UT Commodity Market Update 3/8/2018

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Corn: So far this week, corn futures have been on a steady climb. May corn futures have increased $0.08 while September corn futures increased $0.07. The increase can be attributed to the USDA’s latest World Agricultural Supply and Demand Estimate (WASDE) report that was released today. The USDA is projecting higher exports and increased domestic demand due to higher ethanol production. Export figures were increased by 175 million bushels to 2.225 billion bushels. The cause of the increase is due primarily due to U.S. corn being competitive in the export market, strong sales, and lower competition from Argentina. The estimated range for the season-average corn price received by farmers is between $3.15 and $3.55. Overall, the global corn production forecast remains unchanged. For South America, Brazil and Argentina corn production have been lowered due to drier weather and higher temperatures. Again, U.S. exports are projected to be higher due to a reduction in South American production.

The recent increase in corn prices will allow producers to start pricing corn at or above $4.00. For producers with corn in their crop mix, this may be a selling point for a portion of the 2018 crop. The local basis for new crop corn was -$0.11 as of today’s market close.

Soybeans: May soybean futures have decreased by $0.10 while November soybean futures increased by $0.08. The decline in May futures can be partially attributed to a reduction in export projections. Today’s WASDE report, export numbers were reduced by 35 million bushels due to increased production and exports coming out of Brazil. Domestic demand was raised by 10 million bushels due to the current demand for soybean meal. However, the reduction in exports resulted in a net increase in ending stocks of 25 million bushels. Global oilseed production was projected to be lower due to a reduction in Argentina soybean production. The projected average farmer received price range of $9.00 to $9.60 was unchanged for the 2017/2018 crop.

Locally, producers continue to have the opportunity to price soybeans well above the $10.00 price. For producers with soybeans priced above $10.00, the current market prices could enable producers to lock in a higher percentage of their crop at profitable levels. Producers that have no soybean sales on the books should evaluate their cost of production and identify profitable pricing levels. The local basis for new crop soybeans was -$0.14.

Wheat: Since Monday, July wheat futures have decreased by $0.05. The recent run-up in wheat futures can be attributed to concerns over the U.S. wheat crop. The USDA did reduce wheat export sales by 25 million bushels due to lower price competitiveness for U.S. wheat in international markets. Global wheat supplies were increased slightly due to higher production in some key wheat-growing countries. Global wheat consumption was also reduced. Due to rising supplies and lower demand, world ending stocks have raised.

The fact that U.S. wheat prices have increased over the past 7 trading days despite higher global stocks is a curious thing. However, wheat at prices at levels above $5.00 with harvest only 3 to 4 months away is a fact to not overlook. Producers with unsold wheat bushels should strongly look at what the rain has done to their fertilizer and consider their yield potential. After that, farmers need to consider their costs and evaluate selling some of their unpriced wheat bushels. The combination of $5.00 wheat and $10.00 double-cropped beans could result in a profitable combination.

Cotton: December cotton futures closed at 78.46. Cotton equities continue to range between $0.19 and $0.20, assuming at $0.52 loan price. Farmers need to consider the loan price, cotton equities, and any potential module/hauling credit.

Take Home Message: The recent increase in all commodity prices is not near the highs we have seen in prior years. However, the fact that many producers have dialed in their cost of production due to the recent low prices. Some farmers will be able to lock in a profit on a portion of their crop at these levels. Of course, this is assuming a respectable, average yield (if there is such a thing).

As always, producers should analyze their cost of production to be able to make profitable selling decisions. If you need assistance with this, you can contact me directly at danhmorr@utk.edu.

West Tennessee Grain Bids 3-8-2018

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