Corn: It has been a wild ride in the commodity markets this week. Corn, like the other grains, has had its fair share in the roller coaster ride this week. In fact, September corn futures opened Monday at $3.80 and closed today at $3.92. The gain of $0.12 can be attributed mostly to the fear of what will happen to U.S. corn acres along with a spillover effect from the soybean trade. The Midwest has received rainfall in key growing areas that is delaying the planting of corn. The extended forecast for parts of the Midwest continues to show more rainfall, which could translate into acres being planted in soybeans instead of corn as the planting season window narrows for corn. Overall, the U.S. corn crop planting is progressing nicely. According to the USDA’s crop progress report that was released on Monday, 64% of the corn crop is already planted. That is 14% ahead of the 5 year average, but behind last’s years planting progress as of the same date in 2015. Tennessee’s crop is reported to be 89% planted with 69% already emerged. Also out this week was the latest USDA World Agricultural Supply and Demand Estimate (WASDE) report. The report was released on Tuesday and indicated a bearish tone for corn. The report indicated that ending stocks for the 2016/2017 crop year would equal 2.2 billion bushels. This is an increase of 350 million bushels from the 2015/2016 crop year. The USDA is currently projecting a farm price of $3.05 to $3.65 per bushel for corn. This accounts for an expected increase in demand and supply. Of course, these projections will be revised dependent upon what happens to the U.S. crop and other factors. I make mention of this to remind producers that from a fundamental perspective we still have a large amount of grain. Any rally in corn could be viewed as a selling point as we progress further into the growing season.
The average new crop basis for West Tennessee equaled -$0.14 as of market close today.
Soybeans: Soybeans continued to climb higher this week. The main driving factors behind soybean futures is the concerns about the South American bean crop and the latest USDA report. According to the USDA’s WASDE report, the demand for soybeans is expected to increase quite a bit in 2016/2017 marketing year. The USDA pegged the soybean crush, or domestic consumption, at 1,915 million bushels. This is a 35 million bushel increase form 2015/2016 marketing year. This combined with the reduction in South America’s soybean supplies is very bullish for U.S. soybean prices. The thought process is that the reduction in South American soybean stocks will translate into more U.S. soybean exports. That combined with the continuous strengthening in the Brazilian real is supportive of the recent rally in U.S. soybean prices. Producers should continue to evaluate their cost structure and base selling decisions off of crop budgets. The recent climb in futures prices should hopefully equate to profitable selling points. Producers should be mindful that the USDA did state in the report on Tuesday that the 2016/17 U.S. season-average soybean price range is projected at $8.35 to $9.85 per bushel compared with $8.85 per bushel in 2015/16.
As of Monday, 23% of the U.S. soybean crop was planted. This is above the 5 year average of 16% planted, but below the progress we saw this same time last year. In Tennessee, 22% of the crop has been planted .We will likely see soybean acres increase given the recent rally in futures.
The new crop basis for West Tennessee equaled -$0.09 as of market close today.
Wheat: Wheat futures just cannot catch a break. The sheer volume of wheat around the globe will continue to limit the number of U.S. exports. The USDA projects domestic use of wheat to rise in the coming year, but this is not enough to reduce ending stocks. In fact, the USDA reported that ending stocks will be 1,029 million bushels in 2016/2017. If this comes to fruition, this will be the highest since the 1987/1988 crop year. Global wheat supplies are forecasted to be up from 2015/2016 levels despite a reduction in global production. The USDA showed the average farm price for wheat to be $3.70 to $4.50 per bushel. This price range is reflective of what is happening in the fundamentals of the wheat market. Supplies continue to be high due to production in foreign nations while demand stays relatively weak. The average basis for new crop wheat in West Tennessee averaged -$0.07.
In regard to the progress of the wheat crop, 62% of the winter wheat crop was rated good-to-excellent as of Monday. In Tennessee, 96% of the crop is reported to be jointing while 86% is headed out.
Cotton: December cotton futures closed at 60.73. The Chinese cotton reserves sale continues to progress as demand for cotton seems to be adequate. Some analysts are reporting that of the approximate 28,000 bales offered, about 99% of them sold. In domestic news, the USDA’s WASDE report had mixed news for cotton. The report indicated that global cotton consumption would exceed production for the second year in a row, which is a positive sign. However, the projected U.S. cotton crop of 14.8 million bales is anticipated to raise ending stock above the beginning level. Production is estimated to increase by 15% in 2016/2017 over 2015/2016 due to more planted acres and what is thought to be more favorable growing conditions. Exports are shown to be higher due to demand for higher quality cotton that is deemed to be more marketable. The continuing reduction in global cotton supplies will eventually lead to higher cotton prices. However, with lackluster demand, this will take some time. The USDA’s price range for cotton in 2016 reflects this. The range for the marketing year received by farmers is $0.47 to $0.67. Local cotton equities, loan options, continue to range between $0.10 and $0.12.
According to the USDA, 26% of the cotton crop was planted as of 5/8/2016 while 26% of the Tennessee cotton crop was planted.
Take Home Message: Farmers will continue to have to look at their input costs and fixed costs to determine what price levels are profitable. Producers will shift some cotton and corn acres over to soybean given the recent run up in prices. I would encourage producers to reevaluate their cost structure to see if there is truly more profit in soybeans compared to cotton. The sheer volume of cotton to soybeans is something producers should consider when determining which crop has more upside profit potential. Whichever way the pendulum swings, producers will need to be vigilant in pricing their commodities. Some producers have sold soybeans at levels below the current market prices and may look back and regret selling at those levels. However, the crucial thing is to not be complacent. Yes, we have had two, if not three, rallies in soybeans in the past few months. However, that does not mean that the rally will continue. It is very important that producers lock in a profit, not necessarily the highest price. Farmers cannot all hit the market high, but growers should try to lock in prices that will generate a profit for your operation.
West TN Grain Elevator Bids: Grain Newsletter 5-12-2016
