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Department of Agricultural and Resource Economics

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Weekly Crop Comments

By Dr. Aaron Smith

February 5, 2016


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Overview

Corn, soybeans, cotton, and wheat were down for the week. Commodity prices moved sideways at the beginning of the week and down on Friday. Reports this week out of South America should be considered neutral to bearish for corn and soybean prices. The further we move into February and March, the more production uncertainty will be removed from the Argentine and Brazilian crop – this will be negative for prices if the record large crop is realized. Harvest has already commenced on early planted soybeans in South America, but the majority of their soybeans will not be harvested until late February or March. Remember South America’s soybean production region spans a similar distance as ours so their current harvest progress is roughly the equivalent of our soybean harvest commencing in the Deep South. As such, the major producing regions are still to come. The Brazilian soybean crop is likely to be a record, and given our high dollar – relative to the Brazilian Real and Argentine Peso – we will likely see additional export business move south the further we get into the South American harvest.

Domestically, it is that time of year when we start to see planted acreage estimates for key row crops. So far, most estimates have minor increases for cotton and corn a reduction for wheat and soybeans comparable to last year – when considering prevented planting. Producers may adjust their planting intentions following the crop insurance price determination period; however, as usual, the weather will have an important impact on what is planted and when. Currently, most forecasts are predicting a wet planting period.  Cotton can’t seem to catch a break as two negative reports circulated this week. First, it is expected that China may lower prices in order to move some of their enormous cotton reserves. This is obviously not a positive development for cotton prices however the true impact, on price, will be dictated by the quality (which is questionable at best) and mills willingness to utilize the low quality cotton. The second piece of news was the USDA Secretary of Agriculture indicating that he does not believe he has the authority to add cotton as an “other oilseed” in order to make cottonseed eligible for ARC-Co and PLC payments.

 

 

 

 

Corn

March 2016 corn futures closed at $3.65 down 7 cents since last Friday. March 2016 corn futures traded between $3.65 and $3.73 for the week. Across Tennessee, average basis (cash price-nearby futures price) strengthened at Lower-middle and Upper-middle Tennessee and weakened at Northwest Barge Points, Memphis, and Northwest Tennessee. Overall, basis for the week ranged from 12 under to 35 over the March futures contract with an average of 8 over at the end of the week. Ethanol production for the week ending January 29th was 959,000 barrels per day down 2,000 from last week. Ending ethanol stocks were 22.362 million barrels up 926,000 barrels from last week. Corn net sales reported by exporters from January 22nd to 28th were above expectations with net sales of 44.5 million bushels for the 2015/16 marketing year and 0.6 million bushels for the 2016/17 marketing year. Exports for the same time period were up from last week at 26 million bushels. Corn export sales and commitments were 56% 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 70%.

Historical September Corn Futures Prices

 


 


 

 

 

May 2016 corn futures closed at $3.70 down 6 cents since last Friday. Mar/May and Mar/Sep future spreads were 5 cents and 16 cents, respectively. In Tennessee, September 2016 cash forward contracts averaged $3.70 with a range of $3.48 to $4.02. September 2016 corn futures closed at $3.81 down 5 cents since last Friday. Downside price protection could be obtained by purchasing a $3.90 December 2016 Put Option costing 31 cents establishing a $3.59 futures floor.


Nearby and Harvest Corn Futures Prices

 

 

 

 

 

 

 

 

Soybeans

March 2016 soybean futures closed at $8.67 down 15 cents since last Friday. March 2016 soybean futures traded between $8.67 and $8.89. For the week, average soybean basis weakened or remained unchanged at Memphis, Northwest Barge Points, Northwest, and Lower-middle Tennessee and weakened in Upper-middle Tennessee. Basis ranged from 5 under to 33 over the March futures contract at elevators and barge points. Average basis at the end of the week was 13 over the March futures contract. Net sales reported by exporters were below expectations with net sales cancelations of 1.6 million bushels for the 2015/16 marketing year and net sales of 2.4 million bushels for the 2016/17 marketing year. Exports for the same period were down from last week at 41.9 million bushels. Soybean export sales and commitments were 88% 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 90%. March soybean-to-corn price ratio was 2.38 at the end of the week.

   

Historical November Soybean Futures Prices

 

 

 

 

 



May 2016 soybean futures closed at $8.71 down 13 cents since last Friday.  Mar/May and Mar/Nov future spreads were 4 cents and 16 cents, respectively. November/September 2016 soybean-to-corn price ratio was 2.32 at the end of the week. In Tennessee, October/November 2016 cash forward contracts averaged $8.77 with a range of $8.58 to $9.02 at elevators and barge points.  November 2016 soybean futures closed at $8.83 down 10 cents since last Friday. Downside price protection could be achieved by purchasing a $9.00 November 2016 Put Option which would cost 59 cents and set an $8.41 futures floor.  

 

Nearby and Harvest Soybean Futures Prices

 

 

 

 

 

 

 

 

Cotton

March 2016 cotton futures closed at 59.97 down 1.16 cents since last Friday. March 2016 cotton futures traded between 59.83 and 62.59 cents this week. Adjusted world price (AWP) decreased 0.04 cents to 46.85 cents per pound. Delta upland cotton spot price quotes for January 28th were 60.48 cents/lb (41-4-34) and 63.23 cents/lb (31-3-35). Net sales reported by exporters were up from last week with net sales of 251,600 bales for the 2015/16 marketing year and 6,800 bales for the 2016/17 marketing year. Exports for the same period were up from last week at 233,500 bales. Upland cotton export sales were 63% 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 91%.

Historical December Cotton Futures Prices

 

 

 


 

 

 

May 2016 cotton futures closed at 60.60 down 1 cent since last Friday. Mar/May and Mar/Dec cotton futures spreads were 0.63 cents and 1.41 cents, respectively. December 2016 cotton futures closed at 61.38 down 0.01 cents since last Friday. Downside price protection could be obtained by purchasing a 62 cent December 2016 Put Option costing 4 cents establishing a 58 cent futures floor.

Nearby and Harvest Cotton Futures Prices

 

 

 

 

 

 

 

Wheat

March 2016 wheat futures closed at $4.66 down 11cents since last Friday. March 2016 wheat futures traded between $4.65 and $4.83 this week. March wheat-to-corn price ratio was 1.28. Net sales reported by exporters were below expectations with net sales of 2.4 million bushels for the 2015/16 marketing year and 3.2 million bushels for the 2016/17 marketing year. Exports for the same period were down from last week at 8.5 million bushels. Wheat export sales were 78% 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 85%. In Memphis, old crop cash wheat traded between $4.67 and $4.75 for the week. Mar/May and Mar/Jul future spreads were 4 cents and 9 cents, respectively.

Historical July Wheat Futures Prices

 

 

 

 

 

 

May 2016 wheat futures closed at $4.70 down 15 cents since last Friday. In Tennessee, June/July cash forward contracts averaged $4.74 with a range of $4.42 to $5.03. July 2016 wheat futures closed at $4.75 down 15 cents since last Friday. Downside price protection could be obtained by purchasing a $4.80 July 2016 Put Option costing 29 cents establishing a $4.51 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.