Corn: Corn prices have closed higher for the past five trading days. It would appear that the market is trying to shake off the news from the latest USDA planting intention report. Corn futures have regained approximately 50% of what was lost on the report day, which was March 31. This week’s export report indicated that corn shipments increased for the week. As we get closer to planting, weather in key corn growing areas will begin to have a larger impact on corn prices. Until then, we can expect to see corn futures be impacted by outside markets. It would stand to reason that we may not see any noteworthy rallies until the growing season starts.
Since last Thursday, September corn futures have increased by $0.06 while the average local harvest basis for West Tennessee weakened by $0.01.
Soybeans: According to recent surveys from Reuters, the average estimate for Argentina’s soybean crop is 59.16 million metric tons, or 2.17 billion bushels, and the average estimate for Brazil’s soybean crop is 100.2 million metric tons, or 3.68 billion bushels. If we were to assume an average yield of 45 bushels per acre, it would take 81.77 million acres to produce Brazil’s soybean crop. Based on the last March 31st USDA report, the U.S. is expected to plant 82.24 million acres. At the assumed rate of 45 bushels per acre, the size of the Brazil’s crop is very close to the projected size of the 2016 U.S. soybean crop. That does not even account for Argentina’s crop. Needless to say, these are very large crops to contend with. The U.S. dollar is currently trading at $1 U.S. to 3.7 Brazilian Real. On top of contending with a large crop from South America, that crop is cheaper due to the variances in currency valuations. This illustrates the competiveness that U.S. soybeans are facing in the export market.
Over the past week, November soybean futures decreased by $0.06 while the average local harvest bases traded $0.04 higher.
Wheat: Wheat has recently traded lower due to lower export sales. According to weekly USDA export report, weekly export cancellations exceed weekly export sales. Weather is beginning to become a concern in a few key growing areas in the central Plains as soil moisture could be an issue in some areas. However, as of April 3, 2016, 59% of the wheat crop across 18 key growing states was rated good to excellent.
July wheat futures decreased by $0.14 since last Thursday while the average for new crop wheat in West Tennessee equaled -$0.04.
Cotton: December cotton futures closed at 58.05. Since the first of the year, December cotton futures have declined by 6.25. The decrease can be attributed to a continuation in the lackluster demand for cotton. Cotton acres are still expected to be higher in 2016 due to the perceived higher profit potential compared to other row crops. With good yields, it could indeed be a profitable crop in 2016. However, the continuing issue with cotton demand is placing a pressure on cotton prices. Analysts and traders alike are still watching to see what China will do with their cotton reserves. Cotton loan options (equities) continue to be between $0.10 and $0.125.
Take Home Message: Producers will have to continue monitoring prices and contemplate adjusting their crop mixes while they still can. Here in West Tennessee, not many producers have been able to plant much acreage due to weather. Once it begins to warm up, crop planting intentions become obligations and no longer just intentions. Farmers should be review their cost structure if they have not done so in the past 30-60 days in order to adjust crop mixes where necessary. At least, while (and if) they still can. Grain Newsletter 4-7-2016
