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Corn Yields Increased At All-Time Record
DR. AARON SMITH
KNOXVILLE, TENN.
Corn and cotton were down; soybeans and wheat were up for the week. On Friday, the USDA released the August WASDE and Crop Production reports. Corn yields were increased 7.1 bu/acre from the July report to 175.1 bu/acre, an all-time record. If realized corn yields would be 6.7 bu/acre higher than last year and produce a record crop of 15.15 billion bushels. The estimated record production does not bode well for improved price prospects as harvest approaches. Tennessee yields were estimated down 5 bu/acre to 155 bu/acre.
Like corn, soybean yields were revised up to an all-time record of 48.9 bu/acre. This is an increase in average domestic yield of 2.2 bu/acre, from the July estimate, and 0.9 bu/acre from last year. Countering the yield increase was continued upward revisions to estimated and projected soybean demand both domestically and internationally. Strong demand for soybeans and other oilseeds has been able to buoy prices for soybeans relative to other row crops. However, there are limitations to the deviation in relative prices amongst row crops. In Tennessee, soybean yields were estimated at 46 bu/acre, the same as last year.
Cotton took a massive step back this week dropping about 6 cents/lb across contracts. The majority of this decrease can be attributed to beneficial rains across west Texas rather than the WASDE and Crop Production reports. National yield was decreased 15 lbs/acre, from the July estimate, to 800 lbs/acre. This yield if realized would still be 34 lbs/acre higher than last year. Cotton fundamentals continue to move in the right direction to improve long term price prospects, however a large domestic crop and increased planted acreage globally could quickly dash improved price prospects. In Tennessee, cotton yields were estimated at 1,000 lbs/acre, down 46 lbs/acre from last year.
Wheat prices continue to suffer from surplus global supplies. Domestic yields were increased1.3 bu/acre, from the July estimate, to 52.6 bu/acre. This is 9 bu/acre higher than 2015. In Tennessee, wheat yields are estimated at 71 bu/acre up 3 bu/acre from 2015.
Corn
September 2016 corn futures closed at $3.22 down 2 cents since last Friday. September 2016 corn futures traded between $3.12 and $3.27 for the week. Across Tennessee, average basis (cash price-nearby futures price) weakened or remained unchanged at Memphis, Northwest, Lower-middle, and Upper-middle Tennessee and weakened at Northwest Barge Points. Overall, basis for the week ranged from 1 under to 41 over the September futures contract with an average of 7 over at the end of the week. Ethanol production for the week ending August 5 was 1,018,000 barrels per day up 14,000 from last week. Ethanol stocks were 20.460 million barrels, down 143,000 barrels. Corn net sales reported by exporters from July 29-August 4 were above expectations with net sales of 23.4 million bushels for the 2015/16 marketing year and 40.0 million bushels for the 2016/17 marketing year. Exports for the same time period were up from last week at 56.9 million bushels. Corn export sales and commitments were 103 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 104 percent.
Sep/Dec and Sep/Mar future spreads were 11 and 21 cents, respectively. This week’s Crop Progress report estimated corn condition at 74 percent good-to-excellent and 7 percent poor-to-very poor; corn silking at 97 percent compared to 91 percent last week, 94 percent last year, and a 5-year average of 94 percent; corn dough or beyond at 53 percent compared to 30 percent last week, 44 percent last year, and a 5-year average of 42 percent; and corn dent or beyond at 9 percent compared to 8 percent last year and a 5-year average of 12 percent. In Tennessee, this week’s Crop Progress report indicated corn condition at 66 percent good-to-excellent and 10 percent poor-to-very poor; corn silking at 98% compared to 97 percent last week, 98 percent last year, and a 5-year average of 99 percent; corn dough or beyond at 88 percent compared to 79 percent last week, 83 percent last year, and a 5-year average of 83 percent; and corn dent or beyond at 57 percent compared to 34 percent last week, 24 percent last year, and a 5-year average of 40 percent. In Tennessee, September 2016 cash forward contracts averaged $3.24 with a range of $3.06 to $3.40. December 2016 corn futures closed at $3.33 down 1 cent since last Friday. Downside price protection could be obtained by purchasing a $3.40 December 2016 Put Option costing 20 cents establishing a $3.20 futures floor. March 2017 corn futures closed at $3.43 down 1 cent since last Friday.
Soybeans
September 2016 soybean futures closed at $9.99 up 11 cents since last Friday. September 2016 soybean futures traded between $9.81 and $10.15. For the week, average soybean basis strengthened at Memphis and weakened at Northwest Barge Points, Upper-middle, Northwest, and Lower-middle Tennessee. Basis ranged from 30 under to 43 over the September futures contract at elevators and barge points. Average basis at the end of the week was 4 over the September futures contract. Net sales reported by exporters were above expectations with net sales of 11.3 million bushels for the 2015/16 marketing year and net sales of 102.6 million bushels for the 2016/17 marketing year. Exports for the same period were up from last week at 39.5 million bushels. Soybean export sales and commitments were 108 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 103 percent. September soybean-to-corn price ratio was 3.10 at the end of the week.
Sep/Nov and Sep/Jan future spreads were -18 cents and -17 cents, respectively. This week’s Crop Progress report estimated soybean condition at 72 percent good-to-excellent and 7 percent poor-to-very-poor; soybeans blooming at 91 percent compared to 85 percent last week, 86 percent last year, and a 5-year average of 88 percent; and soybeans setting pods at 69 percent compared to 54 percent last week, 65 percent last year, and a 5-year average of 61 percent. In Tennessee, this week’s Crop Progress report indicated soybean condition at 76 percent good-to-excellent and 4 percent poor-to-very poor; soybeans blooming at 89 percent compared to 81 percent last week, 79 percent last year, and a 5-year average of 79 percent; and soybeans setting pods at 70 percent compared to 55 percent last week, 58 percent last year, and a 5-year average of 57 percent. November/December 2016 soybean-to-corn price ratio was 2.95 at the end of the week. In Tennessee, October/November 2016 cash forward contracts averaged $9.86 with a range of $9.50 to $10.20 at elevators and barge points. November 2016 soybean futures closed at $9.81 up 7 cents since last Friday. Downside price protection could be achieved by purchasing a $9.90 November 2016 Put Option which would cost 40 cents and set a $9.50 futures floor. January 2017 soybean futures closed at $9.82 up 8 cents since last Friday.
Cotton
October 2016 cotton futures closed at 69.88 down 6.76 cents since last Friday. Adjusted world price (AWP) increased 0.14 cents to 64.69 cents per pound. Delta upland cotton spot price quotes for August 12 were 69.38 cents/lb (41-4-34) and 72.13 cents/lb (31-3-35). Net sales reported by exporters were down from last week with net sales of 132,000 bales for the 2016/17 marketing year. 680,800 bales were carried over from the 2015/16 marketing year ending July 31 into the 2016/17 marketing year. Total export sales for the 2015/16 marketing year ended July 31 were 8.42 million bales. Exports for the week ending August 4 were up from last week at 194,700 bales. Upland cotton export sales were 41 percent of the USDA estimated total annual exports for the 2016/17 marketing year (August 1 to July 31), compared to a 5-year average of 41 percent.
This week’s Crop Progress report estimated cotton condition at 48 percent good-to-excellent and 16 percent poor-to-very poor; cotton squaring at 96 percent compared to 92 percent last week, 95 percent last year, and a 5-year average of 96 percent; cotton setting bolls at 70 percent compared to 54 percent last week, 65 percent last year, and a 5-year average of 72 percent; and cotton bolls opening at 9 percent compared to 6 percent last year and a 5-year average of 7 percent. In Tennessee, this week’s Crop Progress report indicated cotton condition at 78 percent good-to-excellent and 3 percent poor-to-very poor; cotton squaring at 97 percent compared to 95 percent last week, 92 percent last year, and a 5-year average of 96 percent; cotton setting bolls at 82 percent compared to 68 percent last week, 69 percent last year, and a 5-year average of 74 percent; and cotton bolls opening at 1 percent compared to 1 percent last year and a 5-year average of 0 percent. December 2016 cotton futures closed at 70.65 down 6.09 cents since last Friday. Dec/Oct and Dec/Mar cotton futures spreads were -0.77 cents and 0.46 cents, respectively. December 2016 cotton futures traded between 70.2 and 77.1 cents this week. Downside price protection could be obtained by purchasing a 71 cent December 2016 Put Option costing 3.75 cents establishing a 67.25 cent futures floor. March 2017 cotton futures closed at 71.11 down 5.86 cents since last Friday.
Wheat
In Tennessee, August cash wheat prices averaged $3.94 with a range of $3.81 to $4.11 for the week. Nationally, the Crop Progress report indicated winter wheat harvested at 94 percent compared to 89 percent last week, 96 percent last year, and a 5-year average of 91 percent; spring wheat condition at 68 percent good-to-excellent and 8 percent poor-to-very poor; and spring wheat harvested at 30 percent compared to 10 percent last week, 22 percent last year, and a 5-year average of 18 percent.
September 2016 wheat futures closed at $4.22 up 6 cents since last Friday. September 2016 wheat futures traded between $4.06 and $4.27 this week. September wheat-to-corn price ratio was 1.31. Net sales reported by exporters were above expectations with net sales of 22.3 million bushels for the 2016/17 marketing year. Exports for the week were down from last week at 14.9 million bushels. Wheat export sales were 43 percent of the USDA estimated total annual exports for the 2016/17 marketing year (June 1 to May 31), compared to a 5-year average of 43 percent. Sep/Dec and Sep/Jul future spreads were 18 cents and 60 cents, respectively. December 2016 wheat futures closed at $4.40 up 2 cents since last Friday. December wheat-to-corn price ratio was 1.33. July 2017 wheat futures closed at $4.82 up 3 cents since last Friday. Downside price protection could be obtained by purchasing a $4.90 July 2017 Put Option costing 46 cents establishing a $4.44 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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