|
WASDE Increases Corn, Soybean Yields, All-Time Highs If Utilized
DR. AARON SMITH
KNOXVILLE, TENN.
Corn and wheat were down; and cotton and soybeans were mixed for the week. The US presidential election and surprises in the USDA’s November WASDE created volatility in markets. The night of the presidential election DJIA futures were down close to 800 points, however these losses were erased by morning. By the end of the week the DJIA was up over 900 points and set a new all-time high, a remarkable change.
The next surprise was the USDA’s November WASDE. National corn and soybean yields were increased 1.9 bu/acre to 175.3 bu/acre and 1.1 bu/acre to 52.5 bu/acre, respectively. Both would be all-time highs if realized. As a result of the yield revision, estimated domestic ending stocks were increased 83 million bushels for corn (to 2.403 billion) and 85 million bushels for soybeans (to 480 million). Projected foreign ending stocks for corn were revised down 29 million bushels to 6.186 billion and foreign soybean stocks were increased 67 million bushels to 2.515 billion bushels. Estimated domestic cotton yield was increased 6 lbs/acre to 803 lbs/acre, up 37 lbs/acre form last year. Projected wheat supply and demand was left virtually unchanged from last month’s estimates. Details of this month’s USDA WASDE report and market reaction can be found on our Outlook page.
In Tennessee the Crop Production Report, estimated corn yields unchanged at 148 bu/acre; soybean yields were decreased 2 bu/acre to 44 bu/acre; and cotton yields were increased 57 lbs/acre to 1,075 lbs/acre (a new state record if achieved). The late summer drought reduced corn and soybean yields from earlier estimates. Additionally, there was tremendous variability in yields from county-to-county and field-to-field due to differences in rainfall events.
Corn
December 2016 corn futures closed at $3.40 down 8 cents since last Friday. December 2016 corn futures traded between $3.39 and $3.56 for the week. Across Tennessee, average basis (cash price-nearby futures price) strengthened at Memphis, Northwest Barge Points, Northwest, Upper-middle, and Lower-middle Tennessee. Overall, basis for the week ranged from 25 under to 35 over the December futures contract with an average of 5 over at the end of the week. Ethanol production for the week ending November 4 was 1,002,000 barrels per day down 20,000 from last week. Ethanol stocks were 19.229 million barrels, down 510,000 barrels. This week’s Crop Progress report estimated corn harvested at 86% compared to 75 percent last week, 91 percent last year, and a 5-year average of 85 percent. In Tennessee, this week’s Crop Progress report indicated corn harvested at 100 percent compared to 99 percent last week, 98 percent last year, and a 5-year average of 97 percent. Dec/Mar and Dec/Dec future spreads were 9 and 39 cents, respectively. In Tennessee, January 2017 cash forward contracts averaged $3.66 with a range of $3.40 to $3.93.
Corn net sales reported by exporters from October 28 to November 3 were within expectations with net sales of 48.6 million bushels for the 2016/17 marketing year. Exports for the same time period were up from last week at 35.1 million bushels. Corn export sales and commitments were 46 percent of the USDA estimated total annual exports for the 2016/17 marketing year (September 1 to August 31) compared to a 5-year average of 45 percent. March 2017 corn futures closed at $3.49 down 8 cents since last Friday. December 2017 corn futures closed at $3.79 down 8 cents since last Friday. Downside price protection could be obtained by purchasing a $3.80 December 2017 Put Option costing 31 cents establishing a $3.49 futures floor.
Soybeans
January 2017 soybean futures closed at $9.86 down 4 cents since last Friday. January 2017 soybean futures traded between $9.73 and $10.08. For the week, average soybean basis strengthened at Memphis, Northwest Barge Points, Northwest, Upper-middle, and Lower-middle Tennessee. Basis ranged from 38 under to 5 over the January futures contract at elevators and barge points. Average basis at the end of the week was 11 under the January futures contract. This week’s Crop Progress report estimated soybeans harvested at 93 percent compared to 87 percent last week, 94 percent last year, and a 5-year average of 91 percent. In Tennessee, this week’s Crop Progress report indicated soybeans harvested at 91 percent compared to 86 percent last week, 79 percent last year, and a 5-year average of 72 percent. January/December soybean-to-corn futures price ratio was 2.90 at the end of the week.
Jan/Mar and Jan/Nov future spreads were 8 cents and -2 cents, respectively. Net sales reported by exporters were below expectations with net sales of 36.8 million bushels for the 2016/17 marketing year and 3.7 million for the 2017/18 marketing year. Exports for the same period were down from last week at 102.6 million bushels. Soybean export sales and commitments were 67 percent of the USDA estimated total annual exports for the 2016/17 marketing year (September 1 to August 31), compared to a 5-year average of 66 percent. March 2017 soybean futures closed at $9.94 down 3 cents since last Friday. In Tennessee, January cash contracts average $10.06 with a range of $9.80 to $10.34. November 2017 soybean futures closed at $9.84 up 2 cents since last Friday. November/December 2017 soybean-to-corn price ratio was 2.60 at the end of the week. Downside price protection could be achieved by purchasing a $10.00 November 2017 Put Option which would cost 73 cents and set a $9.27 futures floor.
Cotton
Delta upland cotton spot price quotes for November 10 were 69.20 cents/lb (41-4-34) and 71.95 cents/lb (31-3-35). Adjusted world price (AWP) decreased 0.98 cents to 58.07 cents per pound. This week’s Crop Progress report estimated cotton harvested at 56 percent compared to 46 percent last week, 46 percent last year, and a 5-year average of 60 percent. In Tennessee, this week’s Crop Progress report indicated cotton harvested at 86 percent compared to 74 percent last week, 66 percent last year, and a 5-year average of 75 percent. December 2016 cotton futures closed at 68.44 down 0.09 cents since last Friday. December 2016 cotton futures traded between 67.87 and 71.44 cents this week.
Dec/Mar and Dec/Dec cotton futures spreads were 0.59 cents and 0.43 cents, respectively. Net sales reported by exporters were up from last week with net sales of 168,800 bales for the 2016/17 marketing year and 15,600 for the 2017/18 marketing year. Exports for the same period were up from last week at 134,700 bales. Upland cotton export sales were 56 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 57 percent. March 2017 cotton futures closed at 69.03 down 0.07 cents since last Friday. December 2017 cotton futures closed at 68.87 up 0.13 cents since last Friday. Downside price protection could be obtained by purchasing a 69 cent December 2017 Put Option costing 4.82 cents establishing a 64.18 cent futures floor.
Wheat
Wheat net sales reported by exporters were above expectations with net sales of 28.3 million bushels for the 2016/17 marketing year. Exports for the week were up from last week at 14 million bushels. Wheat export sales were 65 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 65 percent. December 2016 wheat futures closed at $4.03 down 11 cents since last Friday. December 2016 wheat futures traded between $4.01 and $4.19 this week. December wheat-to-corn price ratio was 1.19.
Dec/Mar and Dec/Jul future spreads were 18 cents and 49 cents, respectively. March 2017 wheat futures closed at $4.21 down 11 cents since last Friday. March 2017 wheat-to-corn price ratio was 1.21. Nationally, the Crop Progress report indicated winter wheat condition at 58 percent good-to-excellent and 9 percent poor-to-very poor; winter wheat planted at 91 percent compared to 86 percent last week, 91 percent last year, and a 5-year average of 92 percent; and winter wheat emerged at 79 percent compared to 70 percent last week, 78 percent last year, and a 5-year average of 78 percent. In Tennessee, winter wheat condition was estimated at 44 percent good-to-excellent and 18 percent poor-to-very poor; winter wheat planted at 81 percent compared to 71 percent last week, 70 percent last year, and a 5-year average of 67 percent; and winter wheat emerged at 45 percent compared to 33 percent last week, 50 percent last year, and a 5-year average of 41 percent. In Tennessee, June/July 2017 cash wheat ranged from $4.22 to $4.78. July 2017 wheat futures closed at $4.52 down 7 cents since last Friday. Downside price protection could be obtained by purchasing a $4.60 July 2017 Put Option costing 35 cents establishing a $4.25 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
|
|