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Late Planting Leading To Yield Variability
DR. AARON SMITH
KNOXVILLE, TENN.
Weather / yield expectations will continue to drive markets as the harvest season approaches. In many states, recent weather has been supportive for crop development, however due to late planting a tremendous amount of yield variability exists. In addition to concerns over stand quality, an early frost could dramatically reduce US corn and soybean production in Northern states.
In Tennessee, corn yield is currently estimated at 174 bushels per acre with projected harvest acres of 920,000 (production of 160.1 million bushels). If realized, this would exceed the previous largest corn crop in Tennessee (2014 – 141 million bushels) by almost 20 million bushels. Given the size of the corn crop, harvest basis in Tennessee will likely be weaker than normal. Producers should evaluate on- and off-farm storage options to avoid selling commodities at seasonal lows.
On Friday, China announced retaliatory tariffs of 5-10 percent that will affect $75 billion of US goods. President Trump indicated a US response would be forth coming. Escalation of the US-China trade war does not bode well for agricultural commodity prices particularly soybeans and cotton with 48 percent and 76 percent of US production projected to be exported for the 2019/20 marketing year. Market facilitation payments (MFP) will provide short-term financial help for producers affected by the trade war, however long-term recovery of US market share for agricultural commodities in China will be very difficult given China’s investment in other agricultural exporting countries, such as Brazil.
Ethanol production for the week ending August 16 was 1.023 million barrels per day, down 22,000 from the previous week. Ethanol stocks were 23.367 million barrels, down 0.516 million barrels. Corn net sales reported by exporters for August 9-15 were up from last week with net sales of 4.7 million bushels for the 2018/19 marketing year and 11.9 million bushels for the 2019/20 marketing year. Exports for the same time period were down 24 percent from last week at 21.2 million bushels. Corn export sales and commitments were 94 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 104 percent. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at Memphis, Northwest Barge Points, and Upper-Middle Tennessee and weakened at Northwest Tennessee. Overall, basis for the week ranged from 21 under to 40 over with an average of 4 under the September futures at elevators and barge points. September 2019 corn futures closed at $3.59, down 12 cents since last Friday. For the week, September 2019 corn futures traded between $3.57 and $3.70. Sep/Dec(’19) and Sep/Dec(‘20) future spreads were 8 and 45 cents.
Nationally, the Crop Progress report estimated corn condition at 56 percent good-to-excellent and 14 percent poor-to-very poor; corn silking at 95 percent compared to 90 percent last week, 100 percent last year, and a 5-year average of 99 percent; corn dough at 55 percent compared to 39 percent last week, 83 percent last year, and a 5-year average 76 percent; and corn dented at 15 percent compared to 7 percent last week, 41 percent last year, and a 5-year average of 30 percent. In Tennessee, the Crop Progress report estimated corn condition at 85 percent good-to-excellent and 4 percent poor-to-very poor; corn silking at 100 percent compared to 98 percent last week, 100 percent last year, and a 5-year average of 100 percent; corn dough at 93 percent compared to 89 percent last week, 97 percent last year, and a 5-year average of 95 percent; corn dented at 62 percent compared to 45 percent last week, 69 percent last year, and a 5-year average of 64 percent; and corn mature at 4 percent compared to 5 percent last year and a 5-year average of 6 percent. In Tennessee, September 2019 corn cash forward contracts averaged $3.57 with a range of $3.35 to $3.62. December 2019 corn futures closed at $3.67, down 13 cents since last Friday. Downside price protection could be obtained by purchasing a $3.70 December 2019 Put Option costing 15 cents establishing a $3.55 futures floor. December 2020 corn futures closed at $4.04, down 4 cents since last Friday.
Soybeans
Net sales reported by exporters were up compared to last week with net sales of 1.0 million bushels for the 2018/19 marketing year and net sales of 29.1 million bushels for the 2019/20 marketing year. Exports for the same period were up 15 percent compared to last week at 43.2 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 104 percent. Average soybean basis strengthened at Memphis, Northwest Barge Points, Northwest, and Upper-middle Tennessee. Basis ranged from 50 under to 4 over the September futures contract at elevators and barge points. Average basis at the end of the week was 13 under the September futures contract. September 2019 soybean futures closed at $8.43, down 24 cents since last Friday. For the week, September 2019 soybean futures traded between $8.42 and $8.69. September soybean-to-corn price ratio was 2.35 at the end of the week. Sep/Nov and Sep/Jan future spreads were 13 and 28 cents.
Nationally, the Crop Progress report estimated soybean condition at 53 percent good-to-excellent and 14 percent poor-to-very poor; soybeans blooming at 90 percent compared to 82 percent last week, 99 percent last year, and a 5-year average of 96 percent; and soybeans setting pods at 68 percent compared to 54 percent last week, 90 percent last year, and a 5-year average of 85 percent. In Tennessee, the Crop Progress report estimated soybean condition at 74 percent good-to-excellent and 7 percent poor-to-very poor; soybeans blooming at 90 percent compared to 85 percent last week, 96 percent last year, and a 5-year average of 94 percent; and soybeans setting pods at 73 percent compared to 66 percent last week, 87 percent last year, and a 5-year average of 81 percent. In Tennessee, October/November 2019 soybean cash contracts average $8.30 with a range of $8.02 to $8.53. November 2019 soybean futures closed at $8.56, down 23 cents since last Friday. Downside price protection could be achieved by pur-chasing an $8.60 November 2019 Put Option which would cost 23 cents and set an $8.37 futures floor. Nov/Dec 2019 soybean-to-corn price ratio was 2.33 at the end of the week. January 2020 soybean futures closed at $8.71, down 22 cents since last Friday.
Cotton
Net sales reported by exporters were down compared to last week with net sales of 164,000 bales for the 2019/20 marketing year and 500 bales for the 2020/21 marketing year. Exports for the same time period were up 25 percent compared to last week at 344,000 bales. Upland cotton export sales were 49 percent of the USDA estimated total annual exports for the 2019/20 marketing year (August 1 to July 31), compared to the previous 5-year average of 43 percent. Delta upland cotton spot price quotes for August 22 were 55.87 cents/lb (41-4-34) and 58.12 cents/lb (31-3-35). Adjusted World Price (AWP) increased 0.35 cents to 52.57 cents.
Nationally, the Crop Progress report estimated cotton condition at 49 percent good-to-excellent and 15 percent poor-to-very poor; cotton setting bolls at 85 percent compared to 77 percent last week, 85 percent last year, and a 5-year average of 85 percent; and cotton bolls opening at 24 percent compared to 20 percent last week, 16 percent last year, and a 5-year average of 13 percent. In Tennessee, the Crop Progress report estimated cotton condition at 65 percent good-to-excellent and 14 percent poor-to-very poor; cotton setting bolls at 94 percent compared to 80 percent last week, 97 percent last year, and a 5-year average of 91 percent; and cotton bolls opening at 4 percent compared to 3 percent last week, 13 percent last year, and a 5-year average of 8 percent. December 2019 cotton futures closed at 58.21, down 1.92 cents since last Friday. For the week, December 2019 cotton futures traded between 58.06 and 60.25 cents. Dec/Mar and Dec/Dec cotton futures spreads were 0.94 cents and 4.28 cents. Downside price protection could be obtained by purchasing a 59 cent December 2019 Put Option costing 2.3 cents establishing a 56.7 cent futures floor. March 2020 cotton futures closed at 59.15, down 1.57 cents since last Friday. December 2020 cotton futures closed at 62.49, down 0.81 cents since last Friday.
Wheat
Nationally, the Crop Progress report estimated winter wheat harvested at 93 percent compared to 89 percent last week, 97 percent last year, and a 5-year average of 98 percent; spring wheat condition at 70 percent good-to-excellent and 7 percent poor-to-very poor; and spring wheat harvested at 16 percent compared to 8 percent last week, 56 percent last year, and a 5-year average of 49 percent. In Tennessee, August 2019 wheat cash contracts ranged from $4.51 to $4.95 for the week.
Wheat net sales reported by exporters were up compared to last week with net sales of 21.8 million bushels for the 2019/20 marketing year and 0.2 million bushels for the 2020/21 marketing year. Exports for the same time period were up 4 percent from last week at 24.2 million bushels. Wheat export sales were 39 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 45 percent. September 2019 wheat futures closed at $4.75, up 5 cents since last Friday. September 2019 wheat futures traded between $4.56 and $4.75 this week. September wheat-to-corn price ratio was 1.32 Sep/Dec and Sep/Jul future spreads were 2 and 15 cents. December 2019 wheat futures closed at $4.77, unchanged since last Friday. In Memphis, June/July 2020 cash contracts ranged from $4.83 to $4.90. July 2020 wheat futures closed at $4.90, down 5 cents since last Friday. Downside price protection could be obtained by purchasing a $5.00 July 2020 Put Option costing 40 cents establishing a $4.60 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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