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Corn Exports Are Below All-Time Record
DR. AARON SMITH
KNOXVILLE, TENN.
Corn, soybeans, and wheat were down; cotton was mixed for the week. The 2015/16 corn and soybean marketing year comes to an end August 31 and exports are estimated at 1.925 billion bushels and 1.88 billion bushels for corn and soybeans, respectively. Corn exports are well below the all-time record of 2.437 billion bushels exported during the 2007/08 marketing year, while soybeans set a third consecutive all-time record. Both commodities are expected to increase export sales for the forthcoming marketing year. The August WASDE projections for 2016/17 marketing year exports are 2.175 billion bushels (15 percent of total use) and 1.95 billion bushels (49 percent of total use) for corn and soybeans, respectively. Due to the record estimated yield and production this Fall, exports will be extremely important to avoid even lower corn and soybean prices than today’s levels. To meet the estimated export sales target, exports will need to average 41.8 million bushels a week for corn and 37.5 million bushels a week for soybeans. Seasonality of export demand should be anticipated (greater sales during certain months for each commodity). From October-January, soybean export sales are typically their strongest while April-July US exports wain as importers shift purchases to South America. In general, corn export sales are more consistent throughout the year, however the past 5-years corn sales have had seasonal highs from November-March. Export sales should be watched closely as we move into harvest as they could precipitate strong price movements.
Wheat futures had another atrocious week as prices fell 30-45 cents to set new contract lows. Nearby wheat futures reached lows not seen since September of 2006. There is little relief in sight for wheat prices with both Russia and Canada expecting excellent yields and production. As such, supplies are likely to remain near or break all-time records. To adjust supplies for increased consumption the number of days of inventory on hand can be estimated. The number of days of inventory on hand is the number of days it would take to runout of wheat without additional production – assuming uniform daily consumption. Currently, the USDA projects the global days of inventory on hand at 127 days - an all-time high. For comparison, the number of days of inventory on hand in 2006 was 79 days. Similarly, the US is up almost 100 days, from 81 in 2006 to 173 projected for 2016/17. The likely result of this surplus domestic and global inventory is continued low prices and reduced domestic planted acreage.
Corn
September 2016 corn futures closed at $3.16 down 18 cents since last Friday. September 2016 corn futures traded between $3.15 and $3.34 for the week. Across Tennessee, average basis (cash price-nearby futures price) weakened at Northwest Barge Points, Northwest, and Upper-middle Tennessee and strengthened or remained unchanged at Memphis and Lower-middle Tennessee. Overall, basis for the week ranged from 12 under to 19 over the September futures contract with an average of 2 over at the end of the week. Ethanol production for the week ending August 19 was 1,028,000 barrels per day down 1,000 from last week. Ethanol stocks were 20.817 million barrels, up 392,000 barrels. Corn net sales reported by exporters from August 12-18 were within expectations with net sales of 2.8 million bushels for the 2015/16 marketing year and 41.7 million bushels for the 2016/17 marketing year. Exports for the same time period were down from last week at 41.2 million bushels. Corn export sales and commitments were 102 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 105 percent.
Sep/Dec and Sep/Mar future spreads were 9 and 18 cents, respectively. This week’s Crop Progress report estimated corn condition at 75 percent good-to-excellent and 7 percent poor-to-very poor; corn dough or beyond at 85 percent compared to 73 percent last week, 81 percent last year, and a 5-year average of 76 percent; and corn dent or beyond at 40 percent compared to 21 percent last week, 34 percent last year, and a 5-year average of 35 percent. In Tennessee, this week’s Crop Progress report indicated corn condition at 67 percent good-to-excellent and 9 percent poor-to-very poor; corn dough or beyond at 97 percent compared to 94 percent last week, 96 percent last year, and a 5-year average of 96 percent; corn dent or beyond at 81 percent compared to 65 percent last week, 68 percent last year, and a 5-year average of 74 percent; and corn mature at 16 percent compared to 4 percent last year and a 5-year average of 20 percent. In Tennessee, September 2016 cash forward contracts averaged $3.28 with a range of $3.12 to $3.53. December 2016 corn futures closed at $3.25 down 18 cents since last Friday. Downside price protection could be obtained by purchasing a $3.30 December 2016 Put Option costing 15 cents establishing a $3.15 futures floor. March 2017 corn futures closed at $3.34 down 19 cents since last Friday.
Soybeans
September 2016 soybean futures closed at $9.90 down 37 cents since last Friday. September 2016 soybean futures traded between $9.82 and $10.41. For the week, average soybean basis strengthened at Memphis, Northwest Barge Points, and Upper-middle Tennessee and weakened at Northwest and Lower-middle Tennessee. Basis ranged from 26 under to 37 over the September futures contract at elevators and barge points. Average basis at the end of the week was 1 over the September futures contract. Net sales reported by exporters were above expectations with net sales of 4.2 million bushels for the 2015/16 marketing year and net sales of 71.3 million bushels for the 2016/17 marketing year. Exports for the same period were up from last week at 31.9 million bushels. Soybean export sales and commitments were 104 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. September soybean-to-corn price ratio was 3.13 at the end of the week.
Sep/Nov and Sep/Jan future spreads were -23 cents and -21 cents, respectively. This week’s Crop Progress report estimated soybean condition at 72 percent good-to-excellent and 7 percent poor-to-very-poor; and soybeans setting pods at 89 percent compared to 80 percent last week, 85 percent last year, and a 5-year average of 85 percent. In Tennessee, this week’s Crop Progress report indicated soybean condition at 78 percent good-to-excellent and 4 percent poor-to-very poor; soybeans blooming at 98 percent compared to 94 percent last week, 93 percent last year, and a 5-year average of 94 percent; and soybeans setting pods at 87 percent compared to 80 percent last week, 78 percent last year, and a 5-year average of 80 percent. November/December 2016 soybean-to-corn price ratio was 2.98 at the end of the week. In Tennessee, October/November 2016 cash forward contracts averaged $10.07 with a range of $9.51 to $10.54 at elevators and barge points. November 2016 soybean futures closed at $9.67 down 37 cents since last Friday. Downside price protection could be achieved by purchasing a $9.70 November 2016 Put Option which would cost 37 cents and set a $9.42 futures floor. January 2017 soybean futures closed at $9.69 down 37 cents since last Friday.
Cotton
October 2016 cotton futures closed at 67.71 up 0.14 cents since last Friday. Adjusted world price (AWP) decreased 1.42 cents to 58.81 cents per pound. Delta upland cotton spot price quotes for August 25 were 67.25 cents/lb (41-4-34) and 70 cents/lb (31-3-35). Net sales reported by exporters were up from last week with net sales of 275,900 bales for the 2016/17 marketing year and net sales of 18,500 bales for the 2016/17 marketing year. Exports for the same period were up from last week at 193,500 bales. Upland cotton export sales were 37 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 42 percent.
This week’s Crop Progress report estimated cotton condition at 47 percent good-to-excellent and 18 percent poor-to-very poor; cotton setting bolls at 92 percent compared to 88 percent last week, 80 percent last year, and a 5-year average of 89 percent; and cotton bolls opening at 16 percent compared to 12 percent last week, 13 percent last year, and a 5-year average of 15 percent. In Tennessee, this week’s Crop Progress report indicated cotton condition at 80 percent good-to-excellent and 3 percent poor-to-very poor; cotton setting bolls at 97 percent compared to 91 percent last week, 84 percent last year, and a 5-year average of 91 percent; and cotton bolls opening at 9 percent compared to 5 percent last week, 7 percent last year, and a 5-year average of 8%. December 2016 cotton futures closed at 68.03 the same as last Friday. Dec/Oct and Dec/Mar cotton futures spreads were -0.32 cents and 0.33 cents, respectively. December 2016 cotton futures traded between 67.07 and 69.12 cents this week. Downside price protection could be obtained by purchasing a 69 cent December 2016 Put Option costing 3.4 cents establishing a 65.6 cent futures floor. March 2017 cotton futures closed at 68.36 down 0.4 cents since last Friday.
Wheat
In Tennessee, August cash wheat prices averaged $3.84 with a range of $3.40 to $4.17 for the week. Nationally, the Crop Progress report indicated spring wheat harvested at 65 percent compared to 48 percent last week, 69 percent last year, and a 5-year average of 46 percent.
September 2016 wheat futures closed at $3.83 down 44 cents since last Friday. September 2016 wheat futures traded between $3.66 and $4.05 this week. September wheat-to-corn price ratio was 1.21. Net sales reported by exporters were below expectations with net sales of 14 million bushels for the 2016/17 marketing year. Exports for the week were down from last week at 20.7 million bushels. Wheat export sales were 45 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 46 percent. Sep/Dec and Sep/Jul future spreads were 24 cents and 72 cents, respectively. December 2016 wheat futures closed at $4.07 down 37 cents since last Friday. December wheat-to-corn price ratio was 1.25. In Memphis, June/July 2017 cash wheat ranged from $4.60 to $4.71. July 2017 wheat futures closed at $4.55 down 30 cents since last Friday. Downside price protection could be obtained by purchasing a $4.60 July 2017 Put Option costing 31 cents establishing a $4.29 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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