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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

July 18, 2014


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Overview

Corn and cotton were down, soybeans were mixed, and wheat was up for the week. This week corn traded mostly sideways after two weeks where harvest futures dropped by approximately 30 cents a week. The past two week futures decline was sparked by the June 30th Acreage and Grain Stocks report, however excellent growing conditions year-to-date, potentially resulting in record domestic yield and production, combined with higher carryover from the current marketing year have continued to provide downward price pressure since early May. Similar to corn, soybeans ended there two week slide and harvest futures closed up from last week. Soybean prices still have downside risk. As we move closer to harvest, if growing conditions remain above average, the remaining production/weather risk will be removed and a record crop secured. Supporting soybean prices is strong domestic crush and export sales, however it remains to be seen if demand will be able to keep up with the anticipated record supply. Cotton prices have continued their decline this week, but their rate of decline has slowed and we may have reached a bottom near the 67 cent level. Chinese stocks continue to hangover cotton markets like the sword of Damocles, creating great uncertainty for future prices. One positive in cotton markets is demand for good quality cotton is still present so if the cotton crop can be put up in good condition export demand should be strong partially canceling out the increase in domestic production. Wheat harvest in Tennessee is pretty much complete with yields coming in strong, however some quality concerns have been realized throughout the state. September wheat futures prices bottomed out on Monday near $5.24, rebounded in the middle of the week to a high of $5.60, before giving most of the increase back on Friday, closing at $5.32.

 

 

 

Corn

September 2014 corn futures closed at $3.71 down 7 cents from last week with support at $3.63 and resistance at $3.84. Across Tennessee basis (cash price- nearby future price) weakened at Memphis, Northwest Barge Points, Northwest, and Upper-middle Tennessee and strengthened in Lower-middle Tennessee. Overall basis for the week ranged from even to 32 over the September futures contract with an average of 17 over at the end of the week. Corn net sales reported by exporters from July 4th to 10th were above expectations at 22.6 million bushels for the 2013/14 marketing year and above expectations at 19.5 million bushels for the 2014/15 marketing year. Exports for the same time period were down from last week at 35.7 million bushels. Corn export sales and commitments are 100% of the USDA estimated total annual exports for the 2013/14 marketing year (September 1 to August 31) compared to a 5-year average of 103%. Ethanol production for the week ending July 11th was 943,000 barrels per day up 16,000 barrels per day. Ending ethanol stocks were 17.945 million barrels down 341,000 barrels. Nationally, the July 14th Crop Progress report estimated corn silking at 34% compared to 15% last week, 15% last year, and a 5-year average of 33% and corn condition at 76% good to excellent 5% poor to very poor. In Tennessee, corn silking was estimated at 78% compared to 56% last week, 73% last year, and a 5-year average of 84%; corn dough or beyond at 12% compared to 20% last year and a 5-year average of 22%; and corn condition at 79% good to excellent and 3% poor to very poor. This week September and December 2014 corn futures prices traded between $3.70 and $3.95. September cash forward contracts at elevators and barge points for the week averaged $3.64 with a range of $3.41 to $3.88. Sep/Dec and Sep/Mar future spreads were 7 cents and 19 cents, respectively.

Historical September Corn Futures Prices

 


 

 

 

 

December 2014 corn futures closed at $3.78 down 6 cents from last week with support at $3.70 and resistance at $3.92. March futures closed at $3.90. Downside price protection could be obtained by purchasing a $4.20 September 2015 Put Option costing 42 cents establishing a $3.78 futures floor.

Nearby and Harvest Corn Futures Prices

 

 

 

 

 

 

 

Soybeans

August 2014 soybean futures closed at $11.76 down 19 cents for the week with support at $11.64 and resistance at $11.91. Nearby soybean to corn price ratio was 3.17 at the end of the week. For the week, average soybean basis weakened at Northwest Barge Points, Northwest, and Upper-middle Tennessee and strengthened at Memphis and Lower-middle Tennessee. Basis ranged from 40 over to 125 over the August futures contract at elevators and barge points. Average basis at the end of the week was 67 over the August futures contract. Net sales reported by exporters were within expectations with net sales of 1.4 million bushels for the 2013/14 marketing year and within expectations for the 2014/15 marketing year with net sales of 20.6 million bushels. Exports for the same period were up from last week at 3.5 million bushels. Soybean export sales and commitments are 103% of the USDA estimated total annual exports for the 2013/14 marketing year (September 1 to August 31), compared to a 5-year average of 103%. September 2014 soybean futures were trading at $11.04. Aug/Sep and Aug/Nov future spreads were -72 cents and -91 cents.

Historical November Soybean Futures Prices

 

 

 

 

 

 

 

November 2014 soybean futures closed at $10.85 up 10 cents from last week with support at $10.71 and resistance at $11.08. The Crop Progress report estimated soybeans blooming at 41% compared to 24% last week, 24% last year, and a 5-year average of 37%; and soybean condition at 72% good to excellent 6% poor to very poor. In Tennessee, soybeans emerged were estimated at 88% compared to 78% last week, 87% last year, and a 5-year average of 96%; soybeans blooming at 30% compared to 18% last week, 14% last year, and a 5-year average of 38%; and soybean condition at 79% good to excellent 2% poor to very poor. This week November 2014 soybean futures traded between $10.65 and $11.18. Harvest soybean to corn price ratio was 2.87. November cash forward contracts averaged $10.92 with a range of $10.56 to $11.24. Downside price protection could be achieved by purchasing an $11.00 November 2014 Put Option which would cost 54 cents and set a $10.46 futures floor.

Nearby and Harvest Soybean Futures Prices

 

 

 

 

 

 

 

Cotton

December 2014 cotton futures closed at 67.74 down 0.38 cents for the week with support at 66.84 and resistance at 68.46. Net sales reported by exporters were down from last week at 20,900 bales of upland cotton for the 2013/14 marketing year and up from last week at 342,800 bales for the 2014/15 marketing year. Exports for the same period were down from last week at 81,400 bales. Cotton export sales and commitments are 107% of the USDA estimated total annual exports for the 2013/14 marketing year (August 1 to July 31), compared to a 5-year average of 109%. Oct 2014 cotton futures are trading at 68.63. The Crop Progress report estimated cotton squaring at 70% compared to 53% last week, 66% last year, and a 5-year average of 74%; cotton setting bolls at 24% compared to 12% last week, 16% last year, and a 5-year average 25%; and cotton condition at 53% good to excellent 14% poor to very poor. In Tennessee, cotton squaring was estimated at 74% compared to 62% last week, 50% last year, and a 5-year average of 76%; cotton setting bolls at 15% compared to 8% last week, 2% last year, and a 5-year average of 17%; and cotton condition at 74% good to excellent 5% poor to very poor. December cotton futures traded between 67.25 and 69.14 cents this week. Downside price protection could be obtained by purchasing a 68 cent December 2014 Put Option costing 3.08 cents establishing a 64.92 cent futures floor.

Historical December Cotton Futures Prices

 

 

 


 

 

 

March 2014 cotton futures closed at 68.39 down 0.65 cents for the week with support at 67.58 and resistance at 68.98. Cotton adjusted world price (AWP) decreased 2.28 cents to 62.06 cents. Oct/Dec and Dec/Mar future spreads were -0.89 cents and 0.65 cents.

Nearby and Harvest Cotton Futures Prices

 

 

 

 

 

 

 

Wheat

September 2014 wheat futures closed at $5.32 up 6 cents from last week with support at $5.17 and resistance at $5.76. Net sales reported by exporters were below expectations at 11.8 million bushels for the 2014/15 marketing year. Exports for the same period were up from last week at 15.3 million bushels. Wheat export sales are 35% of the USDA estimated total annual exports for the 2014/15 marketing year (June 1 to May 31), compared to a 5-year average of 30%. The Crop Progress report estimated winter wheat harvested at 69% compared to 57% last week, 66% last year, and a 5-year average of 68%. In Tennessee, winter wheat harvested at 88% compared to 78% last week, 97% last year, and a 5-year average of 99%. September wheat futures traded between $5.24 and $5.60 this week. September wheat to corn price ratio was 1.43. In Tennessee, July cash contracts averaged $5.25 with a range of $4.78 to $6.00 at elevators and barge points. Sep/Dec and Sep/July future spreads were 24 cents and 73 cents.

Historical July Wheat Futures Prices

 

 

 

 

 


 

December 2014 wheat futures closed at $5.56 up 9 cents from last week with support at $5.39 and resistance at $5.86. The Crop Progress report estimated spring wheat headed at 69% compared to 47% last week, 67% last year, and a 5-year average of 68%; and spring wheat condition at 70% good to excellent 6% poor to very poor. December wheat to corn price ratio was 1.47. July 2015 wheat futures closed at $6.05. Downside price protection could be obtained by purchasing a $6.10 July 2015 Put Option costing 48 cents establishing a $5.62 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.