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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

April 29, 2016


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Overview

Corn, cotton, soybeans, and wheat were up for the week. Corn net sales for export were almost double pre-report estimates at 85.1 million bushels for the week of April15-20. Immediately following the export sales report on Thursday, July corn futures increased 5 cents. Currently, total export commitments (outstanding sales + exports) total 1.459 billion bushels (540 million bushels of outstanding sales plus 919 million bushels of accumulated exports), 191 million bushels short of the USDA’s 2015/16 marketing year projection of 1.65 billion bushels, with 19 weeks remaining in the marketing year. To achieve the USDA projection, net sales would need to average just over 10 million bushels per week. This does not assume a net sales carryover from the 2015/16 marketing year into the 2016/17 marketing year (last year 56 million bushels were carried over from the 2014/15 to the 2015/16 marketing year) or account for any net sales cancellations. As such, due to the recent increase in export sales we may see the USDA raise corn exports 25-100 million bushels on future WASDE reports. Driving U.S. export sales are concerns that dry weather in Brazil could reduce production of second crop corn and the further weakening of the USD in recent weeks. This week the USD index reached an 8 month low and the Brazilian Real a 9 month high (relative the USD). A weaker USD is beneficial for all US agricultural exports. Like corn, soybeans have benefited from a weaker USD resulting in improved export prospects. Currently, soybean export commitments are 1.671 billion bushels (1.55 billion bushels of accumulated exports plus 126 million bushels of outstanding sales), 34 million bushels less than the USDA’s 2015/16 marketing year projection of 1.705 billion bushels. Weekly sales for the remainder of the marketing year would need to be 1.8 million bushels per week to meet the export target (again assuming no sales cancellations or carry over into the 2016/17 marketing year). For both corn and soybeans the increase in exports has been positive for prices; however even if the USDA increases exports 100 million bushels for both commodities carryover into the next marketing year would still be 1,762 and 345 million bushels, respectively.  As such, further price improvements will be driven mostly by changes in new crop production as a result of weather.    

CME has released the following daily limits effective May1st: corn – 25 cents (unchanged); wheat – 35 cents (unchanged); soybeans – 65 cents (up 5 cents); soybean meal $20/ton (unchanged); and soybean oil – 2cents/lb (unchanged)

 

 

 

 

 

Corn

May 2016 corn futures closed at $3.90 up 19 cents since last Friday. May 2016 corn futures traded between $3.68 and $3.92 for the week. Across Tennessee, average basis (cash price-nearby futures price) strengthened or remained unchanged at Memphis, Northwest Barge Points, Upper-middle, and Lower-middle Tennessee and weakened in Northwest Tennessee. Overall, basis for the week ranged from 6 under to 45 over the May futures contract with an average of 13 over at the end of the week. Ethanol production for the week ending April 22 was 927,000 barrels per day down 12,000 from last week. Ending ethanol stocks were 21.629 million barrels down 417,000 barrels from last week. Corn net sales reported by exporters from April 15-21 were above expectations with net sales of 85.1 million bushels for the 2015/16 marketing year and 17.3 million bushels for the 2016/17 marketing year. Exports for the same time period were down from last week at 42.9 million bushels. Corn 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 91%.

Historical September Corn Futures Prices

 

 


 


 

 

July 2016 corn futures closed at $3.91 up 16 cents since last Friday. May/Jul and May/Sep future spreads were both 1 cent. This week’s Crop Progress report estimated corn planted at 30% compared to 13% last week, 16% last year, and a 5-year average of 16%; and corn emerged at 5% compared to 2% last year and a 5-year average of 4%. In Tennessee, this week’s Crop Progress report indicated corn planting at 65% compared to 35% last week, 14% last year, and a 5-year average of 43%; and corn emerged at 15% compared to 2% last year and a 5-year average of 20%. In Tennessee, September 2016 cash forward contracts averaged $3.77 with a range of $3.57 to $4.05. September 2016 corn futures closed at $3.91 up 16 cents since last Friday. Downside price protection could be obtained by purchasing a $4.00 December 2016 Put Option costing 33 cents establishing a $3.67 futures floor.


Nearby and Harvest Corn Futures Prices

 

 

 

 

 

 

 

 

Soybeans

May 2016 soybean futures closed at $10.21 up 34 cents since last Friday. May 2016 soybean futures traded between $9.77 and $10.36. For the week, average soybean basis weakened or remained unchanged at Memphis, Northwest Barge Points, Northwest, and Lower-middle Tennessee and strengthened at Upper-middle Tennessee. Basis ranged from 31 under to 9 over the May futures contract at elevators and barge points. Average basis at the end of the week was 6 under the May futures contract. Net sales reported by exporters were within expectations with net sales of 8.3 million bushels for the 2015/16 marketing year and net sales of 26.5 million bushels for the 2016/17 marketing year. Exports for the same period were down from last week at 10.2 million bushels. Soybean export sales and commitments were 98% 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 99%. May soybean-to-corn price ratio was 2.62 at the end of the week.

Historical November Soybean Futures Prices

 

 

 

 

 



July 2016 soybean futures closed at $10.29 up 33 cents since last Friday.  May/Jul and May/Nov future spreads were 8 cents and -14 cents, respectively. This week’s Crop Progress report estimated soybeans planted at 3% compared to 2% last year and a 5-year average of 2%. In Tennessee, this week’s Crop Progress report indicated soybean planting at 2% compared to 1% last year and a 5-year average of 1%. November/September 2016 soybean-to-corn price ratio was 2.58 at the end of the week. In Tennessee, October/November 2016 cash forward contracts averaged $9.94with a range of $9.63 to $10.21 at elevators and barge points.  November 2016 soybean futures closed at $10.07 up 24 cents since last Friday. Downside price protection could be achieved by purchasing a $10.20 November 2016 Put Option which would cost 61 cents and set a $9.59 futures floor.

Nearby and Harvest Soybean Futures Prices

 

 

 

 

 

 

 

Cotton

May 2016 cotton futures closed at 63.76 up 0.68 cents since last Friday. May 2016 cotton futures traded between 63.15 and 65.94 cents this week. Adjusted world price (AWP) increased 1.8 cents to 52.33 cents per pound. Delta upland cotton spot price quotes for April 28th were 63.94 cents/lb (41-4-34) and 66.69 cents/lb (31-3-35). Net sales reported by exporters were down from last week with net sales of 48,700 bales for the 2015/16 marketing year and 4,700 bales for the 2016/17 marketing year. Exports for the same period were up from last week at 244,300 bales. Upland cotton export sales were 87% 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 101%.

Historical December Cotton Futures Prices

 

 

 


 

 

 

July 2016 cotton futures closed at 63.77 up 0.08 cents since last Friday. May/Jul and May/Dec cotton futures spreads were 0.01 cents and -1.04 cents, respectively. December 2016 cotton futures closed at 62.72 up 0.2 cents since last Friday. This week’s Crop Progress report estimated cotton planted at 10% compared to 7% last week, 9% last year, and a 5-year average of 13%. In Tennessee, this week’s Crop Progress report indicated cotton planting at 1% compared to 0% last week, 2% last year, and a 5-year average of 1%. Downside price protection could be obtained by purchasing a 63 cent December 2016 Put Option costing 3.45 cents establishing a 59.55 cent futures floor.


Nearby and Harvest Cotton Futures Prices

 

 

 

 

 

 

 

Wheat

May 2016 wheat futures closed at $4.78 up 11 cents since last Friday. May 2016 wheat futures traded between $4.62 and $4.86 this week. May wheat-to-corn price ratio was 1.23. Net sales reported by exporters were above expectations with net sales of 12.9 million bushels for the 2015/16 marketing year and net sales of 16.7 million bushels for the 2016/17 marketing year. Exports for the same period were up from last week at 16.2 million bushels. Wheat export sales were 95% 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 102%. In Memphis, old crop cash wheat traded between $4.66 and $4.74 for the week. May/Jul and May/Sept future spreads were 10 cents and 20 cents, respectively.

Historical July Wheat Futures Prices

 

 

 

 

 

 

July 2016 wheat futures closed at $4.88 up 14 cents since last Friday. In Tennessee, June/July cash forward contracts averaged $4.77 with a range of $4.38 to $5.07. Nationally, winter wheat condition was estimated at 59% good-to-excellent and 8% poor-to-very poor; winter wheat headed at 26% compared to 12% last week, 25% last year, and a 5-year average of 24%; spring wheat planted at 42% compared to 27% last week, 50% last year, and a 5-year average of 28%; and spring wheat emerged at 8% compared to 8% last year and a 5-year average of 7%. In Tennessee, winter wheat condition was reported as 83% good-to-excellent and 2% poor-to-very poor; winter wheat jointing at 89% compared to 70% last week, 77% last year, and a 5-year average of 84%; and winter wheat headed 10% compared to 2% last week, 25% last year, and a 5-year average of 32%. Downside price protection could be obtained by purchasing a $4.90 July 2016 Put Option costing 21 cents establishing a $4.69 futures floor. September 2016 wheat futures closed at $4.98 up 15 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.