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Export Sales Behind Pace Due To Uncertain Markets
DR. AARON SMITH
KNOXVILLE, TENN.
Trade uncertainty and weather remain the dominant influence in corn, soy-bean, wheat, and cotton markets. Currently, we are just over six months into the corn and soybean marketing years, seven months into the cotton marketing year, and nine months into the wheat marketing year. Given the massive trade disruptions (China, USMCA, and the E.U.) that affected agricultural in 2018 and have persisted in 2019, it will not be surprising to many that outstanding export sales and accumulated export shipments are behind the pace required to meet USDA marketing year projections.
Wheat exports for 2018/19 are currently projected at 965 million bushels, however total export commitments (accumulated exports + outstanding sales) to date are at 89 percent (859 million bushels). Compared to the five year average of 99 percent of the marketing year total for this week, the export sales commitments are well behind previous years. To meet the current projection wheat export sales would need to average 8.83 million bushels a week, which seems doable, however this does not account for sales cancellations or export sales rolled into the next marketing year.
Corn exports for 2018/19 are currently projected at 2.375 billion bushels, however total export commitments to date are at 69 percent (1.69 billion bushels). Compared to the five year average of 78 percent of the marketing year total for this week, the export sales commitments are well behind previous years. To meet the current projection corn export sales would need to average 27.4 million bushels a week, not accounting for sales cancellations or export sales rolled into the 2019/20 marketing year.
Soybean exports for 2018/19 are currently projected at 1.875 billion bushels, however total export commitments to date are at 81 percent (1.52 billion bushels). Compared to the five year average of 92 percent of the marketing year total for this week, the export sales commitments are well behind previous years. To meet the current projection soybean export sales would need to average 14.4 million bushels a week, not accounting for sales cancellations or export sales rolled into the 2019/20 marketing year.
Cotton exports for 2018/19 are currently projected at 15 million bales, however total export commitments to date are at 89 percent (13.35 million bales). Compared to the five year average of 90 percent of the marketing year total for this week, the export sales commitments are close to previous years, but sales have slowed substantially in 2019 compared to the pace last fall. To meet the current projection cotton export sales would need to average 82,500 bales a week, not accounting for sales cancellations or export sales rolled into the 2019/20 marketing year.
Export sales continue to lag the pace required to meet USDA projections. Additionally, we are entering a time of the year where exports typically tail off as export business shifts to South America. However, comparisons with previous years, or typical trade patterns, need to be taken with a grain of salt as the current trade environment for agriculture is anything but typical/predictable.
Corn
Ethanol production for the week ending March 15 was 1.004 million barrels per day, down 1,000 from the previous week. Ethanol stocks were 24.412 million barrels, up 681,000 barrels. Corn net sales reported by exporters from March 8-14 were up from last week at 33.7 million bushels for the 2018/19 marketing year and 2.4 million bushels for the 2019/20 marketing year. Exports for the same time period were down from last week at 30.1 million bushels. Corn export sales and commitments were 69 percent of the USDA estimated total annual exports for the 2018/19 marketing year (September 1 to August 31) compared to a 5-year average of 78 percent. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at Northwest Barge Points, Northwest, and Upper-middle Tennessee and weakened at Memphis. Overall, basis for the week ranged from 8 under to 17 over with an average of 4 over the May futures at the end of the week. May 2019 corn futures closed at $3.78, up 5 cents since last Friday. For the week, May 2019 corn futures traded between $3.67 and $3.78. July 2019 corn futures closed at $3.87, up 5 cents since last Friday. May/Jul and May/Dec future spreads were 9 and 22 cents.
In Tennessee, September 2019 corn cash forward contracts averaged $3.77 with a range of $3.55 to $3.90. December 2019 corn futures closed at $4.00, up 4 cents since last Friday. Downside price protection could be obtained by purchasing a $4.10 December 2019 Put Option costing 32 cents establishing a $3.78 futures floor.
Soybeans
Net sales reported by exporters were down compared to last week at 14.7 million bushels for the 2018/19 marketing year and net sales reductions of 2.4 million bushels for the 2019/20 marketing year. Exports for the same period were up compared to last week at 37.3 million bushels. Soybean export sales and commitments were 81 percent of the USDA estimated total annual exports for the 2018/19 marketing year (September 1 to August 31), compared to a 5-year average of 92 percent. Average soybean basis strengthened or remained unchanged at Northwest and Upper-middle Tennessee and weakened at Memphis and Northwest Barge Points. Basis ranged from 50 under to even the May futures contract at elevators and barge points. Average basis at the end of the week was 27 under the May futures contract. May 2019 soybean futures closed at $9.03, down 6 cents since last Friday. For the week, May 2019 soybean futures traded between $8.99 and $9.12. May soybean-to-corn price ratio was 2.39 at the end of the week. July 2019 soybean futures closed at $9.17, down 6 cents since last Friday. May/Jul and May/Nov future spreads were 14 and 34 cents.
In Tennessee, October/November 2019 soybean cash contracts average $9.04 with a range of $8.74 to $9.27. November 2019 soybean futures closed at $9.37, down 5 cents since last Friday. Downside price protection could be achieved by purchasing a $9.40 November 2019 Put Option which would cost 47 cents and set an $8.93 futures floor. Nov/Dec 2019 soybean-to-corn price ratio was 2.34 at the end of the week.
Cotton
Net sales reported by exporters were down compared to last week at 125,000 bales for the 2018/19 marketing year and 32,800 bales for the 2019/20 marketing year. Exports for the same time period were up compared to last week at 350,100 bales. Upland cotton export sales were 89 percent of the USDA estimated total annual exports for the 2018/19 marketing year (August 1 to July 31), compared to a 5-year average of 90 percent. Delta upland cotton spot price quotes for March 21 were 72.68 cents/lb (41-4-34) and 74.43 cents/lb (31-3-35). Adjusted World Price (AWP) increased 1.73 cents to 65.83 cents. May 2019 cotton futures closed at 76.58, up 1.08 cents since last Friday. For the week, May 2019 cotton futures traded between 74.89 and 77.82 cents. May/Jul and May/Dec cotton futures spreads were 0.99 cents and -1.28 cents. July 2019 cotton futures closed at 77.57, up 0.97 cents since last Friday.
December 2019 cotton futures closed at 75.3, up 0.78 cents since last Friday. Downside price protection could be obtained by purchasing a 76 cent December 2019 Put Option costing 4.37 cents establishing a 71.63 cent futures floor.
Wheat
Wheat net sales reported by exporters were up compared to last week at 11.0 million bushels for the 2018/19 marketing year and 5.1 million bushels for the 2019/20 marketing year. Exports for the same time period were down from last week at 13.1 million bushels. Wheat export sales were 89 percent of the USDA estimated total annual exports for the 2018/19 marketing year (June 1 to May 31), compared to a 5-year average of 99 percent. May 2019 wheat futures closed at $4.66, up 4 cents since last Friday. May 2019 wheat futures traded between $4.53 and $4.73 this week. May wheat-to-corn price ratio was 1.23. May/Jul and May/Sep future spreads were 4 cents and 13 cents.
In Tennessee, June/July 2019 wheat cash contracts ranged from $4.52 to $4.97 for the week. July 2019 wheat futures closed at $4.70, up 2 cents since last Friday. Downside price protection could be obtained by purchasing a $4.80 July 2019 Put Option costing 27 cents establishing a $4.53 futures floor. September 2019 wheat futures closed at $4.79, up 3 cents since last Friday. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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