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Department of Agricultural and Resource Economics

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Weekly Crop Comments

By Dr. Aaron Smith

January 20, 2017


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Overview

Corn, cotton, soybeans, and wheat were up for the week.

New crop corn futures continue to elude the psychological barrier of $4.00/bu. However, the trend in December 2017 corn futures has been up since the contract low of $3.58 ½ on August 31, 2016. It is likely that 2017 harvest futures will get above $4.00 in the next couple of months so holding off on pricing new crop may be warranted. Given large domestic and global supplies it remains unlikely that a dramatic price appreciation is likely, so be vigilant in pricing some production if harvest futures are between $4.00 and $4.25.

This week, March 2017 soybeans reached a 6 month high of $10.80. The last time March 2017 prices were above $10.80 was this past July when concerns over dry conditions across the Midwest pushed futures prices over $11.00. Similarly, November soybeans set a one month high of $10.33 ¾. Soybeans remain a puzzle as prices have been in an upward trend since late September - driven by strong global demand for soybeans, particularly from China. However, concerns about record production from South America and potential trade disruptions with China and other agricultural trading partners have the potential to facilitate a quick price decline should either materialize. The upward trend could continue, however selling additional old crop soybeans with the nearby contract above $10.50 and up to 25% of estimated new crop production with the harvest contract above $10.00 remains prudent risk management decisions.

March 2017 cotton futures are up 17.25 cents from the contract low of 55.79 on February 29, 2016. There remains significant resistance near 75 cents so pricing some production when prices near this threshold should still be considered. December 2017 cotton remains a little more uncertain at this time as prices have been reluctant to move outside of the 68-72 cent trading range that has been entrenched since September. A reasonable argument can be made that the market should move higher for a number of reasons but planted acreage this spring will be key in determining how far the market may move.

July wheat remains well below $5.00 in spite of the dramatic drop in winter wheat plantings. Global supplies will continue to limit price appreciation.


 

 

 

 

Corn

March 2017 corn futures closed at $3.69 up 11 cents since last Friday. For the week, March 2017 corn futures traded between $3.58 and $3.70. Across Tennessee, average basis (cash price-nearby futures price) strengthened or remained unchanged at Northwest Barge Points and Northwest Tennessee and weakened at Memphis, Upper-middle, and Lower-middle Tennessee. Overall, basis for the week ranged from 4 under to 31 over the March futures contract with an average of 15 over at the end of the week. Corn net sales reported by exporters from January 6-12 were above expectations with net sales of 53.8 million bushels for the 2016/17 marketing year and 0.5 million bushels for the 2017/18 marketing year. Exports for the same time period were up from last week at 36.5 million bushels. Corn export sales and commitments were 67% of the USDA estimated total annual exports for the 2016/17 marketing year (September 1 to August 31) compared to a 5-year average of 62%. Ethanol production for the week ending January 13 was 1.054 million barrels per day up 5,000 from last week. Ethanol stocks were 21.115 million barrels, up 1,106,000 barrels. Mar/May and Mar/Dec future spreads were 7 and 26 cents, respectively.

Historical September Corn Futures Prices

 

 


 


 



May 2017 corn futures closed at $3.76 up 11 cents since last Friday. In Tennessee, September 2017 cash forward contracts averaged $3.78 with a range of $3.66 to $4.04. December 2017 corn futures closed at $3.95 up 9 cents since last Friday. Downside price protection could be obtained by purchasing a $4.00 December 2017 Put Option costing 34 cents establishing a $3.66 futures floor.


Nearby and Harvest Corn Futures Prices

 

 

 

 

 

 

 

 

Soybeans

March 2017 soybean futures closed at $10.67 up 21 cents since last Friday. For the week, March 2017 soybean futures traded between $10.52 and $10.80. Average soybean basis strengthened at Lower-middle Tennessee and weakened at Memphis, Northwest Barge Points, Upper-middle, and Northwest Tennessee. Basis ranged from 30 under to 7 over the March futures contract at elevators and barge points. Average basis at the end of the week was 10 under the March futures contract. Net sales reported by exporters were above expectations with net sales of 36 million bushels for the 2016/17 marketing year and 2.5 million bushels for the 2017/18 marketing year. Exports for the same period were up from last week at 58 million bushels. Soybean export sales and commitments were 88% of the USDA estimated total annual exports for the 2016/17 marketing year (September 1 to August 31), compared to a 5-year average of 84%. March soybean-to-corn futures price ratio was 2.89 at the end of the week.

Historical November Soybean Futures Prices

 

 

 

 

 





Mar/May and Mar/Nov future spreads were 9 cents and -39 cents, respectively. May 2017 soybean futures closed at $10.76 up 21 cents since last Friday. In Tennessee, October / November 2017 cash contracts average $10.19 with a range of $10.00 to $10.38.  November/December 2017 soybean-to-corn price ratio was 2.6 at the end of the week. November 2017 soybean futures closed at $10.28 up 10 cents since last Friday. Downside price protection could be achieved by purchasing a $10.40 November 2017 Put Option which would cost 74 cents and set a $9.66 futures floor.

Nearby and Harvest Soybean Futures Prices

 

 

 

 

 

 



Cotton

March 2017 cotton futures closed at 73.04 up 0.77 cents since last Friday. For the week, March 2017 cotton futures traded between 71.81 and 73.43 cents. Delta upland cotton spot price quotes for January 19 were 72.69 cents/lb (41-4-34) and 74.94 cents/lb (31-3-35). Adjusted world price (AWP) decreased 0.76 cents to 62.58 cents per pound. Net sales reported by exporters were up from last week with net sales of 346,500 bales for the 2016/17 marketing year and 48,800 bales for the 2017/18 marketing year. Exports for the same period were up from last week at 222,500 bales. Upland cotton export sales were 78% of the USDA estimated total annual exports for the 2016/17 marketing year (August 1 to July 31), compared to a 5-year average of 79%. May 2017 cotton futures closed at 73.67 up 0.91 cents since last Friday.

Historical December Cotton Futures Prices

 

 

 


 

 


Mar/May and Mar/Dec cotton futures spreads were 0.63 cents and -1.85 cents, respectively. December 2017 cotton futures closed at 71.19 up 0.29 cents since last Friday. Downside price protection could be obtained by purchasing a 72 cent December 2017 Put Option costing 4.91 cents establishing a 67.09 cent futures floor.


Nearby and Harvest Cotton Futures Prices

 

 

 

 

 

 



Wheat

March 2017 wheat futures closed at $4.28 up 2 cents since last Friday. March 2017 wheat futures traded between $4.21 and $4.37 this week. Wheat net sales reported by exporters were within expectations with net sales of 8.9 million bushels for the 2016/17 marketing year and 2.2 million bushels for the 2017/18 marketing year. Exports for the week were up from last week at 14.5 million bushels. Wheat export sales were 82% of the USDA estimated total annual exports for the 2016/17 marketing year (June 1 to May 31), compared to a 5-year average of 81%. March wheat-to-corn price ratio was 1.16. In Memphis, old crop cash wheat ranged from $4.31 to $4.41.

Historical July Wheat Futures Prices

 

 

 

 

 

 

Mar/May and Mar/Jul future spreads were 15 cents and 30 cents, respectively. May 2017 wheat futures closed at $4.43 up 4 cents since last Friday. May 2017 wheat-to-corn price ratio was 1.18. In Tennessee, June/July 2017 cash wheat ranged from $4.30 to $4.78. July 2017 wheat futures closed at $4.58 up 4 cents since last Friday. Downside price protection could be obtained by purchasing a $4.60 July 2017 Put Option costing 28 cents establishing a $4.32 futures floor.

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.