Corn: September corn futures have traded sideways since the market’s open on Monday morning. Earlier in the week, corn futures were higher due to the USDA’s lower than expected carry out in the latest World Agricultural Supply and Demand Estimate (or WASDE) report. The WASDE report was released and it indicated that corn ending stocks were 2.08 billion bushels. This was lower than the average trade estimate of 2.205 billion bushels. Normally, when you have a report that indicates lower supplies, you would expect to see higher prices in the corn market. We did see that for a brief period; however, weather forecasts for the Midwest began to once again dictate the price direction of corn futures. Current forecasts are indicating that the anticipated heat wave that was to hit the Midwest will not last long. The current crop progress report rated 76% of the corn crop as good-to-excellent with 32% of the crop silking. This is ahead of the 5 year average of 26% of the crop silking. Hot weather and rainfall levels will determine whether we have a record crop like USDA says we will. This time of year corn prices will literally change direction daily based on the weather forecast. Local new crop basis averaged -$0.04 for West Tennessee as of market close today.
Soybeans: November soybeans futures have declined by $0.10 since the market’s open on Monday. The main factor in the change in soybeans prices has been the weather. Heat is forecasted in the central plains and parts of the Midwest as soybeans begin to bloom and set pods. According to the latest crop progress report, 40% of the crop is blooming and 7% of the crop is setting pods. The overall condition of the soybean crop is rather good so far. The USDA rated 71% of the crop as being good-to-excellent. However, any extended periods of high temperatures could change this. Some states are beginning to show that the heat has taken a toll on part of the soybean crop. Kansas and Nebraska combined make up 11% of the planted soybean acres in the U.S. These two states are lagging slightly behind other states in the overall condition of their soybean crop. As we enter into the critical seed development stage for beans, hot weather will be a concern for producers. We can expect to see the direction of bean prices to fluctuate with the forecast. Local new crop basis averaged -$0.04 for West Tennessee as of market close today.
Wheat: Since the market’s open on Monday, September wheat futures have declined by $0.03. The USDA confirmed that there is still plenty of wheat in the world. The latest WASDE report indicated that the 2016 wheat crop was larger than what the USDA had previously projected. Demand for wheat was also been higher than expected with total use being higher due to an increase in feed use and higher exports. However, the net change to ending stocks was a larger U.S. carryover of wheat than what was estimated in last month’s report. The following nations are expected to harvest a larger wheat crop than what the USDA had originally estimated: Argentina, Australia, Canada, Russia, and Ukraine. Thus, adding more wheat to global supplies. Local cash basis for West Tennessee continues to average -$0.19.
Cotton: December cotton futures closed at 73.98. Cotton futures have rallied approximately 7.00 so far this week. The cause of that has been a combination of supply concerns and the possibility of higher demand for cotton. There is concern about the cotton crop in Texas. In the beginning of the planting season, excess rainfall delayed plantings and damaged part of the crop. In parts of West Texas, temperatures have reached triple digits with some fearing that this may negatively impact the crop there. Also, the cotton crop in Pakistan and India has been negatively impacted by adverse weather conditions. In fact, expectations for the Pakistan cotton crop have been lowered by about one million bales. China has steadily been buying cotton out of the reserve, which is a positive factor for cotton. Cotton equities (loan options) have increased as well. Cotton equities for West Tennessee are approximately $0.15-$0.16. In talking with local brokers, producers have been able to secure prices near or above $0.75 per lb. during the trade today when factoring in a ginning rebate of $0.06 per lb.
Take Home Message: Weather will continue to dictate the direction of grain prices going forward. For the short term, the direction of prices will change daily based on weather forecasts. Volatility will continue with both beans and corn as we do not truly know our national yield potential yet. Cotton prices have traded higher this week to levels we have not seen so far this growing season. Cotton prices do not appear to have room to climb much higher than what it has these past few days. Producers should really consider this rally as a potential selling point, at least on equities. As always, you should know your cost of production and consider these costs when pricing commodities to ensure sales are at profitable levels.
West TN Grain Elevator Bids: Grain Newsletter 7-14-2016
