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USDA Releases Initial Estimates For 2016/2017 Marketing Year
DR. AARON SMITH
KNOXVILLE, TENN.
Corn, soybeans, cotton, and wheat were down for the week. This week was not good for prices as all 12 futures contracts reported below set new 4-week lows. On Thursday and Friday, the USDA held their 92nd Annual Outlook Conference. Included in the conference were initial estimates for the 2016/2017 marketing year. Domestic balance sheet highlights for each commodity were:
Corn: 2016 planted acres are estimated at 90 million, up 2 million from last year. Trend line yield is estimated at 168 bu/acre. Total domestic production is estimated at 13.825 billion bushels. For use, domestic use is estimated up 130 million bushels (125 million from higher feed and residual use) and exports up 50 million from last year. The net result is a 140 million bushel increases in ending stocks to 1.977 billion bushels and a stocks-to-use ratio of 14.4 percent (up from 13.6 percent last year). The 2016/17 marketing year price is projected at $3.45/bu.
Soybeans: 2016 planted acres are estimated at 82.5 million, down 0.2 million from last year. Trend line yield is estimated at 46.7 bu/acre (down from last year’s yield of 48 bu/acre). Total domestic production is estimated at 3.81 billion bushels (down 120 million from the 2015/16 marketing year). For use, domestic crush is estimated up 20 million bushels, at 1.9 billion bushels, and exports up 135 million from last year, at 1.825 billion bushels. The net result is an estimated 10 million bushel decrease in ending stocks, to 440 million bushels and a stocks-to-use ratio of 11.4 percent (down from 12.1 percent last year). The 2016/17 marketing year price is projected at $8.50/bu.
Cotton: 2016 planted acres are estimated at 9.4 million, up 950,000 from last year. Trend line yield is estimated at 812 lbs/acre (up from 769 lbs /acre last year). Total domestic production is estimated at 14.3 million bales, up 1.36 from last year. For use, domestic use is estimated at 3.6 million bales (the same as last year) and exports up 1.2 million from last year at 10.7 million bales. The net result is ending stocks remaining at 3.6 million and a stocks-to-use ratio of 25.2 percent (down from 27.5 percent last year). World ending stocks are estimated down 5 million bales to 99.1 million. The 2016/17 marketing year price is projected at $0.58/lb.
Wheat: 2016 planted acres are estimated at 51 million, down 3.6 million from last year. Trend line yield is estimated at 45.9 bu/acre. Total domestic production is estimated at 1.991 billion bushels (down 61 million). For use, domestic use is estimated up 60 million bushels and exports up 75 million from last year. The net result is a 23 million bushel increases in ending stocks to 989 million bushels and a stocks-to-use ratio of 47.3 percent (down from 49.3 percent last year). The 2016/17 marketing year price is projected at $4.20/bu.
Corn
March 2016 corn futures closed at $3.54 down 11 cents since last Friday. March 2016 corn futures traded between $3.52 and $3.69 for the week. Across Tennessee, average basis (cash price-nearby futures price) weakened or remained unchanged at Memphis, Northwest Barge Points, Northwest, Lower-middle, and Upper-middle Tennessee. Overall, basis for the week ranged from 6 under to 35 over the March futures contract with an average of 11 over at the end of the week. Ethanol production for the week ending February 19th was 994,000 barrels per day up 19,000 from last week. Ending ethanol stocks were 23.105 million barrels down 113,000 barrels from last week. Corn net sales reported by exporters from February 12th to 18th were within expectations with net sales of 36.8 million bushels for the 2015/16 marketing year and net sales of 5.2 million bushels for the 2016/17 marketing year. Exports for the same time period were up from last week at 34.3 million bushels. Corn export sales and commitments were 64 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 76 percent.
May 2016 corn futures closed at $3.59 down 10 cents since last Friday. Mar/May and Mar/Sep future spreads were 5 cents and 16 cents, respectively. In Tennessee, September 2016 cash forward contracts averaged $3.62 with a range of $3.35 to $3.97. September 2016 corn futures closed at $3.70 down 8 cents since last Friday. Downside price protection could be obtained by purchasing a $3.80 December 2016 Put Option costing 29 cents establishing a $3.51 futures floor.
Soybeans
March 2016 soybean futures closed at $8.55 down 23 cents since last Friday. March 2016 soybean futures traded between $8.54 and $8.87. For the week, average soybean basis strengthened at Northwest Barge Points and Lower-middle Tennessee and weakened at Memphis, Northwest, and Upper-middle Tennessee. Basis ranged from 11 under to 25 over the March futures contract at elevators and barge points. Average basis at the end of the week was 7 over the March futures contract. Net sales reported by exporters were within expectations with net sales of 12.1 million bushels for the 2015/16 marketing year and net sales of 0.01 million bushels for the 2016/17 marketing year. Exports for the same period were down from last week at 55 million bushels. Soybean export sales and commitments were 91 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 93 percent. March soybean-to-corn price ratio was 2.42 at the end of the week.
May 2016 soybean futures closed at $8.63 down 17 cents since last Friday. Mar/May and Mar/Nov future spreads were 8 cents and 21 cents, respectively. November/September 2016 soybean-to-corn price ratio was 2.37 at the end of the week. In Tennessee, October/November 2016 cash forward contracts averaged $8.70 with a range of $8.46 to $8.97 at elevators and barge points. November 2016 soybean futures closed at $8.76 down 12 cents since last Friday. Downside price protection could be achieved by purchasing an $8.80 November 2016 Put Option which would cost 45 cents and set an $8.35 futures floor.
Cotton
March 2016 cotton futures closed at 57.92 down 2.09 cents since last Friday. March 2016 cotton futures traded between 57.16 and 60.65 cents this week. Adjusted world price (AWP) decreased 0.03 cents to 44.66 cents per pound. Delta upland cotton spot price quotes for February 25th were 57.53 cents/lb (41-4-34) and 60.28 cents/lb (31-3-35). Net sales reported by exporters were down from last week with net sales of 110,600 bales for the 2015/16 marketing year and 18,700 bales for the 2016/17 marketing year. Exports for the same period were up from last week at 171,800 bales. Upland cotton export sales were 73 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 94 percent.
May 2016 cotton futures closed at 57.53 down 2.01 cents since last Friday. Mar/May and Mar/Dec cotton futures spreads were -0.39 cents and -0.83 cents, respectively. December 2016 cotton futures closed at 57.09 down 2.47 cents since last Friday. Downside price protection could be obtained by purchasing a 58 cent December 2016 Put Option costing 3.90 cents establishing a 54.1 cent futures floor.
Wheat
March 2016 wheat futures closed at $4.43 down 18 cents since last Friday. March 2016 wheat futures traded between $4.42 and $4.63 this week. March wheat-to-corn price ratio was 1.25. Net sales reported by exporters were within expectations with net sales of 14.3 million bushels for the 2015/16 marketing year and 3.6 million bushels for the 2016/17 marketing year. Exports for the same period were down from last week at 8.5 million bushels. Wheat export sales were 84 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 91 percent. In Memphis, old crop cash wheat traded between $4.37 and $4.53 for the week. Mar/May and Mar/Jul future spreads were 9 cents and 16 cents, respectively.
May 2016 wheat futures closed at $4.52 down 14 cents since last Friday. In Tennessee, June/July cash forward contracts averaged $4.55 with a range of $4.20 to $4.87. July 2016 wheat futures closed at $4.59 down 15 cents since last Friday. Downside price protection could be obtained by purchasing a $4.60 July 2016 Put Option costing 25 cents establishing a $4.35 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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