Corn: September corn futures closed at their highest levels so far this year. It is hard to believe that $4.00 is finally here. After all, it was not that long ago that this price level seemed unobtainable. The combination of a few factors such as higher soybean prices, increased involvement of fund trading, and a weaker dollar have contributed to higher prices. It is worth mentioning that the U.S. dollar has been on a declining trend for almost 30 days straight. This does help commodities in that exports are now cheaper to foreign customers. The million dollar question is can we sustain the rally in corn futures. That remains to be seen, but it is becoming apparent that any major rally in corn futures will likely be the result of adverse weather conditions. So far, this spring has been a wet one that has not put too much stress on the corn crop. However, some acres did not get planted due to all the rainfall. To what extent this impacts total acres planted, we do not know at this time.
In regard to crop progress, 86% of the total U.S. corn crop has been planted. In Tennessee, 97% of the crop has been planted with 89% of the crop having already emerged. This is well above the 5 year average for Tennessee.
September corn futures traded $0.13 higher since last week’s levels while the average new crop basis for corn declined by $0.03.
Soybeans: Soybean futures have rallied even higher this week due to an increase in demand. Demand for soybeans has increased greatly as the price of soybean meal has continued to trend higher. This has happened because of what is going on in Argentina. Argentina is the world’s largest exporter of soybean meal. However, the nation of Argentina has received excess rainfall that has negatively impacted their crop. This has caused them to not be able to export enough soybean meal to meet market demand. The U.S. has stepped in to fill some of that export market demand and our prices are up as a result. This rally has really been more supportive of old crop soybean futures, but new crop soybean futures have improved as well. New crop soybean futures have the potential to trend higher if we see a weather event occur during the growing season. Yet, we do not know if that will happen or not. We do know that November soybean futures are at the highest levels that we have seen in the past 12 months. Hopefully, producers will take advantage of these levels and try to lock in a profit where possible. If producers are thinking that the rally could continue, then a minimum/maximum contract could enable farmers to lock in a price floor that is profitable with upside potential. Producers should bear in mind that these contracts come with fees and profitability will be dependent upon your cost structure.
In regard to crop progress, 56% of the U.S. soybean crop has been planted and 22% of the crop has already emerged. In Tennessee, 50% of the soybean crop has been planted and only 21% of the crop has emerged. Both of which are above the 5 year average for Tennessee.
Over the past week, November soybean futures stayed relatively unchanged as they only increased by $0.01. The new crop basis for West Tennessee weakened by $0.04.
Wheat: Wheat futures rallied this week due to the expectations that the winter wheat crop has been damaged by excess rainfall. Another contributing factor to the rally is that some spring wheat growing regions are beginning to turn dry along with cash wheat trading below corn, which could result in a higher amount of wheat being used in feed. The underlying fundamentals of the wheat market have not changed though. Global supplies of wheat continue to be a burden on wheat prices. That combined with what is expected to be relatively stable domestic demand for wheat does not support a large rally in wheat futures. In fact, USDA is projecting the stocks to use ratio for 2016 to be 49.5%, which is in line with the 2015 stock to use ratio of 50.2%. Wheat harvest for Tennessee is just around the corner so basis could begin to face harvest pressure.
In regard to crop progress, 75% of the U.S. crop has headed out while 62% of the U.S. wheat crop is rated as good-to-excellent. In Tennessee, 99% of the crop has already headed out and 25% of the crop has already started to turn color.
Since last week, July wheat futures traded $0.13 higher. The average new crop basis for wheat in West Tennessee averaged -$0.07.
Cotton: December cotton futures closed at 63.88, which is a 20 week high. The cause of the recent increase in cotton futures is partially due to higher prices in China, better exports, and weather concerns in some cotton producing areas. China reserve sales were reported to equal about 2.24 million bales. In the short term, the market fundamentals for cotton have not changed drastically. We still have a lot of cotton to mill through in order to reduce global stocks. However, it is still good to see some positive movement in the futures market.
In regard to planting progress, 46% of the U.S. cotton crop has been planted. In Tennessee, 67% of the cotton crop has been planted as of 5/22/2016. In West Tennessee, some strides to finish planting the cotton crop this week have been hampered by rainfall. Overall, most producers are getting close to finish planting their cotton crop.
Cotton equities, or loan options, continue to range between $0.10 and $0.12 for West Tennessee.
Take Home Message: The recent rallies in commodity prices present some selling opportunities as we start to near the end of the planting season. We will soon begin to enter into the time of year when weather dictates the direction of the market. When that occurs, additional sales will be made dependent upon the condition of the crop along with the anticipated direction of the market.
West Tennessee Grain Bids can be viewed here: Grain Newsletter 5-26-2016
