 31), compared to a 5-year average of 103%.

Historical December Cotton Futures Prices

 

 

 


 

 

 

October 2016 cotton futures closed at 62.11 up 0.79 cents since last Friday. Jul/Oct and Jul/Dec cotton futures spreads were 0.44 cents and -0.34 cents, respectively. This week’s Crop Progress report estimated cotton planted at 40% compared to 26% last week, 32% last year, and a 5-year average of 39%. In Tennessee, this week’s Crop Progress report indicated cotton planting at 50% compared to 26% last week, 42% last year, and a 5-year average of 33%. December 2016 cotton futures closed at 61.33 up 0.82 cents since last Friday. Downside price protection could be obtained by purchasing a 62 cent December 2016 Put Option costing 3.66 cents establishing a 58.34 cent futures floor.


Nearby and Harvest Cotton Futures Prices

 

 

 

 

 

 

 

Wheat

July 2016 wheat futures closed at $4.67 down 7 cents since last Friday. July 2016 wheat futures traded between $4.62 and $4.84 this week. July wheat-to-corn price ratio was 1.19. Net sales reported by exporters were above expectations with net sales of 6.4 million bushels for the 2015/16 marketing year and net sales of 21.1 million bushels for the 2016/17 marketing year. Exports for the same period were down from last week at 14 million bushels. Wheat export sales were 98% of the USDA estimated total annual exports for the 2015/16 marketing year (June 1 to May 31), compared to a 5-year average of 104%. In Memphis, old crop cash wheat traded between $4.58 and $4.71 for the week. Jul/Sep and Jul/Dec future spreads were 11 cents and 29 cents, respectively.

Historical July Wheat Futures Prices

 

 

 

 

 

 

In Tennessee, June/July cash forward contracts averaged $4.71 with a range of $4.29 to $5.02. Nationally, winter wheat condition was estimated at 62% good-to-excellent and 8% poor-to-very poor; winter wheat headed at 68% compared to 57% last week, 65% last year, and a 5-year average of 56%; spring wheat planted at 89% compared to 77% last week, 92% last year, and a 5-year average of 64%; and spring wheat emerged at 60% compared to 39% last week, 63% last year, and a 5-year average of 36%. In Tennessee, winter wheat condition was reported as 85% good-to-excellent and 2% poor-to-very poor; and winter wheat headed 96% compared to 86% last week, 90% last year, and a 5-year average of 91%. Downside price protection could be obtained by purchasing a $4.70 July 2016 Put Option costing 14 cents establishing a $4.56 futures floor. September 2016 wheat futures closed at $4.78 down 6 cents since last Friday.

Nearby and Fall Wheat Futures Prices

 

 

 

 

 

 

 

Additional Information:

If you would like further information or clarification on topics discussed in the crop comments section or would like to be added to our free email list please contact me at aaron.smith@utk.edu.