Weekly Crop Comments, May 3, 2013

Soybean, corn, cotton, and wheat prices are up for the week. This is Aaron Smith with University of Tennessee Extension on May 3, 2013. Going forward, I will be taking over the weekly and monthly crop commentary from Chuck Danehower. I would like to thank Chuck for doing an excellent job the past 4 plus years and assisting in my transition into the role. Chuck remains in his position of extension area specialist and continues to be a key contributor to the University of Tennessee crop economics team.

This week had mixed reports on the US economy: the index of consumer confidence fell 12.2% based largely on a drop in expectations of future growth; however, an April 30th report, indicated home prices rose 8.1% to their highest level since 2008 and initial unemployment applications fell to their lowest level since January 2008. The unemployment rate dropped from 0.1 to 7.5%. Overall economic news was supportive to the markets. As for agricultural commodities, on the supply side, weather forecasts and weekly crop progress reports influenced and will continue to influence market direction. While on the demand side China continues to be a key factor.

Corn: Nearby:

Weekly exports met expectations with net sales of 38.8 million bushels (13 million bushels for the 2012/13 marketing year and 25.8 million bushels for the 2013/14 year). Ethanol production rose 4,000 barrels per day to 857,000 barrels per day. July corn futures closed at $6.61 up 43 cents.

New Crop:

Corn planted as of April 28 was reported at 5% compared to 4% last week, 49% last year and a 5-year average of 31%. Planted acres were below expectations contributing to higher futures prices on Monday. There is still time to get the majority of corn acres planted, but the first half of May will be a critical period. We are still more or less looking at a weather market. Currently producers should consider pricing 20-25% of the 2013 crop and look for any rallies from planting delays to move up to 30% priced or to the level that crop insurance won’t cover. Due to weather uncertainty, Put Options should be considered as a pricing tool. From a price risk management standpoint, a $5.80 September Put Option costing 42 cents would set a $5.38 futures floor.

Cotton: Nearby:

All cotton weekly export net sales were solid at 411,500 bales (314,400 bales of Upland cotton for 2012/13; 87,500 bales of Upland cotton for 2013/14; and 9,600 bales of Pima cotton for 2012/13. May 2nd adjusted world price (AWP) increased 0.97 cents to 71.87 cents. July cotton futures increased to 86.43 cents at close. New Crop:

Cotton planted was reported at 14% this week compared to 10% last week, 25% last year and the 5-year average of 20%. The 85 to 90 cent range is a price point at which producers should look to establish a price or purchase a Put Option. Prices above 90 cents may be difficult to achieve without some unforeseen circumstance. Implementing a floor price strategy would entail buying an 85 cent put option costing 5.38 cents and setting a 79.62 cent futures floor. Cotton equities on 2013 loan cotton are in the 26 cent range.

Soybeans: Nearby:

Weekly exports were above expectations with net sales of 53.3 million bushels (4 million bushels for 2012/13 and 49.2 million bushels for 2013/14). Old crop soybeans experienced net cancelations while new crop soybeans were aided by 42.2 million bushels being purchased by China. Bird flu cases in China increased to 127 and continue to reflect the spread of this disease. This virus is expected to cost their poultry industry millions while potentially lowering feed demand which could impact soybean imports from the U.S. July soybean futures closed at $13.87.

New Crop:

A delay in corn planting and spring wheat planting concerns continues to overhang the new crop soybean market. Coupled with a potential slowdown in demand from China’s bird flu and weaker economic reports, it may be difficult for soybeans to mount a sustained rally. Pricing 10-15% of 2013 production should be considered. Producers should look at any rallies as an opportunity to increase pricing up to the 20% to 25% level or the level that crop insurance doesn’t cover. Downside protection could be achieved by purchasing a $12.40 November Put Option which would cost 79 cents and set an $11.61 futures floor.

Wheat: Nearby:

Weekly exports were above expectations at net sales of 26.3 million bushels (8.0 million bushels for 2012/13 and 18.3 million bushels for 2013/14).

New Crop:

Nationwide, winter wheat heading was reported at 14% compared to 8% last week, 55% last year and the 5-year average of 29%. Crop condition ratings for winter wheat as of April 28 were 33% good to excellent compared to 35% last week and 64% last year. Poor to very poor ratings were 35% compared to 33% last week and 10% last year. Some significant freeze damage has been reported in the central and southern plains. If additional damage occurs it would be supportive to the wheat market. The Kansas Wheat Tour conducted this week estimated average yields of 41 bushels per acre compared to 49 bushels per acre in 2012, resulting in total estimated production of 313 million bushels less than the 382 million bushels produced in 2012. Spring wheat planting is at 12% compared to 7% last week, 70% last year and the 5-year average of 37%. Spring wheat planting intentions in Canada are expected to be up 14.4% or an increase of 2.4 million acres; however, cool temperatures and precipitation in the Northern Plains and Canadian Prairies may delay spring wheat planting. Currently producers should consider having 15 to 20% of the 2013 crop priced and look to move that up to 25 to 35% or the level not covered by revenue crop insurance should markets continue to rally. A $7.25 July Put Option would cost 32 cents and set a $6.93 futures floor.