August WASDE And Crop Production Reports Will Be Released On August 12
DR. AARON SMITH
KNOXVILLE, TENNESSEE
Is the harvest low in for corn and soybeans? December corn futures established a six-month low on July 22nd at $5.61 ¾. Since then, prices have increased nearly 50 cents closing the week at $6.10.
Similarly, November soybeans had a six-month low, of $12.88 ½ before subsequently increasing to $14.08 ¾ on August 5th. Recent moves in futures markets and the drier/hot forecast for August in many production regions would tend to support higher prices moving forward.
However, this year has been filled with volatility and abrupt changes in direction, so a challenge to current harvest lows cannot be ruled out. To give examples of the volatility one only needs to look at the last 20 trading days. In 11 of the last 20 trading days the November soybean contract has seen daily moves of greater than 25 cents, including moves of 62 and 62.5 cents down and 37.75 and 38 cents up.
For December corn, 9 of the last 20 trading days have had daily changes of greater than 10 cents, including a 42.5 cent decrease and a19.5 cent increase). Simply stated, markets still have a tremendous amount of uncertainty and daily price swings are reflecting that uncertainty. U.S. production, global economic uncertainty, rising interest rates, inflation, geopolitical tension (Russia-Ukraine and U.S.-China), and global weather are all contributing to a very unpredictable market environment. For my two cents, I would suggest the harvest low is in, but markets tend to humble those who make predications (it’s a safer approach to manage price risk based on current available information, rather than attempting to predict the future).
Next week markets will get some clarification on U.S. production and yield as the August WASDE and Crop Production reports will be released on August 12. The reports will provide updated acreage and yield estimates for the 2022 crop. Additionally, on August 12 USDA FSA will release the Crop Acreage Data report for the first time in 2022. The Report provides a summary of the producer reported annual acres planted, prevented planted, and failed. The FSA Crop Acreage Data will be updated each month until January 2023.
Corn
Ethanol production for the week ending July 29 was 1.043 million barrels per day, up 22,000 from the previous week. Ethanol stocks were 23.394 million barrels, up 66,000 compared to last week. Corn net sales reported by exporters for July 22-28, 2022, were down compared to last week with net sales of 2.3 million bushels for the 2021/22 marketing year and 10.1 million bushels for the 2022/23 marketing year. Exports for the same period were up 18 percent from last week at 40.2 million 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 103 percent. Across Tennessee, average corn basis (cash price-nearby futures price) weakened or remained unchanged at West, Northwest, West-Central, North-Central, and Mississippi River elevators and barge points. Overall, basis for the week ranged from 10 to 60 over, with an average of 30 over the September futures at elevators and barge points. September 2022 corn futures closed at $6.10, down 6 cents since last Friday. For the week, September 2022 corn futures traded between $5.83 and $6.21. Sep/Dec and Sep/Mar future spreads were 0 and 8 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 80 percent compared to 62 percent last week, 89 percent last year, and a 5-year average of 85 percent; and corn dough at 26 percent compared to 13 percent last week, 35 percent last year, and a 5-year average of 31 percent. In Tennessee, corn condition was estimated at 32 percent good-to-excellent and 38 percent poor-to-very poor; corn silking at 96 percent compared to 92 percent last week, 94 percent last year, and a 5-year average of 95 percent; and corn dough at 67 percent compared to 49 percent last week, 62 percent last year, and a 5-year average of 68 percent. New crop cash prices at elevators and barge points ranged from $5.74 to $6.21. December 2022 corn futures closed at $6.10, down 10 cents since last Friday. Downside price protection could be obtained by purchasing a $6.10 December 2022 Put Option costing 40 cents establishing a $5.70 futures floor. March 2023 corn futures closed at $6.18, down 8 cents since last Friday.
Soybeans
Net sales reported by exporters were down compared to last week with net sales cancelations of 0.4 million bushels for the 2021/22 marketing year and net sales of 15.1 million bushels for the 2022/23 marketing year. Exports for the same period were up 33 percent compared to last week at 19.4 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 average of 104 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 158 under to 37 under, with an average ba-sis of 114 under the August futures contract.
August 2022 soybean futures closed at $16.14, down 23 cents since last Friday. For the week, August 2022 soybean futures traded between $15.45 and $16.50. Aug/Sep and Aug/Nov future spreads were -151 and -206 cents. September 2022 soybean-to-corn price ratio was 2.40 at the end of the week. September 2022 soybean futures closed at $14.63, down 24 cents since last Friday.
Nationally, the Crop Progress report estimated soybean condition at 60 percent good-to-excellent and 11 percent poor-to-very poor; soybeans blooming at 79 percent compared to 64 percent last week, 85 percent last year, and a 5-year average of 80 percent; and soybeans setting pods at 44 percent compared to 26 percent last week, 56 percent last year, and a 5-year average of 51 percent. In Tennessee, soybean condition was estimated at 38 percent good-to-excellent and 27 percent poor-to-very poor; soybeans blooming at 80 percent compared to 69 percent last week, 74 percent last year, and a 5-year average of 78 percent; and soybean setting pods at 47 percent compared to 37 percent last week, 48 percent last year, and a 5-year average of 50 percent.
Nov/Dec 2022 soybean-to-corn price ratio was 2.31 at the end of the week. New crop cash soybean prices at elevators and barge points ranged from $13.41 to $14.45. November 2022 soybean futures closed at $14.08, down 60 cents since last Friday. Downside price protection could be achieved by purchasing a $14.10 November 2022 Put Option which would cost 72 cents and set a $13.38 futures floor.
Cotton
Net sales reported by exporters were down compared to last week with net sales cancellations of 112,400 bales for the 2021/22 marketing year and net sales of 71,400 bales for the 2022/23 marketing year. Exports for the same period were up 11 percent compared to last week at 279,700 bales. Upland cotton export sales were 109 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 112 percent. Delta upland cotton spot price quotes for August 5 were 110.68 cents/lb (41-4-34) and 112.93 cents/lb (31-3-35). Adjusted world price (AWP) was down 15.04 cents at 89.44 cents.
Nationally, the Crop Progress report estimated cotton condition at 38 percent good-to-excellent and 28 percent poor-to-very poor; cotton squaring at 89 percent compared to 80 percent last week, 81 percent last year, and a 5-year average of 87 percent; and cotton setting bolls at 58 percent compared to 48 percent last week, 48 percent last year, and a 5-year average of 50 percent. In Tennessee, cotton condition was estimated at 41 percent good-to-excellent and 32 percent poor-to-very poor; cotton squaring at 96 percent compared to 84 percent last week, 86 percent last year, and a 5-year average of 92 percent; and cotton setting bolls at 66 percent compared to 51 percent last week, 48 percent last year, and a 5-year average of 61 percent.
December 2022 cotton futures closed at 96.13 cents, down 0.61 cents since last Friday. For the week, December 2022 cotton futures traded between 91.6 and 97.52 cents. Dec/Mar and Dec/May cotton futures spreads were -2.33 cents and -3.78 cents. Downside price protection could be obtained by purchasing a 97 cent December 2022 Put Option costing 8.31 cents establishing an 88.69 cent futures floor. March 2023 cotton futures closed at 93.8 cents, up 0.29 cents since last Friday. May 2023 cotton futures closed at 92.35 cents, up 0.32 cents since last Friday.
Wheat
Wheat net sales reported by exporters were down compared to last week at 9.2 million bushels for the 2022/23 marketing year. Exports for the week were down 17 percent compared to last week at 10.6 million bushels. Wheat export sales were 38 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 39 percent.
Nationally, the Crop Progress report estimated winter wheat harvested at 82 percent compared to 77 percent last week, 90 percent last year, and a 5-year average of 85 percent; spring wheat condition at 70 percent good-to-excellent and 7 percent poor-to-very poor; and spring wheat headed at 97 percent compared to 86 percent last week, 99 percent last year, and a 5-year average of 99 percent. Wheat cash prices at elevators and barge points ranged from $7.03 to $7.86.
September 2022 wheat futures closed at $7.75, down 32 cents since last Friday. September 2022 wheat futures traded between $7.52 and $8.20 this week. September wheat-to-corn price ratio was 1.27. Sep/Dec and Sep/Jul future spreads were 20 and 52 cents.
December 2022 wheat futures closed at $7.95, down 30 cents since last Friday. New crop wheat cash prices at elevators and barge points ranged from $7.46 to $8.03. July 2023 wheat futures closed at $8.27, down 20 cents since last Friday. Downside price protection could be obtained by purchasing an $8.30 July 2023 Put Option costing 104 cents establishing a $7.26 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee