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No Bullish News For Corn In WASDE Report
DR. AARON SMITH
KNOXVILLE, TENN.
Soybeans and cotton were up; corn was down; and wheat was mixed for the week. On Friday the USDA released the October World Supply and Demand Estimates (WASDE) and Crop Production reports. Overall, the report provided mixed news across commodities, however in general the report failed to provide the bullish news, particularly for corn, that many were hoping would result in a futures price rally.
Corn: U.S. yield was increased 0.5 bu/acre and harvested acreage was decreased 400,000 acres, resulting in a net reduction in production of 30 million bushels from the September report. Corn production is now estimated 661 million bushels lower than last year’s record of 14.216 billion bushels. In Tennessee, average yield was left unchanged, from the September report, at 165 bu/acre. Harvested acreage from 2014 to 2015 deceased 15 percent to 710,000 acres. Globally, corn stocks are now estimated at 7.395 billion bushels down over 300 million bushels from the last marketing year.
Soybeans: U.S. yield was increased 0.1 bu/acre and harvested acreage was decreased 1.1 million acres resulting in a net decrease in production of 47 million bushels, form the September report. Soybean production is estimated at 3.888 billion bushels 39 million less than less year’s record. In Tennessee, average yield was decreased 1 bu/acre to 44 bu/acre. Compared to last year, harvested acreage was increased 120,000 acres to 1.730 million acres. Globally, soybean stocks are estimated at 3.129 billion bushels up 265 million bushels from the previous marketing year
Cotton: U.S. Yield was decreased 5 lbs/acre with no change in estimated harvested acreage resulting in a 90,000 bale reduction in estimated production compared to the September report. U.S production is now estimated almost 3 million bales lower than last year, primarily due to lower acreage. In Tennessee, yield was estimated at 994 lbs/acre up 34 lbs/acre from the September estimate. If realized it would be the highest average yield ever recorded in Tennessee. Harvested acreage was estimated down 130,000 acres from last year at 140,000 acres. Global production is estimated at 107.38 million bales down 11 million bales from last year. Global marketing year ending stocks are estimated to be down almost 5 million bales at 107 million bales.
Wheat: U.S. yield and acreage were estimated down at 0.5 bu/acre and 1.4 million acres, respectively. U.S. stocks were estimated down 14 million from the December report; however global wheat stocks are 8.4 billion bushels up over 600 million from the previous marketing year.
Corn
December 2015 corn futures closed at $3.82 down 7 cents since last week. This week, December 2015 corn futures traded between $3.81 and $3.99. Across Tennessee, average basis (cash price-nearby futures price) strengthened or remained unchanged at Memphis, Northwest Barge Points, Northwest, Lower-middle, and Upper-middle Tennessee. Overall, basis for the week ranged from 41 under to 15 over the December futures contract with an average of 16 under at the end of the week. Ethanol production for the week ending October 2nd was 950,000 barrels per day up 7,000 from last week. Ending ethanol stocks were 18.812 million barrels up 30,000 barrels from last week. Corn net sales reported by exporters from September 25th to October 1st were below expectations with net sales of 20.5 million bushels for the 2015/16 marketing year and 2.1 million bushels for the 2016/17 marketing year. Exports for the same time period were down from last week at 19.3 million bushels. Corn export sales and commitments were 23 percent of the USDA estimated total annual exports for the 2015/16 marketing year (September 1 to August 31) compared to a 5-year average of 40 percent. Nationally, this week’s Crop Progress report estimated corn condition at 68 percent good-to-excellent and 10 percent poor-to-very poor; corn mature at 86 percent compared to 71 percent last week, 75 percent last year, and a 5-year average of 83 percent; and corn harvested at 27 percent compared to 18 percent last week, 16 percent last year, and a 5-year average of 32 percent. In Tennessee, corn condition was estimated at 85 percent good-to-excellent and 2 percent poor-to-very poor; corn mature at 98 percent compared to 95 percent last week, 96 percent last year, and a 5-year average of 97 percent; and corn harvested at 76 percent compared to 64 percent last week, 69 percent last year, and a 5-year average of 79 percent. Downside price protection could be obtained by purchasing a $3.85 December 2015 Put Option costing 8 cents establishing a $3.77 futures floor. In Tennessee, January 2016 cash forward contracts averaged $3.94 with a range of $3.75 to $4.15.
March 2016 corn futures closed at $3.93 down 6 cents since last week. Dec/Mar and Dec/Sep future spreads were 11 cents and 19 cents, respectively. September 2016 corn futures closed at $4.01 down 2 cents since last week.
Soybeans
November 2015 soybean futures closed at $8.85 up 11 cents since last week. This week November 2015 soybean futures traded between $8.71 and $8.97. November/December soybean-to-corn price ratio was 2.32 at the end of the week. For the week, average soybean basis strengthened or remained unchanged at Northwest Barge Points, Memphis, Northwest, Upper-middle, and Lower-middle Tennessee. Basis ranged from 25 under to 30 over the November futures contract at elevators and barge points. Average basis at the end of the week was 7 over the November futures contract. Net sales reported by exporters were above expectations with net sales of 47.2 million bushels for the 2015/16 marketing year and 36.6 million bushels for the 2016/17 marketing year. Exports for the same period were up from last week at 34.3 million bushels. Soybean export sales and commitments were 47 percent of the USDA estimated total annual exports for the 2015/16 marketing year (September 1 to August 31), compared to a 5-year average of 58 percent. Nationally, this week’s Crop Progress report estimated soybean condition at 64 percent good-to-excellent and 11 percent poor-to-very poor; soybeans dropping leaves at 85 percent compared to 74 percent last week, 81 percent last year, and a 5-year average of 83 percent; and soybeans harvested at 42 percent compared to 21 percent last week, 19 percent last year, and a 5-year average of 32 percent. In Tennessee, soybean condition was estimated at 75 percent good-to-excellent and 7 percent poor-to-very poor; soybeans dropping leaves at 78 percent compared to 65 percent last week, 69 percent last year, and a 5-year average of 72 percent; and soybeans harvested at 23 percent compared to 15 percent last week, 16 percent last year, and a 5-year average of 23 percent. Downside price protection could be achieved by purchasing an $8.90 November 2015 Put Option which would cost 14 cents and set an $8.76 futures floor.
In Tennessee, January 2015 cash forward contracts averaged $8.94 with a range of $8.61 to $9.11 at elevators and barge points. January 2016 soybean futures closed at $8.90 up 12 cents since last week. Sep/Nov and Sep/Jan future spreads were 5 cents and 10 cents, respectively. November 2016 soybean futures closed at $8.95 up 13 cents from last week. September/November 2016 soybean-to-corn price ratio was 2.23 at the end of the week.
Cotton
December 2015 cotton futures closed at 61.61 up 1.47 cents since last week. December 2015 cotton futures traded between 60.2 and 62.48 cents this week. Adjusted world price (AWP) increased 0.9 cents to 45.22 cents per pound. Delta upland cotton spot price quotes for October 8th were 60.97 to 63.72 cents/lb. Net sales reported by exporters were up from last week with net sales of 206,900 bales for the 2015/16 marketing year and 358,300 bales for the 2016/17 marketing year. Exports for the same period were up from last week at 126,600 bales. Upland cotton export sales were 35 percent of the USDA estimated total annual exports for the 2015/16 marketing year (August 1 to July 31), compared to a 5-year average of 55 percent. Nationally, this week’s Crop Progress report estimated cotton condition at 48 percent good-to-excellent and 15 percent poor-to-very poor; cotton bolls opening at 77 percent compared to 69 percent last week, 72 percent last year, and 5-year average of 78 percent; and cotton harvested at 16 percent compared to 11 percent last week, 14 percent last year, and a 5-year average of 18 percent. In Tennessee, cotton condition was estimated at 82 percent good-to-excellent and 1 percent poor-to-very poor; cotton bolls opening at 79 percent compared to 68 percent last week, 84 percent last year, and a 5-year average of 82 percent; and cotton harvested at 4 percent compared to 3 percent last week, 5 percent last year, and a 5-year average of 21 percent. Downside price protection could be obtained by purchasing a 62 cent December 2015 Put Option costing 1.63 cents establishing a 60.37 cent futures floor.
March 2016 cotton futures closed at 61.53 up 1.57 cents since last week. Dec/Mar and Dec/Dec cotton futures spreads were -0.08 cents and 0.84 cents, respectively. December 2016 cotton futures closed at 62.45 up 1.67 cents since last week.
Wheat
December 2015 wheat futures closed at $5.09 down 4 cents since last week. December wheat futures traded between $5.04 and $5.31 this week. December wheat-to-corn price ratio was 1.33. Net sales reported by exporters were within expectations with net sales of 10.6 million bushels for the 2015/16 marketing year and 0.2 million bushels for the 2016/17 marketing year. Exports for the same period were up from last week at 20.9 million bushels. Wheat export sales were 47 percent of the USDA estimated total annual exports for the 2015/16 marketing year (June 1 to May 31), compared to a 5-year average of 57 percent. Dec/Mar and Dec/Jul future spreads were 7 cents and 17 cents, respectively.
March 2016 wheat futures closed at $5.16 down 3 cents from last week. Nationally, this week’s Crop Progress report estimated winter wheat planted at 49 percent compared to 31 percent last week, 54 percent last year, and a 5-year average of 51 percent; and winter wheat emerged at 20 percent compared to 7 percent last week, 26 percent last year, and a 5-year average of 22 percent. In Tennessee, winter wheat planted was estimated at 11 percent compared to 2 percent last week, 12 percent last year, and a 5-year average of 9 percent. In Tennessee, June/July cash forward contracts averaged $5.07 with a range of $4.18 to $5.56. July 2016 wheat futures closed at $5.26 up 1 cent since last week. Downside price protection could be obtained by purchasing a $5.30 July 2016 Put Option costing 45 cents establishing a $4.85 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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