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Global Wheat Stocks Are Projected Down Marginally From 2018
DR. AARON SMITH
KNOXVILLE, TENN.
After an explosive May, that saw December corn futures gain over 40 cents, harvest futures have become range bound swinging between $4.20 and $4.75. Daily price ranges have also been amplified in June and July with many days experiencing 10 cent + trading ranges. Uncertainty regarding planted acres, yield, weather, and exports are currently triggering the increased volatility. Continued volatility should be expected as additional information is revealed.
Like corn, harvest soybean futures are also lacking a strong trend moving sideways in June and July, trading in a range of $8.75 to $9.50. Clarification on US planted acres/yield and trade with China are the likely catalysts that will dictate price direction.
2019 harvest cotton futures have trended lower since August 2018 falling from over 80 cents to below 62 cents. Short term price weakness will continue until export demand increases or weather concerns for the US crop emerge. Prices near 60 cents may be considered speculative buying opportunities.
Nearby wheat futures will be linked to movement in corn futures markets. Global wheat stocks are projected at 10.5 billion bushels, down marginally from 2018 but still near record large. Until wheat stocks are reduced, or expected to be reduced, price in-creases will be constrained. Short term September wheat futures are likely to continue trading between $4.85 and $5.25.
Current USDA export projections for the 2018/19 marketing year for corn, soybeans, cotton, and wheat (marketing year ended May 31) are: 2.1 billion bushels, 1.7 billion bushels, 14.5 million bales, and 936 million bushels. For the forthcoming (current wheat marketing year) 2019/20 marketing year, projections (percent increase) are: corn – 2.15 billion (+2.3 percent); soybeans – 1.875 billion (+10.3 percent); cotton – 17 million bales (+17.2 percent); and 950 million bushels (+1.5 percent). Domestic and global production, economic growth, and further trade developments will ultimately determine US exports for agricultural commodities in 2019/20.
Corn
Ethanol production for the week ending July 12 was 1.066 million barrels per day, up 19,000 from the previous week. Ethanol stocks were 23.365 million barrels, up 356,000 barrels. Corn net sales reported by exporters for July 5-11 were down from last week with net sales of 7.9 million bushels for the 2018/19 marketing year and 5.2 million bushels for the 2019/20 marketing year. Exports for the same time period were down 40 percent from last week at 26.9 million bushels. Corn export sales and commitments were 93 percent of the USDA estimated total annual exports for the 2018/19 marketing year (September 1 to August 31) compared to the previous 5-year average of 102 percent. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened at Memphis, Upper-middle, and Northwest Tennessee and weakened at Northwest Barge Points. Overall, basis for the week ranged from 3 over to 28 over with an average of 14 over the September futures at elevators and barge points. September 2019 corn futures closed at $4.30, down 24 cents since last Friday. For the week, September 2019 corn futures traded between $4.23 and $4.60. Sep/Dec(’19) and Sep/Dec(‘20) future spreads were 5 and -12 cents.
Nationally, the Crop Progress report estimated corn condition at 58 percent good-to-excellent and 12 percent poor-to-very poor; and corn silking at 17 percent compared to 8 percent last week, 59 percent last year, and a 5-year average of 42 percent. In Tennessee, the Crop Progress report estimated corn condition at 80 percent good-to-excellent and 4 percent poor-to-very poor; corn silking at 80 percent compared to 66 percent last week, 90 percent last year, and a 5-year average of 85 percent; and corn dough at 33 percent compared to 17 percent last week, 39 percent last year, and a 5-year average of 24 percent. In Tennessee, September 2019 corn cash forward contracts averaged $4.36 with a range of $4.12 to $4.60. December 2019 corn futures closed at $4.35, down 24 cents since last Friday. Downside price protection could be obtained by purchasing a $4.40 December 2019 Put Option costing 31 cents establishing a $4.09 futures floor. December 2020 corn futures closed at $4.18, down 4 cents since last Friday.
Soybeans
Net sales reported by exporters were up compared to last week with net sales of 4.7 million bushels for the 2018/19 marketing year and 7.3 million bushels for the 2019/20 marketing year. Exports for the same period were up 31 percent compared to last week at 33.4 million bushels. Soybean export sales and commitments were 105 percent of the USDA estimated total annual exports for the 2018/19 marketing year (September 1 to August 31), compared to the previous 5-year average of 103 percent. Average soybean basis strengthened at Memphis, Northwest Barge Points, Northwest, and Upper-middle Tennessee. Basis ranged from 46 under to 18 over the August futures contract at elevators and barge points. Average basis at the end of the week was even the August futures contract. August 2019 soybean futures closed at $9.01, down 12 cents since last Friday. For the week, August 2019 soybean futures traded between $8.75 and $9.18. August/September soybean-to-corn price ratio was 2.1 at the end of the week. September 2019 soybean futures closed at $9.07, down 12 cents since last Friday. Aug/Sep and Aug/Nov future spreads were 6 and 18 cents.
Nationally, the Crop Progress report estimated soybean condition at 54 percent good-to-excellent and 12 percent poor-to-very poor; soybeans emerged at 95 percent compared to 90 percent last week, 100 percent last year, and a 5-year average of 99 percent; and soybeans blooming at 22 percent compared to 10 percent last week, 62 percent last year, and a 5-year average of 49 percent. In Tennessee, the Crop Progress report estimated soybean condition at 77 percent good-to-excellent and 6 percent poor-to-very poor; soybeans emerged at 97 percent compared to 90 percent last week, 97 percent last year, and a 5-year average of 95 percent; soybeans blooming at 40 percent compared to 24 percent last week, 56 percent last year, and a 5-year average of 43 percent; and soybeans setting pods at 13 percent compared to 3 percent last week, 23 percent last year, and a 5-year average of 16 percent. In Tennessee, October/November 2019 soybean cash contracts average $8.84 with a range of $8.38 to $9.18. November 2019 soybean futures closed at $9.19, down 12 cents since last Friday. Downside price protection could be achieved by purchasing a $9.20 November 2019 Put Option which would cost 34 cents and set an $8.86 futures floor. Nov/Dec 2019 soybean-to-corn price ratio was 2.11 at the end of the week.
Cotton
Net sales reported by exporters were up compared to last week with net sales of 54,000 bales for the 2018/19 marketing year and 218,900 bales for the 2019/20 marketing year. Exports for the same time period were down 7 percent compared to last week at 310,300 bales. Upland cotton export sales were 115 percent of the USDA estimated total annual exports for the 2018/19 marketing year (August 1 to July 31), compared to the previous 5-year average of 107 percent. Delta upland cotton spot price quotes for July 18 were 56.53 cents/lb (41-4-34) and 58.78 cents/lb (31-3-35). Adjusted World Price (AWP) decreased 2.24 cents to 55.81 cents.
Nationally, the Crop Progress report estimated cotton condition at 56 percent good-to-excellent and 15 percent poor-to-very poor; cotton squaring at 60 percent compared to 47 percent last week, 70 percent last year, and a 5-year average of 69 percent; and cotton setting bolls at 20 percent compared to 13 percent last week, 30 percent last year, and a 5-year average of 25 percent. In Tennessee, the Crop Progress report estimated cotton condition at 61 percent good-to-excellent and 15 percent poor-to-very poor; cotton squaring at 63 percent compared to 54 percent last week, 91 percent last year, and a 5-year average of 79 percent; and cotton setting bolls at 13 percent compared to 6 percent last week, 31 percent last year, and a 5-year average of 23 percent. December 2019 cotton futures closed at 63.07, up 0.39 cents since last Friday. For the week, December 2019 cotton futures traded between 61.66 and 64.09 cents. Dec/Mar and Dec/Dec cotton futures spreads were 0.91 cent and 2.66 cents. Downside price protection could be obtained by purchasing a 64 cent December 2019 Put Option costing 4.32 cents establishing a 59.68 cent futures floor. March 2020 cotton futures closed at 63.98, up 0.24 cents since last Friday. December 2020 cotton futures closed at 65.73, up 0.17 cents since last Friday.
Wheat
Nationally, the Crop Progress report estimated winter wheat harvested at 57 percent compared to 47 percent last week, 72 percent last year, and a 5-year average of 71 percent; spring wheat condition at 76 percent good-to-excellent and 4 percent poor-to-very poor; and spring wheat headed at 78 percent compared to 56 percent last week, 91 percent last year, and a 5-year average of 87 percent. In Tennessee, the Crop Progress report estimated winter wheat harvested at 99 percent compared to 98 percent last week and 100 percent last year. In Tennessee, July 2019 wheat cash contracts ranged from $4.85 to $5.28 for the week.
Wheat net sales reported by exporters were up compared to last week with net sales of 12.8 million bushels for the 2019/20 marketing year. Exports for the same time period were down 57 percent from last week at 10.5 million bushels. Wheat export sales were 30 percent of the USDA estimated total annual exports for the 2019/20 marketing year (June 1 to May 31), compared to the previous 5-year average of 35 percent. September 2019 wheat futures closed at $5.02, down 21 cents since last Friday. September 2019 wheat futures traded between $4.92 and $5.31 this week. September wheat-to-corn price ratio was 1.17. Sep/Dec and Sep/Jul future spreads were 11 and 29 cents. December 2019 wheat futures closed at $5.13, down 22 cents since last Friday. July 2020 wheat futures closed at $5.31, down 22 cents since last Friday. Downside price protection could be obtained by purchasing a $5.40 July 2020 Put Option costing 43 cents establishing a $4.97 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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