Soybean Meal Has Taken The Lead It Seems In Soybean Prices
DR. AARON SMITH
KNOXVILLE, TENNESSEE
Soybeans led prices higher this week, as drier weather forecasts for August provided support for corn, cotton, and soybean prices. After setting a six-month low of $12.88 ½ on July 22, November soybeans rallied to a high of $14.89 on Friday (July 29), a $2.00 ½ increase. September soybean meal futures increased 15.5 percent this week setting a new contract high at 461.3. Soybean oil had been a major driver in soybean prices earlier this year, but for now it looks like meal has taken the lead. Dry August forecasts across key soybean producing states threaten to further tighten USDA projected ending stocks of 230 million bushels.
The U.S. Drought Monitor, for July 26, showed intensification of drought in Tennessee. 56 percent of the state was reported in drought with 2.5 percent in extreme drought, 23 percent in severe drought, and16.8 percent in moderate drought. At the end of the week, most of the state received 1 to 4 inches of rain, however the rain will have come too late for many acres. Late planted crops and pasture will receive some benefit from the rains.
The Crop Progress report for week #29, for Tennessee, indicated cotton classified in poor-to-very poor condition was estimated at 42 percent. This is the largest amount reported for week #29 in Tennessee since reporting started in 1986. The previous high was 15 percent in 2012.
What does that mean for yield potential in 2022? It’s not promising, but it may not tell us much. There is still too much time to make definitive statements about yield. In 2012, yield finished 30 lbs/acre above trend line. In 2007, the crop was estimated at 8 percent poor-to- very poor in week #29, however state average yield ended up being a record 264 lbs/acre below the trendline. Ultimately, weather from now until to harvest will dictate final yields, but, currently, cotton condition is at a concerning point.
Corn
Ethanol production for the week ending July 22 was 1.021 million barrels per day, down 13,000 from the previous week. Ethanol stocks were 23.328 million barrels, down 225,000 compared to last week. Corn net sales reported by exporters for July 15-21, 2022, were down compared to last week with net sales of 5.9 million bushels for the 2021/22 marketing year and net sales of 7.6 million bushels for the 2022/23 marketing year. Exports for the same period were down 22 percent from last week at 34.2 mil-lion bushels. Corn export sales and commitments were 97 percent of the USDA estimated total exports for the 2021/22 marketing year (September 1 to August 31) compared to the previous 5-year average of 102 percent. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at West, Northwest, West-Central, North-Central, and Mississippi River elevators and barge points. Overall, basis for the week ranged from 27 to 85 over, with an average of 58 over the September futures at elevators and barge points. September 2022 corn futures closed at $6.16, up 52 cents since last Friday. For the week, September 2022 corn futures traded between $5.66 and $6.32. Sep/Dec and Sep/Mar future spreads were 4 and 10 cents.
Nationally, the Crop Progress report estimated corn condition at 61 percent good-to-excellent and 14 percent poor-to-very-poor; corn silking at 62 percent compared to 37 percent last week, 76 percent last year, and a 5-year average of 70 percent; and corn dough at 13 percent compared to 6 percent last week, 17 percent last year, and a 5- year average of 15 percent. In Tennessee, corn condition was estimated at 30 percent good-to-excellent and 38 percent poor-to-very poor; corn silking at 92 percent compared to 82 percent last week, 89 percent last year, and a 5-year average of 91 percent; and corn dough at 49 percent compared to 31 percent last week, 48 percent last year, and a 5-year average of 54 percent. New crop cash prices at elevators and barge points ranged from $5.64 to $6.30. December 2022 corn futures closed at $6.20, up 56 cents since last Friday. Down-side price protection could be obtained by purchasing a $6.20 December 2022 Put Option costing 49 cents establishing a $5.71 futures floor. March 2023 corn futures closed at $6.26, up 55 cents since last Friday.
Soybeans
Net sales reported by exporters were up compared to last week with net sales cancelations of 2.2 million bushels for the 2021/22 marketing year and net sales of 27.5 million bushels for the 2022/23 marketing year. Exports for the same period were down 21 percent compared to last week at 14.5 million bushels. Soybean export sales and commitments were 101 percent of the USDA estimated total annual exports for the 2021/22 marketing year (September 1 to August 31), compared to the previous 5-year aver-age of 103 percent. Across Tennessee, average soybean basis weakened or remained unchanged at West, Northwest, West-Central, North-Central, and Mississippi River elevators and barge points. Basis ranged from 103 under to 55 over, with an average basis of 52 under the August futures contract. August 2022 soybean futures closed at $16.37, up 203 cents since last Friday. For the week, August 2022 soybean futures traded between $14.33 and $16.71. Aug/Sep and Aug/Nov future spreads were -150 and -199 cents. September 2022 soybean-to-corn price ratio was 2.41 at the end of the week. September 2022 soybean futures closed at $14.87, up 160 cents since last Friday.
Nationally, the Crop Progress report estimated soybean condition at 59 percent good-to-excellent and 11 percent poor-to-very poor; soybeans blooming at 64 percent compared to 48 percent last week, 74 percent last year, and a 5-year average of 69 percent; and soybeans setting pods at 26 percent compared to 14 percent last week, 39 percent last year, and a 5-year average of 34 percent. In Tennessee, soybean condition was estimated at 33 percent good-to-excellent and 30 percent poor-to-very poor; soybeans blooming at 69 percent compared to 53 percent last week, 63 percent last year, and a 5-year average of 66 percent; and soybean setting pods 37 percent compared to 20 percent last week, 33 percent last year, and a 5-year average of 36 percent.
Nov/Dec 2022 soybean-to-corn price ratio was 2.37 at the end of the week. New crop cash soybean prices at elevators and barge points ranged from $13.19 to $14.68. November 2022 soybean futures closed at $14.68, up 153 cents since last Friday. Downside price protection could be achieved by purchasing a $14.70 November 2022 Put Option which would cost 82 cents and set a $13.88 futures floor.
Cotton
Net sales reported by exporters were down compared to last week with net sales cancellations of 4,000 bales for the 2021/22 marketing year and 55,700 bales for the 2022/23 marketing year. Exports for the same period were down 24 percent compared to last week at 252,900 bales. Upland cotton export sales were 110 percent of the USDA estimated total annual exports for the 2021/22 marketing year (August 1 to July 31), compared to the previous 5-year average of 113 percent. Delta upland cotton spot price quotes for July 28 were 111.37 cents/lb (41-4-34) and 113.62 cents/lb (31-3-35). Adjusted world price (AWP) was up 0.52 cents at 104.48 cents.
Nationally, the Crop Progress report estimated cotton condition at 34 percent good-to-excellent and 30 percent poor-to-very poor; cotton squaring at 80 percent compared to 74 percent last week, 77 percent last year, and a 5-year average of 80 percent; and cotton setting bolls at 48 percent compared to 31 percent last week, 35 percent last year, and a 5-year average of 38 percent. In Tennessee, cotton condition was estimated at 29 percent good-to-excellent and 42 percent poor-to-very poor; cotton squaring at 84 percent compared to 81 percent last week, 78 percent last year, and a 5-year average of 87 percent; and cotton setting bolls at 51 percent compared to 35 percent last week, 31 percent last year, and a 5-year average of 42 percent.
December 2022 cotton futures closed at 96.74 cents, up 5.85 cents since last Friday. For the week, December 2022 cotton futures traded between 89.5 and 97.65 cents. Dec/Mar and Dec/May cotton futures spreads were -3.23 cents and -4.71 cents. Downside price protection could be obtained by purchasing a 97 cent December 2022 Put Option costing 8.76 cents establishing a 89.5 cent futures floor. March 2023 cotton futures closed at 93.51 cents, up 6.21 cents since last Friday. May 2023 cotton futures closed at 92.03 cents, up 6.43 cents since last Friday.
Wheat
Wheat net sales reported by exporters were down compared to last week at 15.1 million bushels for the 2022/23 marketing year. Exports for the week were up 144 percent compared to last week at 12.7 million bushels. Wheat export sales were 37 percent of the USDA estimated total annual exports for the 2022/23 marketing year (June 1 to May 31), compared to the previous 5-year average of 37 percent.
Nationally, the Crop Progress report estimated winter wheat harvested at 77 percent compared to 70 percent last week, 82 percent last year, and a 5-year average of 80 percent; spring wheat condition at 68 percent good-to-excellent and 8 percent poor-to-very poor; and spring wheat headed at 86 percent compared to 68 percent last week, 96 percent last year, and a 5-year average of 96 percent. Wheat cash prices at elevators and barge points ranged from $7.10 to $8.00.
September 2022 wheat futures closed at $8.07, up 48 cents since last Friday. September 2022 wheat futures traded between $7.60 and $8.45 this week. September wheat-to-corn price ratio was 1.31. Sep/Dec and Sep/Jul future spreads were 18 and 40 cents. December 2022 wheat futures closed at $8.25, up 48 cents since last Friday. July 2023 wheat futures closed at $8.47, up 51 cents since last Friday. Downside price protection could be obtained by purchasing an $8.50 July 2023 Put Option costing 110 cents establishing a $7.40 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee