By Dr. Aaron Smith
Overview
Corn, soybeans, cotton, and wheat were up for the week. Soybeans led grain and oil seed markets higher this week as export demand dramatically exceeded market expectations. November 2014 soybeans peaked at $10.02 this week before retreating late Friday. The November futures contract is up almost $1.00 from the contract low on October 1st of $9.04. December corn followed soybeans higher however with an estimated 2 billion bushel corn surplus at the end of the current marketing year it is likely that advances in corn futures will be limited. Soybean to corn futures price ratios are likely to trade at the higher end of their historical range (close to 3:1). This will be particularly important as we move into the New Year and commodities look to “bid” for 2015 planted acres. December cotton futures were up this week and the December-March inverted spread in cotton futures continued to grow. Harvest conditions so far have been less than ideal as cool wet conditions have slowed the pace however improved forecasts should bring warmer weather at the end of this week and into early next week. Wheat prices have continued their steady climb since the end of September but are approaching significant resistance near $5.50 for the December contact.
Corn
December 2014 corn futures closed at $3.53 up 5 cents a bushel since last week with support at $3.44 and resistance at $3.69. Across Tennessee average basis (cash price- nearby future price) strengthened in Northwest Tennessee and weakened at Memphis, Northwest Barge Points, Upper-middle, and Lower-middle Tennessee. Overall basis for the week ranged from 48 under to 4 over the December futures contract with an average of 29 under at the end of the week. Ethanol production for the week ending October 17th was 896,000 barrels per day up 11,000 barrels per day from last week. Ending ethanol stocks were 17.94 million barrels down 416,000 barrels from last week. Nationally, the October 20th Crop Progress report estimated corn mature at 93% compared to 87% last week, 93% last year, and a 5-year average of 94%; corn harvested at 31% compared to 24% last week, 38% last year, and a 5-year average of 53%; and corn condition at 74% good to excellent 7% poor to very poor. In Tennessee, the Crop Progress report estimated, corn mature at 99% compared to 99% last week, 99% last year, and a 5-year average of 100%; corn harvested at 88% compared to 82% last week, 70% last year, and a 5-year average of 85%; and corn condition at 86% good to excellent and 2% poor to very poor. This week December 2014 corn futures prices traded between $3.42 and $3.65. Dec/Mar and Dec/Sep future spreads were 13 cents and 37 cents, respectively.
January cash forward contracts at elevators and barge points for the week averaged $3.48 with a range of $3.03 to $3.69. March 2015 corn futures closed at $3.66 up 5 cents from last week with support at $3.57 and resistance at $3.83. Corn net sales reported by exporters from October 10th to 16th were above expectations with net sales of 40.6 million bushels for the 2014/15 marketing year. Exports for the same time period were down from last week at 26.6 million bushels. Corn export sales and commitments were 41% of the USDA estimated total annual exports for the 2014/15 marketing year (September 1 to August 31) compared to a 5-year average of 42%. September 2015 futures closed at $3.90. Downside price protection could be obtained by purchasing a $4.00 September 2015 Put Option costing 40 cents establishing a $3.60 futures floor.
Soybeans
November 2014 soybean futures closed at $9.77 up 26 cents for the week with support at $9.59 and resistance at $10.10. Nov/Dec soybean to corn price ratio was 2.77 at the end of the week. For the week, average soybean basis weakened or remained unchanged in all five regions. Basis ranged from 40 under to 50 over the November futures contract at elevators and barge points. Average basis at the end of the week was 2 under the November futures contract. The Crop Progress report estimated soybeans dropping leaves at 95% compared to 91% last week, 93% last year, and a 5-year average of 97%; soybeans harvested at 53% compared to 40% last week, 61% last year, and a 5-year average of 66%; and soybean condition at 73% good to excellent 6% poor to very poor. In Tennessee, the Crop Progress report estimated soybeans dropping leaves at 91% compared to 84% last week, 76% last year, and a 5-year average of 90%; soybeans harvested at 30% compared to 24% last week, 22% last year, and a 5-year average of 44%; and soybean condition at 86% good to excellent 2% poor to very poor. This week November 2014 soybean futures traded between $9.36 and $10.02. January cash forward contracts averaged $9.85 with a range of $9.44 to $10.23.
January 2015 soybean futures closed at $9.83 up 24 cents from last week with support at $9.65 and resistance at $10.17. Net sales reported by exporters were above expectations with net sales of 79.6 million bushels for the 2014/15 marketing year and 0.1 million bushels for the 2015/16 marketing year. Exports for the same period were up from last week at 69.1 million bushels. Soybean export sales and commitments were 71% of the USDA estimated total annual exports for the 2014/15 marketing year (September 1 to August 31), compared to a 5-year average of 60%. Nov/Jan and Nov/Nov future spreads were 6 cents and 0 cents. November 2015 futures closed at $9.77. Downside price protection could be achieved by purchasing a $9.80 November 2015 Put Option which would cost 75 cents and set a $9.05 futures floor.
Cotton
December 2014 cotton futures closed at 63.81 cents up 0.81 cents for the week with support at 61.80 and resistance at 65.66. Cotton adjusted world price (AWP) decreased 0.53 cents to 49.30 cents. The Crop Progress report estimated cotton bolls opening at 86% compared to 77% last week, 80% last year, and a 5-year average of 90%; cotton harvested at 29% compared to 22% last week, 20% last year, and a 5-year average of 31%; and cotton condition at 47% good to excellent 19% poor to very poor. In Tennessee, the Crop Progress report estimated cotton bolls opening at 93% compared to 90% last week, 68% last year, and a 5-year average of 92%; cotton harvested at 20% compared to 13% last week, 8% last year, and a 5-year average of 41%; and cotton condition at 73% good to excellent 3% poor to very poor. December cotton futures traded between 61.98 and 64.66 cents this week. Downside price protection could be obtained by purchasing a 64 cent December 2014 Put Option costing 1.15 cents establishing a 62.85 cent futures floor.
March 2014 cotton futures closed at 62.17 up 0.44 cents for the week with support at 61.21 and resistance at 63.47. Net sales reported by exporters were up from last week at 78,800 bales for the 2014/15 marketing year and 2,500 bales for the 2015/16 marketing year. Exports for the same period were down from last week at 98,100 bales. Cotton export sales were 61% of the USDA estimated total annual exports for the 2014/15 marketing year (August 1 to July 31), compared to a 5-year average of 53%. Dec/Mar future spread was -1.64 cents. December 2015 cotton futures closed at 65.76.
Wheat
December 2014 wheat futures closed at $5.17 up 1 cent from last week with support at $5.02 and resistance at $5.46. In Memphis, old crop cash wheat traded between $4.68 and $4.81 for the week. December wheat futures traded between $5.07 and $5.39 this week. December wheat to corn price ratio was 1.46. Dec/Mar and Dec/July future spreads were 14 cents and 29 cents.
March 2015 wheat futures closed at $5.31 up 3 cents from last week with support at $5.16 and resistance at $5.60. Net sales reported by exporters were below expectations at 11 million bushels for the 2014/15 marketing year. Exports for the same period were down from last week at 15.9 million bushels. Wheat export sales were 59% 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 58%. The Crop Progress report estimated winter wheat planted at 76% compared to 68% last week, 77% last year, and a 5-year average of 77%; and winter wheat emerged at 56% compared to 43% last week, 51% last year, and a 5-year average of 50%. In Tennessee, winter wheat planting was estimated at 25% compared to 20% last week, 0% last year, and a 5-year average of 24%; and winter wheat emerged at 11% compared to 6% last week, 0% last year, and a 5-year average of 5%. June/July 2015 cash forward contracts averaged $5.18 with a range of $4.79 to $5.55 at elevators and barge points. July 2015 wheat futures closed at $5.46. Downside price protection could be obtained by purchasing a $5.50 July 2015 Put Option costing 37 cents establishing a $5.13 futures floor.
Source : utk.edu