UT Commodity Market Update 5/23/2017

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Corn: Over the last 30 days, September corn futures have increased by $0.11. The increase can be attributed to the reduction in corn acres for 2017. The low prices of corn futures caused many farmers to increase their bean acres at the expense of corn acres. As a result, corn futures are showing signs of potentially creeping higher through the growing season. Of course, this all hinges upon the growing conditions of the crop. However, the stage has been set for a chance at higher corn prices.

In regard to the progress of the corn crop, the USDA released the latest crop progress report on 5/15/2017. According to that report, 89% of the corn crop was planted with 74% of the crop having already emerged here in Tennessee. Both of these percentages are ahead of the 5 year average, meaning that we have had favorable planting conditions. For the United States as a whole, only 71% of the corn crop has been planted with only 31% of the crop having emerged. Both of these were below the 5 year average. Some Midwestern states are already starting to release yield predictions that are below the normal trend due to delayed plantings. However, any yield estimate at this point in time is merely a conversational point. If this type of predictions do persist, some selling opportunities may arise over the next few weeks.

Soybeans: Over the last 30 days, November soybean futures have decreased by $0.04. This sideways trading pattern can be attributed to a few factors. First, we know that soybean acres will up in 2017. Secondly, the uncertainty of how the planting season could potentially go just might keep prices in a lull. Thirdly, large global supplies are placing a limit on how prices can go without a weather rally. At this time of the year, it is too soon for a weather rally for soybeans. The planting progress for soybeans was released in the May 15th USDA report as well. The USDA reported that 32% of the soybean crop has been planted with only 8% of crop having already emerged. In Tennessee, 19% of the soybean crop has been planted with only 4% of the crop having emerged.

Wheat: Wheat harvest is all but upon us here in West Tennessee. In fact, the USDA reported that as of last week, 97% of the crop has already headed out. On a national scale, only 63% of the winter wheat crop has headed out. The USDA has rated 51% of the crop as being good-to-excellent. This time last year the winter wheat crop was rated as 62% being good-to-excellent. So, there will be some quality issues in some areas as we begin to harvest the wheat crop. Over the past 30 days, July wheat futures have increased by $0.12, while hitting a high of $4.61 on 5/2/2017. The recent run up in wheat prices is likely due to concerns of the quality of the wheat crop. Any rally in wheat prices at this time of year is likely a selling point for unsold bushels. If you have storage, there is a carry in the wheat market at this point in time. Currently, there is a $0.36 carry between July and December wheat futures. If a farmer had the capability to fumigate and store their wheat until January, there is currently a $0.54 carry between July and March wheat futures. Of course, you would need to figure the cost of carry per month to see if the additional charge in interest, utilities, and labor are less than the net gain in the increase in the futures price along with the basis. The net gain from carrying the wheat may not be economical for most, but it is an interesting factor to consider given the current carry.

Cotton: December cotton opened at 73.10 as of this morning. Lately, the cotton market has been on a slightly downward trend. As of yesterday, global equity markets were lower as political uncertainty is adding to the bearish tone of the market. In regard to planting progress, 35% of the Tennessee cotton crop was planted as of 5/15/2017. On a national level, 33% of the crop has been planted, which is below the 5 year average of 37%. Cotton equities continue to range between $0.16 and $0.17.

Take Home Message: Selling opportunities may not be presenting themselves at the moment for corn and soybeans. However, many producers will likely have unsold bushels of wheat. Any uptick in either basis or wheat futures needs to be closely considered as a selling point. Most producers will sell wheat ahead of harvest or across the scale to generate cash flow. As such, farmers should pay very close attention to the wheat markets amidst planting and spraying, which is not an easy task.

West Tennessee Grain Bids: Grain Newsletter 5-22-2017

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