Great Deal Of Yield Uncertainty Nationally As Weather/Rainfall Has Been Sporadic
DR. AARON SMITH
KNOXVILLE, TENNESSEE
Futures markets rallied this week with December corn increasing 29 cents, November soybeans increasing 72 cents, and December cotton increasing 12.46 cents. Cottons remarkable rally opens the door for a return above $1.20. This week the USDA released the August Crop Production and WASDE reports. The Crop Production report contained initial survey-based yield estimates. Nationally, corn, soybean, upland cotton, and winter wheat yields were projected at 175.4 bu/acre, 51.9 bu/acre, 837 lbs/ acre, and 47.9 bu/acre. There remains a great deal of yield uncertainty nationally as weather/rainfall has been sporadic across large sections of the Corn Belt this growing season. As such, revisions to current yield estimates are likely to occur on future USDA reports. National estimated planted (and harvested) acreage for corn, soybeans, and cotton were: 89.8 million acres (81.8 million); 88.0 million acres (87.2 million); and 12.48 million acres (7.13 million). Cotton abandonment is projected at 42.8 percent, well above previous projections.
In Tennessee, the Crop Production Report estimated yields at 130 bu/ acre (corn), 44 bu/acre (soybean), 869 lbs/acre (cotton), and 71 bu/ acre (wheat). Across the state yields are highly variable, however in general crops are in better condition in the East than the West. Over the past two weeks parts of west Tennessee have received 3-7 inches of rain. The rain is likely too late to help with most corn yields but may provide benefit to cotton and soybeans. State yields will likely be revised in the September Crop Production report as the survey was conducted from July 25 to August 8 to capture expected yields as of August 1. A summary of the August WASDE report can be found at: https://arec.tennessee.edu/extension/tennessee-market-highlights/monthly-crop-comments/
Corn
Ethanol production for the week ending August 5 was 1.022 million barrels per day, down 21,000 from the previous week. Ethanol stocks were 23.256 million barrels, down 138,000 compared to last week. Corn net sales reported by exporters for July 29 to August 4, 2022, were up compared to last week with net sales of 7.6 million bushels for the 2021/22 marketing year and 7.5 million bushels for the 2022/23 marketing year. Exports for the same period were down 31 percent from last week at 27.8 million bushels. Corn export sales and commitments were 98 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) 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 7 to 50 over, with an average of 30 over the September futures at elevators and barge points. September 2022 corn futures closed at $6.39, up 29 cents since last Friday. For the week, September 2022 corn futures traded between $6.01 and $6.40. Sep/Dec and Sep/Mar future spreads were 3 and 10 cents.
Nationally, the Crop Progress report estimated corn condition at 58 percent good-to-excellent and 16 percent poor-to-very-poor; corn silking at 90 percent compared to 80 percent last week, 94 percent last year, and a 5-year average of 93 percent; corn dough at 45 percent compared to 26 percent last week, 53 percent last year, and a 5-year average of 49 percent; and corn dented at 6 percent compared to 7 percent last year and a 5-year average of 9 percent. In Tennessee, corn condition was estimated at 31 percent good-to-excellent and 37 percent poor-to-very poor; corn silking at 97 percent compared to 96 percent last week, 97 percent last year, and a 5-year average of 98 percent; corn dough at 78 percent compared to 67 percent last week, 77 percent last year, and a 5-year average of 80 percent; and corn dented at 32 percent compared to 13 percent last week, 39 percent last year; and a 5-year average of 29 percent. New crop cash prices at elevators and barge points ranged from $5.87 to $6.39. December 2022 corn futures closed at $6.42, up 32 cents since last Friday. Downside price protection could be obtained by purchasing a $6.50 December 2022 Put Option costing 48 cents establishing a $6.02 futures floor. March 2023 corn futures closed at $6.49, up 31 cents since last Friday.
Soybeans
Net sales reported by exporters were up compared to last week with net sales cancelations of 2.5 million bushels for the 2021/22 marketing year and net sales of 17.5 million bushels for the 2022/23 marketing year. Exports for the same period were up 77 percent compared to last week at 32.9 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 50 under to 81 over, with an average basis of 11 over the September futures contract. September 2022 soybean futures closed at $15.35, up 72 cents since last Friday. For the week, September 2022 soybean futures traded between $14.53 and $15.57. Sep/ Nov and Sep/Jan future spreads were -81 and -75 cents. September 2022 soybean-to-corn price ratio was 2.40 at the end of the week.
Nationally, the Crop Progress report estimated soybean condition at 59 percent good-to-excellent and 11 percent poor-to-very poor; soybeans blooming at 89 percent compared to 79 percent last week, 90 percent last year, and a 5-year average of 88 percent; and soybeans setting pods at 61 percent compared to 44 percent last week, 70 percent last year, and a 5-year average of 66 percent. In Tennessee, soybean condition was estimated at 42 percent good-to-excellent and 23 percent poor-to-very poor; soybeans blooming at 86 percent compared to 80 percent last week, 83 percent last year, and a 5-year average of 85 percent; and soybean setting pods at 59 percent compared to 47 percent last week, 60 percent last year, and a 5-year average of 63 percent.
Nov/Dec 2022 soybean-to-corn price ratio was 2.26 at the end of the week. New crop cash soybean prices at elevators and barge points ranged from $13.71 to $14.79. November 2022 soybean futures closed at $14.54, up 46 cents since last Friday. Downside price protection could be achieved by purchasing a $14.60 November 2022 Put Option which would cost 73 cents and set a $13.87 futures floor. January 2023 soybean futures closed at $14.60, up 43 cents since last Friday.
Cotton
Net sales reported by exporters were up compared to last week with net sales of 102,400 bales for the 2021/22 marketing year and 38,400 bales for the 2022/23 marketing year. Exports for the same period were up 6 percent compared to last week at 295,500 bales. Upland cotton export sales were 51 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 47 percent. A total of 2,387,800 running bales in sales were carried over from the 2021/2022 marketing year, which ended July 31. Accumulated exports for the 2021/22 marketing year were 13,179,100 running bales, down 11 percent from the prior years’ total of 14,882,100 running bales. Delta upland cotton spot price quotes for August 11 were 119.44 cents/lb (41-4-34) and 121.69 cents/lb (31-3-35). Adjusted world price (AWP) was down 1.29 cents at 88.15 cents.
Nationally, the Crop Progress report estimated cotton condition at 31 percent good-to-excellent and 34 percent poor-to-very poor; cotton squaring at 95 percent compared to 89 percent last week, 87 percent last year, and a 5-year average of 93 percent; cotton setting bolls at 69 percent compared to 58 percent last week, 61 percent last year, and a 5-year average of 64 percent; and cotton bolls opening at 9 percent compared to 5 percent last year and a 5-year average of 9 percent. In Tennessee, cotton condition was estimated at 48 percent good-to- excellent and 21 percent poor-to-very poor; cotton squaring at 98 percent compared to 96 percent last week, 92 percent last year, and a 5-year average of 96 percent; cotton setting bolls at 82 percent compared to 66 percent last week, 63 percent last year, and a 5-year average of 77 percent; and cotton bolls opening at 1 percent compared to a 5-year average of 1 percent. December 2022 cotton futures closed at 108.59 cents, up 12.46 cents since last Friday. For the week, December 2022 cotton futures traded between 95.14 and 108.59 cents. Dec/Mar and Dec/May cotton futures spreads were -2.95 cents and -4.72 cents. Downside price protection could be obtained by purchasing a 109 cent December 2022 Put Option costing 11.45 cents establishing an 97.55 cent futures floor. March 2023 cotton futures closed at 105.64 cents, up 11.84 cents since last Friday. May 2023 cotton futures closed at 103.87 cents, up 11.52 cents since last Friday.
Wheat
Wheat net sales reported by exporters were up compared to last week at 13.2 million bushels for the 2022/23 marketing year. Exports for the week were up 113% compared to last week at 22.6 million bushels – a marketing year high. Wheat export sales were 40 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 41 percent.
Nationally, the Crop Progress report estimated winter wheat harvested at 86 percent compared to 82 percent last week, 94 percent last year, and a 5-year average of 91 percent; spring wheat condition at 64 percent good-to-excellent and 8 percent poor-to-very poor; spring wheat harvested at 9 percent compared to 35 percent last year and a 5- year average of 19 percent. Wheat cash prices at elevators and barge points ranged from $7.19 to $8.11. September 2022 wheat futures closed at $8.06, up 31 cents since last Friday. September 2022 wheat futures traded between $7.60 and $8.20 this week. September wheat-to-corn price ratio was 1.26. Sep/Dec and Sep/Jul future spreads were 16 and 36 cents.
December 2022 wheat futures closed at $8.22, up 27 cents since last Friday. New crop wheat cash prices at elevators and barge points ranged from $7.63 to $8.28. July 2023 wheat futures closed at $8.42, up 15 cents since last Friday. Downside price protection could be obtained by purchasing an $8.50 July 2023 Put Option costing 101 cents establishing a $7.49 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee