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Several Factors Contribute To November Soybeans Tumble Lower
DR. AARON SMITH
KNOXVILLE, TENN.
November soybeans continued to tumble lower. Since April 15th, soybeans have decreased 66 ¾ cents, from $9.31 to $8.64 ¼. Large supplies, week export sales, lack of a resolution to the trade dispute with China, and the potential for additional U.S. acreage shifting to soybeans, as a result of the wet planting conditions, continue to push prices lower.
December 2019 corn bounced higher after last Thursday’s low of $3.71 ¾ gaining 16 cents to close today at $3.87 ¾. Planting conditions remain challenging in many locations. The final planting date for crop insurance purposes in Tennessee is May 20. The end of the late planting period is June 4.
December cotton closed down for the second consecutive week. In 2019, December cotton futures price peaked at 77.75, on April 12. Since then prices have drifted lower closing today at 74.45. A key level of support for cotton is the 74 cent level, if prices breach this level further weakness should be expected.
July wheat set a new contract low this week at $4.26. Global supplies and growing conditions continue to pressure prices lower. Most wheat producing regions have had above average growing conditions, including the U.S. The Kansas wheat tour estimated an average yield of 47.2 bu/acre, up 9.2 bushels from USDA’s estimate for last year. In Tennessee, challenging fall and winter weather has impacted the number of wheat acres and the yield potential, however fields that were able to establish a good stand are in good-to-excellent condition.
Corn
Ethanol production for the week ending April 26 was 1.024 million barrels per day, down 24,000 from the previous week. Ethanol stocks were 22.695 million barrels, down 52,000 barrels. Corn net sales reported by exporters from April 19-25 were up from last week at 23.1 million bushels for the 2018/19 marketing year and 8.2 million bushels for the 2019/20 marketing year. Exports for the same time period were up 9 percent from last week at 53.8 million bushels. Corn export sales and commitments were 79 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 89 percent. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened at Memphis, Northwest Barge Points, and Northwest Tennessee and weakened at Upper-middle Tennessee.
Overall, basis for the week ranged from 13 under to 13 over with an average of 1 under the July futures at elevators and barge points at the end of the week. July 2019 corn futures closed at $3.70, up 9 cents since last Friday. For the week, July 2019 corn futures traded between $3.58 and $3.71. Jul/Sep and Jul/Dec future spreads were 7 and 17 cents.
Nationally, the Crop Progress report estimated corn planted at 15 percent compared to 6 percent last week, 15 percent last year, and a 5-year average of 27 percent; and corn emerged at 3 percent compared to 3 percent last year and a 5-year average of 5 percent. In Tennessee, the Crop Progress report estimated corn planted at 41 percent compared to 24 percent last week, 35 percent last year, and a 5-year average of 50 percent; and corn emerged at 19 percent compared to 9 percent last week, 7 percent last year, and a 5-year average of 19 percent. In Tennessee, September 2019 corn cash forward contracts averaged $3.60 with a range of $3.40 to $3.77. September 2019 corn futures closed at $3.77, up 8 cents since last Friday. December 2019 corn futures closed at $3.87, up 7 cents since last Friday. Downside price protection could be obtained by purchasing a $3.90 December 2019 Put Option costing 29 cents establishing a $3.61 futures floor.
Soybeans
Net sales reported by exporters were down compared to last week at 11.5 million bushels for the 2018/19 marketing year and 0.9 million bushels for the 2019/20 marketing year. Exports for the same period were up 43 percent compared to last week at 21.9 million bushels. Soybean export sales and commitments were 88 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 97 percent. Average soybean basis strengthened at Memphis, Northwest Barge Points, Northwest, and Upper-middle Tennessee. Basis ranged from 55 under to 4 over the July futures contract at elevators and barge points. Average basis at the end of the week was 25 under the July futures contract. July 2019 soybean futures closed at $8.42, down 25 cents since last Friday. For the week, July 2019 soybean futures traded between $8.40 and $8.73. July soybean-to-corn price ratio was 2.28 at the end of the week. August 2019 soybean futures closed at $8.48, down 25 cents since last Friday. Jul/Aug and Jul/Nov future spreads were 6 and 22 cents.
Nationally, the Crop Progress report estimated soybeans planted at 3 percent compared to 1 percent last week, 5 percent last year, and a 5-year average of 6 percent. In Tennessee, the Crop Progress report estimated soybeans planted at 3 percent compared to 1 percent last week, 2 percent last year, and a 5-year average of 4 percent. In Tennessee, October/November 2019 soybean cash contracts average $8.35 with a range of $8.02 to $8.59. November 2019 soybean futures closed at $8.64, down 23 cents since last Friday. Downside price protection could be achieved by purchasing an $8.80 November 2019 Put Option which would cost 48 cents and set an $8.32 futures floor. Nov/Dec 2019 soybean-to-corn price ratio was 2.23 at the end of the week.
Cotton
Net sales reported by exporters were down compared to last week at 144,800 bales for the 2018/19 marketing year and 56,300 bales for the 2019/20 marketing year. Exports for the same time period were down 8 percent compared to last week at 292,600 bales. Upland cotton export sales were 99 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 98 percent. Delta upland cotton spot price quotes for May 2 were 70.95 cents/lb (41-4-34) and 73.20 cents/lb (31-3-35). Adjusted World Price (AWP) decreased 0.41 cents to 68.27 cents. July 2019 cotton futures closed at 75.68, down 2.02 cents since last Friday. For the week, July 2019 cotton futures traded between 75.37 and 78.09 cents. Jul/Oct and Jul/Dec cotton futures spreads were -1.4 cents and -1.2 cents. October 2019 cotton futures closed at 74.28, down 2.06 cents since last Friday.
Nationally, the Crop Progress report estimated cotton planted at 11 percent compared to 9 percent last week, 12 percent last year, and a 5-year average of 13 percent. In Tennessee, the Crop Progress report estimated cotton planted at 2 percent compared to 1 percent last week, 1 percent last year, and a 5-year average of 4 percent. December 2019 cotton futures closed at 74.48, down 1.71 cents since last Friday. Downside price protection could be obtained by purchasing a 75 cent December 2019 Put Option costing 4.03 cents establishing a 70.97 cent futures floor.
Wheat
Wheat net sales reported by exporters were down compared to last week at 4.5 million bushels for the 2018/19 marketing year and 10.9 million bushels for the 2019/20 marketing year. Exports for the same time period were down 30 percent from last week at 20.4 million bushels. Wheat export sales were 100 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 104 percent. Nationally, the Crop Progress report estimated winter wheat condition at 64 percent good-to-excellent and 8 percent poor-to-very-poor; winter wheat headed at 19 percent compared to 9 percent last week, 18 percent last year, and a 5-year average of 29 percent; and spring wheat planted at 13 percent compared to 5 percent last week, 9 percent last year, and a 5-year average of 33 percent. In Tennessee, winter wheat condition was estimated at 60 percent good-to-excellent and 7 percent poor-to-very poor; winter wheat jointing at 94 percent compared to 87 percent last week, 91 percent last year, and a 5-year average of 88 percent; and winter wheat headed at 42 percent compared to 21 percent last week, 26 percent last year, and a 5-year average of 40 percent. In Tennessee, June/July 2019 wheat cash contracts ranged from $4.18 to $4.70 for the week. July 2019 wheat futures closed at $4.38, down 4 cents since last Friday. July 2019 wheat futures traded between $4.26 and $4.48 this week. Downside price protection could be obtained by purchasing a $4.50 July 2019 Put Option costing 21 cents establishing a $4.29 futures floor. July wheat-to-corn price ratio was 1.18. Jul/Sep and Jul/Jul future spreads were 8 and 52 cents.
September 2019 wheat futures closed at $4.46, down 4 cents since last Friday. July 2020 wheat futures closed at $4.90, down 7 cents since last Friday. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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