Ethanol Production For The Week Was Down From The Previous Week
DR. AARON SMITH
KNOXVILLE, TENNESSEE
Corn basis in Tennessee remains exceptionally strong as concerns over the 2022 crop were validated with a USDA estimated average yield for the state of 130 bushel per acre (26 percent below trendline yield).
Production in the state is projected at 119.6 million bushels, 43.6 million bushels less than last year. Tight reserves and possible quality issues, due to the June-July drought, will keep basis and quality premiums at elevated levels.
November soybean prices have been consolidating near $14.00. The recent trading range has been between $12.89 and $14.89. Anticipated record South American planting has helped quell concerns over limited U.S. ending stocks (estimated at 245 million bushels), however, there remains a great deal of production uncertainty, and global demand for soybean oil and meal remains strong. The next major breakout (up or down) in soybean prices will likely be associated with planting and weather in Brazil and Argentina.
Since August 5, December cotton has moved from 96.13 to 116.01 cents, a 19.88 cent increase in ten trading days. The USDA’s August WASDE report estimated abandonment at 5.35 million acres (42.9 percent of planted acres). If realized, this would be the highest abandonment on record and only the 9th time abandonment has exceeded 20 percent since 1909. U.S. production is now estimated at 12.57 million bales, based on 7.13 million acres harvested and an average yield of 846 lbs. per acre. As a result, projected U.S. exports were dropped 2 million bales and ending stocks were decreased 600,000 bales to 1.8 million bales.
The supply side of the U.S. cotton balance sheet provides tremendous support for higher prices. The December contract could challenge the contract high of 133.79 cents, on May 17, if harvest weather challenges occur. This week wheat prices moved sharply lower. The September contract dropped below $7.50 for the first time since February 3. The July 2023 contract is still near $8.00. Producers considering planting wheat this fall may want to consider obtaining some downside price protection for the 2023 crop.
Corn
Ethanol production for the week ending August 12 was 0.983 million barrels per day, down 39,000 from the previous week. Ethanol stocks were 23.446 million barrels, up 190,000 compared to last week. Corn net sales reported by exporters for August 5-11, 2022, were up compared to last week with net sales of 3.9 million bushels for the 2021/22 marketing year and 29.5 million bushels for the 2022/23 marketing year. Exports for the same period were down 12 percent from last week at 24.5 million bushels. Corn export sales and commitments were 100 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 Northwest, West-Central, North-Central, and Mississippi River elevators and barge points and weakened at West elevators and barge points. Overall, basis for the week ranged from 10 to 75 over, with an average of 36 over the September futures at elevators and barge points. September 2022 corn futures closed at $6.26, down 13 cents since last Friday. For the week, September 2022 corn futures traded between $6.08 and $6.35. Sep/Dec and Sep/Mar future spreads were -3 and 4 cents.
Nationally, the Crop Progress report estimated corn condition at 57 percent good-to-excellent and 16 percent poor-to-very-poor; corn silking at 94 percent compared to 90 percent last week, 98 percent last year, and a 5-year average of 97 percent; corn dough at 62 percent compared to 45 percent last week, 71 percent last year, and a 5-year average of 65 percent; and corn dented at 16 percent compared to 6 percent last week, 20 percent last year, and a 5-year average of 20 percent. In Tennessee, corn condition was estimated at 33 percent good-to-excellent and 31 percent poor-to-very poor; corn silking at 98 percent compared to 97 percent last week, 100 percent last year, and a 5-year average of 100 percent; corn dough at 87 percent compared to 78 percent last week, 88 percent last year, and a 5-year average of 89 percent; and corn dented at 44 percent compared to 32 percent last week, 56 percent last year; and a 5-year average of 51 percent. New crop cash prices at elevators and barge points ranged from $5.90 to $6.40. December 2022 corn futures closed at $6.23, down 19 cents since last Friday. Downside price protection could be obtained by purchasing a $6.30 December 2022 Put Option costing 42 cents establishing a $5.88 futures floor. March 2023 corn futures closed at $6.30, down 19 cents since last Friday.
Soybeans
Net sales reported by exporters were up compared to last week with net sales of 3.6 million bushels for the 2021/22 marketing year and 47.9 million bushels for the 2022/23 marketing year. Exports for the same period were down 23 percent compared to last week at 25.4 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 52 under to 72 over, with an average basis of 2 over the September futures contract. September 2022 soybean futures closed at $14.88, down 47 cents since last Friday. For the week, September 2022 soybean futures traded between $14.43 and $15.30. Sep/Nov and Sep/Jan future spreads were -84 and -78 cents. September 2022 soybean-to-corn price ratio was 2.38 at the end of the week.
Nationally, the Crop Progress report estimated soybean condition at 58 percent good-to-excellent and 12 percent poor-to-very poor; soybeans blooming at 93 percent compared to 89 percent last week, 94 percent last year, and a 5-year average of 93 percent; and soybeans setting pods at 74 percent compared to 61 percent last week, 80 percent last year, and a 5-year average of 77 percent. In Tennessee, soybean condition was estimated at 49 percent good-to-excellent and 17 percent poor-to-very poor; soybeans blooming at 92 percent compared to 86 percent last week, 90 percent last year, and a 5-year average of 91 percent; and soybean setting pods at 70 percent compared to 59 percent last week, 72 percent last year, and a 5-year average of 74 percent.
Nov/Dec 2022 soybean-to-corn price ratio was 2.25 at the end of the week. New crop cash soybean prices at elevators and barge points ranged from $13.53 to $14.42. November 2022 soybean futures closed at $14.04, down 50 cents since last Friday. Downside price protection could be achieved by purchasing a $14.10 November 2022 Put Option which would cost 57 cents and set a $13.53 futures floor. January 2023 soybean futures closed at $14.10, down 50 cents since last Friday.
Cotton
Net sales reported by exporters were down compared to last week with net sales of 49,500 bales for the 2021/22 marketing year and 10,600 bales for the 2022/23 marketing year. Exports for the same period were down 10 percent compared to last week at 267,400 bales. Upland cotton export sales were 65 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 49 percent. Delta upland cotton spot price quotes for August 18 were 126.12 cents/lb. (41-4-34) and 128.37 cents/lb. (31-3-35). Adjusted world price (AWP) was up 13.75 cents at 101.9 cents.
Nationally, the Crop Progress report estimated cotton condition at 34 percent good-to-excellent and 35 percent poor-to-very poor; cotton setting bolls at 80 percent compared to 69 percent last week, 73 percent last year, and a 5-year average of 78 percent; and cotton bolls opening at 15 percent compared to 9 percent last week, 9 percent last year, and a 5-year average of 14 percent. In Tennessee, cotton condition was estimated at 59 percent good-to-excellent and 11 percent poor-to-very poor; cotton setting bolls at 91 percent compared to 82 percent last week, 74 percent last year, and a 5-year average of 86 percent; and cotton bolls opening at 4 percent compared to 1 percent last week, 3 percent last year, and a 5-year average of 4 percent. December 2022 cotton futures closed at 116.01 cents, up 7.42 cents since last Friday. For the week, December 2022 cotton futures traded between 111.01 and 119.59 cents. Dec/Mar and Dec/May cotton futures spreads were -3.17 cents and -6.12 cents. Downside price protection could be obtained by purchasing a 117 cent December 2022 Put Option costing 11.4 cents establishing a 105.6 cent futures floor. March 2023 cotton futures closed at 112.84 cents, up 7.2 cents since last Friday. May 2023 cotton futures closed at 109.89 cents, up 6.02 cents since last Friday.
Wheat
Wheat net sales reported by exporters were down compared to last week at 7.6 million bushels for the 2022/23 marketing year. Exports for the week were down 43 percent compared to last week at 12.8 million bushels. 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 43 percent.
Nationally, the Crop Progress report estimated winter wheat harvested at 90 percent compared to 86 percent last week, 97 percent last year, and a 5-year average of 94 percent; spring wheat condition at 64 percent good-to-excellent and 6 percent poor-to-very poor; spring wheat harvested at 16 percent compared to 9 percent last week, 55 percent last year, and a 5-year average of 35 percent. Wheat cash prices at elevators and barge points ranged from $6.76 to $8.01. September 2022 wheat futures closed at $7.55, down 51 cents since last Friday. September 2022 wheat futures traded between $7.25 and $8.10 this week. September wheat-to-corn price ratio was 1.21. Sep/Dec and Sep/Jul future spreads were 17 and 43 cents. December 2022 wheat futures closed at $7.72, down 50 cents since last Friday. New crop wheat cash prices at elevators and barge points ranged from $7.13 to $8.15. July 2023 wheat futures closed at $7.98, down 44 cents since last Friday. Downside price protection could be obtained by purchasing an $8.00 July 2023 Put Option costing 92 cents establishing a $7.08 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee