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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

November 25, 2016


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Overview

Corn and soybeans were up; cotton was down; and wheat was mixed for the week. Soybean and corn futures prices had a great Thanksgiving week. January soybean futures increased over 50 cents and March corn appreciated almost 10 cents. In Tennessee, basis did soften for both commodities but net prices to producers were up for the week. The primary catalyst for the rising prices was again strong export sales. Export sales continue to remain strong in spite of the appreciating USD. The focus for the markets will continue to be export demand and South American (Brazil and Argentina) growing conditions and crop progress. Export demand will likely be dictated by South American crop progress as the New Year approaches. If South America is on pace to harvest a record crop then US export demand could dry up because current currency exchange rates favor soybean and corn exports from Brazil and Argentina. On the other hand if production estimates are reduced due to adverse growing conditions we could see a continued acceleration in US export demand and prices. As such, we will likely continue to see volatility in futures markets (especially soybeans).

Cotton futures took a small step back after last week’s run-up however nearby contract months remain above 70 cents. Futures prices above 70 cents, given strong yields in Tennessee, should be viewed as pricing opportunities as there is a tremendous amount of price uncertainty moving into 2017.

This week wheat futures saw the nearby contract decrease and the harvest contract appreciate slightly. Currently, there are massive global wheat reserves. However, it is very likely that domestic planted acreage for the winter wheat crop will be down from last year. As such, a production disruption could provide price support to domestic wheat markets.


 

 

 

 

Corn

December 2016 corn futures closed at $3.49 up 7 cents since last Friday. December 2016 corn futures traded between $3.44 and $3.51 for the week. Across Tennessee, average basis (cash price-nearby futures price) weakened or remained unchanged at Memphis, Northwest Barge Points, Northwest, Upper-middle, and Lower-middle Tennessee. Overall, basis for the week ranged from 16 under to 35 over the December futures contract with an average of 5 over at the end of the week. Ethanol production for the week ending November 18 was 1,014,000 barrels per day down 3,000 from last week. Ethanol stocks were 18.952 million barrels, up 343,000 barrels. This week’s Crop Progress report estimated corn harvested at 97% compared to 93% last week, 97% last year, and a 5-year average of 96%. In Tennessee, corn harvested was estimated at 100% compared to 100% last week, 99% last year, and a 5-year average of 100%. Dec/Mar and Dec/Dec future spreads were 9 and 38 cents, respectively. In Tennessee, January 2017 cash forward contracts averaged $3.70 with a range of $3.47 to $3.94.

Historical September Corn Futures Prices

 

 


 


 



Corn net sales reported by exporters from November 11-17 were above expectations with net sales of 66.5 million bushels for the 2016/17 marketing year. Exports for the same time period were up from last week at 23.3 million bushels. Corn export sales and commitments were 52% 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 49%. March 2017 corn futures closed at $3.58 up 9 cents since last Friday. December 2017 corn futures closed at $3.87 up 9 cents since last Friday. Downside price protection could be obtained by purchasing a $3.90 December 2017 Put Option costing 33 cents establishing a $3.57 futures floor.


Nearby and Harvest Corn Futures Prices

 

 

 

 

 

 

 

 

Soybeans

January 2017 soybean futures closed at $10.46 up 57 cents since last Friday. January 2017 soybean futures traded between $9.95 and $10.46. For the week, average soybean basis weakened or remained unchanged at Memphis, Northwest Barge Points, Northwest, Upper-middle, and Lower-middle Tennessee. Basis ranged from 38 under to 5 over the January futures contract at elevators and barge points. Average basis at the end of the week was 15 under the January futures contract. In Tennessee, this week’s Crop Progress report indicated soybeans harvested at 98% compared to 95% last week, 90% last year, and a 5-year average of 90%. January/December soybean-to-corn futures price ratio was 3.00 at the end of the week.

Historical November Soybean Futures Prices

 

 

 

 

 





Jan/Mar and Jan/Nov future spreads were 8 cents and -20 cents, respectively. Net sales reported by exporters were above expectations with net sales of 69.8 million bushels for the 2016/17 marketing year. Exports for the same period were up from last week at 103.2 million bushels. Soybean export sales and commitments were 72% 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 70%. March 2017 soybean futures closed at $10.54 up 56 cents since last Friday. In Tennessee, January cash contracts average $10.29 with a range of $10.11 to $10.45. November 2017 soybean futures closed at $10.26 up 33 cents since last Friday. November/December 2017 soybean-to-corn price ratio was 2.65 at the end of the week. 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

Delta upland cotton spot price quotes for November 25 were 71.75 cents/lb (41-4-34) and 74.5 cents/lb (31-3-35). Adjusted world price (AWP) increased 2.02 cents to 61.22 cents per pound. This week’s Crop Progress report estimated cotton harvested at 67% compared to 61% last week, 68% last year, and a 5-year average of 77%. In Tennessee, this week’s Crop Progress report indicated cotton harvested at 97% compared to 93% last week, 87% last year, and a 5-year average of 85%. December 2016 cotton futures closed at 72.65 down 0.73 cents since last Friday. December 2016 cotton futures traded between 72 and 73.85 cents this week.

Historical December Cotton Futures Prices

 

 

 


 

 


Dec/Mar and Dec/Dec cotton futures spreads were -1.4 cents and -2.43 cents, respectively. Net sales reported by exporters were up from last week with net sales of 254,800 bales for the 2016/17 marketing year and 44,200 bales for the 2017/18 marketing year. Exports for the same period were up from last week at 132,400 bales. Upland cotton export sales were 60% 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 64%. March 2017 cotton futures closed at 71.25 down 1.29 cents since last Friday. December 2017 cotton futures closed at 70.22 down 0.69 cents since last Friday. Downside price protection could be obtained by purchasing a 71 cent December 2017 Put Option costing 5.36 cents establishing a 65.64 cent futures floor.


Nearby and Harvest Cotton Futures Prices

 

 

 

 

 

 

 

Wheat

Wheat net sales reported by exporters were above expectations with net sales of 26.2 million bushels for the 2016/17 marketing year. Exports for the week were down from last week at 13.9 million bushels. Wheat export sales were 70% 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 68%. December 2016 wheat futures closed at $3.95 down 8 cents since last Friday. December 2016 wheat futures traded between $3.94 and $4.12 this week. December wheat-to-corn price ratio was 1.13.

Historical July Wheat Futures Prices

 

 

 

 

 

 

Dec/Mar and Dec/Jul future spreads were 24 cents and 54 cents, respectively. March 2017 wheat futures closed at $4.19 down 1 cent since last Friday. March 2017 wheat-to-corn price ratio was 1.17. Nationally, the Crop Progress report indicated winter wheat condition at 58% good-to-excellent and 10% poor-to-very poor; winter wheat planted at 97% compared to 94% last week, 95% last year, and a 5-year average of 99%; and winter wheat emerged at 89% compared to 84% last week, 89% last year, and a 5-year average of 88%. In Tennessee, winter wheat condition was estimated at 34% good-to-excellent and 27% poor-to-very poor; winter wheat planted at 91% compared to 85% last week, 89% last year, and a 5-year average of 90%; and winter wheat emerged at 66% compared to 54% last week, 74% last year, and a 5-year average of 67%. In Tennessee, June/July 2017 cash wheat ranged from $4.23 to $4.71. July 2017 wheat futures closed at $4.49 up 1 cent since last Friday. Downside price protection could be obtained by purchasing a $4.60 July 2017 Put Option costing 37 cents establishing a $4.23 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.