For West Tennessee Grain elevator bids as of today’s market close: grain-newsletter-12-9-2016
Corn: The corn market has recently experienced a bit of an uptick in prices. The March contract has gained approximately $0.12 this week. However, September futures for next year have traded virtually sideways this week. Why have corn prices begun to show signs of improvement? Well, the answer is a mixture of things. First off, the financial sector continues to show signs of strengthening after the presidential election. The DOW Jones closed at record high of 19,756.85 yesterday. The financial markets and the commodity markets are interrelated. Therefore, the gains felt on Wall Street find their way over to the Chicago Mercantile Exchange. Now, that is not the only reason that corn prices have increased this week. Export sales continue to exceed USDA expectations and are ahead of last year’s numbers. The combination of a positive mood on Wall Street and better than expected sales make for a recipe for higher corn futures.
The USDA released the latest WASDE report today and it contained virtually no changes in corn figures. The only change worth noting is that the USDA did increase their projected average farm price for corn to $3.05 – $3.65 for the 2016 marketing year. This is a nickel increase over the price range that was in last month’s report.
Producers continue to hold on tight to their corn with many bushels still in storage. With these low prices, farmers are incentivized to wait for higher prices versus selling at a loss. The average cash basis for corn in West Tennessee was $0.04 as of today’s market close.
Soybeans: Soybean prices have been improving over the past few weeks. Over the past 20 days or so, January soybean futures have increased by $0.60. This increase in prices can be attributed partly due to the positivity seen in the financial markets. However, the main reason for the increase in soybean prices has been demand for U.S. soybeans in the export market and concerns over the South American soybean crop. Argentina has been very dry and the lack of rainfall has South American producers concerned with the yield potential of their crop. Brazil is set to harvest their soybean crop in about a month. Argentina is about three months away from harvesting their soybean crop. The crop in Argentina could recover if it receives rainfall, but a prolonged period without water will definitely reduce the yield potential of their crop.
The USDA released the latest WASDE report today and it contained virtually no changes in soybean figures. The only change worth noting is that the USDA did increase their projected average farm price for soybeans to $8.70 – $10.20 for the 2016 marketing year. This is a $0.25 increase over the price range that was in last month’s report. The average cash basis for soybeans in West Tennessee was -$0.10 as of today’s market close.
Wheat: The U.S. wheat crop is a tough spot with 30% of the entire winter wheat crop being in a drought area. This is according to the National Weather Service’s Drought Monitor. In regard to the Drought Monitor, much of West Tennessee is classified as being in a D2 severe drought. The lasted USDA report raised the size of the Australian wheat crop by 5 million metric tons. The USDA report also indicated that Canada’s and China’s wheat crop will be larger than previously projected. This means that there will be even more wheat added to global supplies, which places further downward pressure on wheat prices. The July 2017 futures have declined by about $1.40 per bushel since June 2016. In a period of only 5 months, wheat prices have declined by 24%. The wheat market is faced with major supply issues that do not seem to have a solution.
The USDA released the latest WASDE report today and it contained virtually no changes in wheat figures. The only change worth noting is that the USDA did lower their projected average farm price for wheat to $3.60 – $3.80 for the 2016 marketing year. This is a $0.10 decrease over the price range that was in last month’s report. The average cash basis for wheat in West Tennessee was -$0.11 as of today’s market close.
Cotton: March cotton futures closed today at 70.80. The USDA report reveal a few numbers that are worth mentioning. The report indicated that world production was up by 960,000 bales. World ending stocks projections were raised by almost 1 million bales from the November report to December report. However, Chinese usage was up by 250,000 bales. Cotton futures look to continue to trade sideways within the range of 68.50 to 70.50 for the time being. Cotton loan options, or equities, continue to be near $0.13 – $0.14.
Take Home Message: Producers with corn in the bin should look at the recent increase in corn futures to identify any potential selling points. Farmers must factor in the cost of continuing to store grain versus selling at today’s prevailing price. The cost to carry the grain forward must be exceeded by the anticipated gain in improved futures and basis. Cotton producers that have experienced great yields these past few years are likely considering upping their acreage for 2017. I would caution producers to use a 5 year average yield in developing projections for next year so you do not overstate potential farm income from cotton acres. I would also highly encourage all of our readers to take advantage of the Farm Manage program this winter to get assistance in developing your farm plan for 2017. The program is free to all Tennessee farmers and landowners. If you are interested in the program, you can email me directly to learn more about the program at danhmorr@utk.edu.
