Corn: Since the market open on Monday, September corn futures have gained $0.10 while basis stayed relatively unchanged at the local level. The continuing rally in corn futures is a three part story. First, the damage to the South American crop continues to prevail in the market price of corn. Second, the recent weakening of the U.S. dollar has made exports more attractive to foreign buyers. The recent job report on Friday was indicative of a weaker economy. As a result, commodities such as grains, gold, and crude oil have been trading higher. Thirdly, corn futures continue to benefit from the rally in soybeans.
While it is unknown if this rally will continue, it is a relief to Tennessee producers to see new crop corn prices above $4.00. Two months ago, we would not have thought this possible. As such, farmers should really keep a keen eye on this rally. Producers that have not sold above 25% of their crop may look at these price levels to consider layering in additional sales. A minimum/maximum price contract could be an appropriate marketing solution to farmers that believe that the rally could continue. However, these contracts have costs associated with them that producers should be mindful of. As we move forward, we can expect to see weather play a larger role in determining the price of corn. For now, the forecast for the Midwest is to be warmer with rainfall in the extended forecast.
Soybeans: The rally in soybeans has continued for yet another week. In fact, the November contract has gained $0.60 since the market’s open on Monday. The demand for U.S. soybeans continues to stay strong. This is evidenced by China’s continuance to buy U.S. soybeans. The $11.00 price mark did not stem the tide of their buying and the next price target may very well be the $12.00 mark. The damage that was dealt to the South American crop has truly benefitted soybean prices the most. The USDA stated that the Brazil soybean crop would be 99 million metric tons back in May. Today, the Brazilian government estimated that the crop would be about 95.63 million metric tons. That is a difference of approximately 124 million bushels. At 45 bushels per acre, it would take 2.75 million acres of soybeans to replace that crop loss.
Producers should continue to pay close attention to the rally in soybeans. The rally may continue on, but we do not know that. We do know that these price levels are higher than what we thought would occur in 2016. I would encourage producers to monitor their crop budgets and layer in additional sales at profitable levels.
Wheat: The rally in wheat has been fueled primarily by short covering by traders ahead of delivery. Wheat futures have also benefitted from the weakness in the U.S. dollar along with reports that the French wheat crop has been damaged by excess rainfall. However, the fundamentals of wheat supplies has not changed drastically. Wheat supplies continue to be more than adequate while demand stays steady to slightly weaker. The export report from the USDA contained disappointing news. The USDA reported at 14% decline in total exports for the 2015/2016 marketing year. Also, the fact that winter wheat harvest is upon us adds to the supply side of the equation. So far this week, these factors have not kept July wheat futures from trading higher. For producers, that is good news.
In West Tennessee, yields reports are starting to trickle in. So far, most yields have been in the range of 60 to 80 bushels with 70 bushels per acre seemingly being the average. Locally, wheat basis has come under pressure from harvest with the average basis being -$0.13. Wheat prices are continuing to hover around the $5.00 mark, which has been a selling point for some West Tennessee producers.
Cotton: The December cotton contract closed at 65.40. Cotton futures have rallied for the past 20 days or so, which is positive news given the recent trend that cotton has been trading. However, there will likely be some technical resistance if prices trend towards the 66.00 to 67.00 levels.
Cotton producers should be aware of the recent government program that the USDA has authorized. This program called “Cotton Ginning Cost Share Program” will pay Tennessee producers a payment of $56.26 per acre for every acre of cotton planted in 2015.
Cotton equities, or loan options, continue to range between $0.10 and $0.12 for West Tennessee.
Take Home News: Producers should continue to monitor their cost structure and keep an eye on commodity prices. Many producers can likely book some bushels at a profit at these price levels given the recent rallies that we have had in the markets.
West Tennessee Grain bids: Grain Newsletter 6-9-2016
