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Wet Conditions May Prevent Planting With Switch To Soybeans
DR. AARON SMITH
KNOXVILLE, TENN.
On Friday March 29, the USDA released the Prospective Plantings and March Grain Stocks reports. A full summary of the reports for corn, soybeans, wheat, and cotton can be found at: https://ag.tennessee.edu/arec/Pages/cropeconomics.aspx.
Prospective Plantings
Corn – U.S. corn plantings were projected at 92.792 million acres, up 3.663 million acres compared to 2018. In Tennessee, corn plantings were projected at 850,000 acres, up 110,000 acres compared to 2018. It is important to note that the report projections do not fully account for flooding and wet planting conditions that have been rampant across several key states. The current wet conditions (and projections for intensification) increase the likelihood of prevented planting claims or a switch to soybeans or an alternative later planted crop.
Soybeans – U.S. soybean plantings were projected at 84.617 million acres, down 4.579 million acres compared to 2018. In Tennessee, soybean plantings were projected at 1.5 million acres, down 200,000 acres compared to 2018. Soybean plantings will be influenced by planting conditions and movement (if any) in negotiations with China. Large domestic stocks continue to dampen price expectations.
Wheat – U.S. all wheat planted was projected at 45.754 million acres, down 2.046 million acres compared to 2018. Spring wheat plantings were projected at 12.83 million acres (plus 1.42 million acres of Durum), down 370,000 acres (Durum down 645,000 acres) compared to 2018. U.S. winter wheat acres planted were projected at 31.504 million acres, down 1.031 million acres compared to 2018. In Tennessee, winter wheat plantings were projected at 300,000, down 80,000 compared to 2018. Tennessee acres were revised down, as expected, due to poor planting conditions in the fall. Nationally, wheat acres have plummeted, but large stocks and stagnant demand continue to override reduced production – keeping prices low.
Cotton – U.S. upland cotton plantings were projected at 13.525 million acres, down 325,000 acres compared to 2018. In Tennessee, cotton acres planted were projected at 360,000, the same as 2018. The national upland cotton projection is 661,000 acres lower than the NCC projections (Tennessee 21,000 acres lower than the NCC projection). Similar to corn, planting conditions will dictate final acreage numbers, particularly in the Mid-South. For the day, cotton was the only winner from a price standpoint.
March 1 - Grain Stocks
Grain Stocks reports are released quarterly by the USDA. The reports provide two principle estimates for markets: 1) the amount of stocks remaining for a commodity at a specific point in time; and 2) implied demand for the commodity (how much has been used: production + imports + beginning stocks – current stocks = use over the time period) for a time period.
Corn stocks were estimated at 8.604 billion bushels, down 288 million bushels compared to last year. Soybean stocks were estimated at 2.715 billion bushels, up 606 million bushels compared to last year. Wheat stocks were estimated at 1.591 billion, up 96,000 bushels. Although wheat and corn stocks were down compared to last year, current stocks were higher than anticipated by many resulting in substantial price declines for the day.
Corn
Ethanol production for the week ending March 22 was 975 million barrels per day, down 29,000 from the previous week. Ethanol stocks were 24.448 million barrels, up 36,000 barrels. Corn net sales reported by exporters from March 15-21 were up from last week at 35.6 million bushels for the 2018/19 marketing year and 3.4 million bushels for the 2019/20 marketing year. Exports for the same time period were up 26 percent from last week at 37.8 million bushels. Corn export sales and commitments were 71 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 80 percent. Across Tennessee, average corn basis (cash price-nearby futures price) weakened or remained unchanged at Memphis, Northwest Barge Points, Northwest, and Upper-middle Tennessee. Overall, basis for the week ranged from 7 under to 15 over with an average of 3 over the May futures at the end of the week. May 2019 corn futures closed at $3.56, down 22 cents since last Friday. For the week, May 2019 corn futures traded between $3.56 and $3.80. July 2019 corn futures closed at $3.66, down 21 cents since last Friday. May/Jul and May/Dec future spreads were 10 and 28 cents.
In Tennessee, September 2019 corn cash forward contracts averaged $3.80 with a range of $3.58 to $3.90. December 2019 corn futures closed at $3.84, down 16 cents since last Friday. Downside price protection could be obtained by purchasing a $3.90 De-cember 2019 Put Option costing 25 cents establishing a $3.65 futures floor.
Soybeans
Net sales reported by exporters were down compared to last week at 6.7 million bushels for the 2018/19 marketing year and 0.6 million bushels for the 2019/20 marketing year. Exports for the same period were down 6 percent compared to last week at 34.6 million bushels. Soybean export sales and commitments were 82 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 93 percent. Average soybean basis weakened or remained unchanged at Memphis, Northwest Barge Points, Northwest, and Upper-middle Tennessee. Basis ranged from 49 under to 8 under the May futures contract at elevators and barge points. Average basis at the end of the week was 34 under the May futures contract. May 2019 soybean futures closed at $8.84, down 19 cents since last Friday. For the week, May 2019 soybean futures traded between $8.83 and $9.08. May soybean-to-corn price ratio was 2.48 at the end of the week. July 2019 soybean futures closed at $8.97, down 20 cents since last Friday. May/Jul and May/Nov future spreads were 13 and 35 cents.
In Tennessee, October/November 2019 soybean cash contracts average $8.93 with a range of $8.58 to $9.22. November 2019 soybean futures closed at $9.19, down 18 cents since last Friday. Downside price protection could be achieved by purchasing a $9.20 November 2019 Put Option which would cost 42 cents and set an $8.78 futures floor. Nov/Dec 2019 soybean-to-corn price ratio was 2.39 at the end of the week.
Cotton
Net sales reported by exporters were up compared to last week at 219,000 bales for the 2018/19 marketing year and 175,600 bales for the 2019/20 marketing year. Exports for the same time period were up 9 percent compared to last week at 380,000 bales. Upland cotton export sales were 90 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 92 percent. Delta upland cotton spot price quotes for March 28 were 71.37 cents/lb (41-4-34) and 73.12 cents/lb (31-3-35). Adjusted World Price (AWP) increased 2.4 cents to 68.23 cents. May 2019 cotton futures closed at 77.61, up 1.03 cents since last Friday. For the week, May 2019 cotton futures traded between 75.52 and 77.98 cents. May/Jul and May/Dec cotton futures spreads were 0.7 cents and -2.17 cents. July 2019 cotton futures closed at 78.31, up 0.74 cents since last Friday.
December 2019 cotton futures closed at 75.44, up 0.14 cents since last Friday. Downside price protection could be obtained by purchasing a 76 cent December 2019 Put Option costing 4.5 cents establishing a 71.5 cent futures floor.
Wheat
Wheat net sales reported by exporters were up compared to last week at 17.5 million bushels for the 2018/19 marketing year and 1.3 million bushels for the 2019/20 marketing year. Exports for the same time period were up 19 percent from last week at 15.6 million bushels. Wheat export sales were 90 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 100 percent. May 2019 wheat futures closed at $4.57, down 9 cents since last Friday. May 2019 wheat futures traded between $4.52 and $4.78 this week. May wheat-to-corn price ratio was 1.28. May/Jul and May/Sep future spreads were 6 cents and 14 cents.
In Tennessee, June/July 2019 wheat cash contracts ranged from $4.60 to $5.00 for the week. July 2019 wheat futures closed at $4.63, down 7 cents since last Friday. Downside price protection could be obtained by purchasing a $4.65 July 2019 Put Option costing 18 cents establishing a $4.47 futures floor. September 2019 wheat futures closed at $4.71, down 8 cents since last Friday. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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