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Strong Export Sales Imperative To Maintain Commodity Prices
DR. AARON SMITH
KNOXVILLE, TENN.
Export sales and harvest weather continue to be the dominant market drivers. Total export commitments (net sales plus accumulated year-to-date exports), as a percent of total marketing year USDA targets, for corn (22 percent) and soybeans (38 percent) are well behind the 5-year average – 36 percent and 54 percent and last year’s export commitments – 44 percent and 45 percent. For clarification, the current marketing year (2019-20) USDA export targets for corn and soybeans are 1.9 billion bushels and 1.775 billion bushels, so total export commitments year-to-date are 418 million bushels (1.9 billion x 22 percent) and 675 million (1.775 billion x 38 percent). Compared to last years (2018-19) commitments for the current week of 909 million bushels (2.065 billion bushels x 44 percent) and 787 million bushels (1.748 billion bushels x 45 percent).
Wheat export commitments as a percent of total marketing year exports (54 percent) are higher than last year at this time (52 percent), but behind the 5-year average of 61 percent. Cotton export commitments (60 percent) exceed the 5-year average (53 percent), but are behind last year’s pace (70 percent). 2019-20 marketing year export sales of cotton and wheat are currently projected by USDA at 16.5 million bales and 950 million bushels.
Strong export sales will be imperative to maintain and enhance commodity prices for the remainder of 2019 and early 2020. Anticipated South American production will be a key determinant in export sales pace and consequently prices.
Corn
Ethanol production for the week ending October 18 was 0.996 million barrels per day, up 25,000 from the previous week. Ethanol stocks were 21.364 million barrels, down 0.697 million barrels compare to last week. Corn net sales reported by exporters for October 11-17 were up from last week with net sales of 19.3 million bushels for the 2019/20 marketing year and 3.6 million bushels for the 2020/21 marketing year. Exports for the same time period were down 12 percent from last week at 19.3 million bushels. Corn export sales and commitments were 22 percent of the USDA estimated total annual exports for the 2019/20 marketing year (September 1 to August 31) compared to the previous 5-year average of 36 percent. Nationally, the Crop Progress report estimated corn condition at 56 percent good-to-excellent and 14 percent poor-to-very poor; corn mature at 86 percent compared to 73 percent last week, 99 percent last year, and a 5-year average of 97 percent; and corn harvested at 30 percent compared to 22 percent last week, 48 percent last year, and a 5-year average of 47 percent. In Tennessee, the Crop Progress report estimated corn condition at 83 percent good-to-excellent and 3 percent poor-to-very poor; and corn harvested at 96 percent compared to 92 percent last week, 91 percent last year, and a 5-year average of 93 percent. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at Memphis, Northwest Barge Points, Upper-middle, and Northwest Tennessee. Overall, basis for the week ranged from 35 under to even with an average of 15 under the December futures at elevators and barge points. December 2019 corn futures closed at $3.86, down 5 cents since last Friday. For the week, December 2019 corn futures traded between $3.84 and $3.95.
Dec/Mar and Dec/Dec future spreads were 11 and 21 cents. In Tennessee, January corn cash contracts averaged $4.05 with a range of $3.83 to $4.14. March 2020 corn futures closed at $3.97, down 5 cents since last Friday. December 2020 corn futures closed at $4.07, down 3 cents since last Friday. Downside price protection could be obtained by purchasing a $4.10 December 2020 Put Option costing 26 cents establishing a $3.84 futures floor.
Soybeans
Net sales reported by exporters were down compared to last week with net sales of 17.5 million bushels for the 2019/20 marketing year. Exports for the same period were up 45 percent compared to last week at 50.8 million bushels. Soybean export sales and commitments were 38 percent of the USDA estimated total annual exports for the 2019/20 marketing year (September 1 to August 31), compared to the previous 5-year average of 54 percent. Nationally, the Crop Progress report estimated soybean condition at 54 percent good-to-excellent and 14 percent poor-to-very poor; soybeans dropping leaves at 94 percent compared to 85 percent last week, 98 percent last year, and a 5-year average of 97 percent; and soybeans harvested at 46 percent compared to 26 percent last week, 51 percent last year, and a 5-year average of 64 percent. In Tennessee, the Crop Progress report estimated soybean condition at 61 percent good-to-excellent and 9 percent poor-to-very poor; soybeans dropping leaves at 96 percent compared to 92 percent last week, 96 percent last year, and a 5-year average of 95 percent; and soybeans harvested at 62 percent compared to 50 percent last week, 51 percent last year, and a 5-year average of 51 percent. Average soybean basis strengthened or remained unchanged at Memphis, Northwest Barge Points, Upper-middle, and Northwest Tennessee. Basis ranged from 62 under to 7 over the November futures contract at elevators and barge points. Average basis at the end of the week was 17 under the November futures contract. November 2019 soybean futures closed at $9.20, down 14 cents since last Friday. For the week, November 2019 soybean futures traded between $9.19 and $9.45. November/December 2019 soybean-to-corn price ratio was 2.38 at the end of the week.
Nov/Jan and Nov/Nov future spreads were 14 and 47 cents. January 2020 soybean futures closed at $9.34, down 13 cents since last Friday. In Tennessee, January 2020 cash contracts ranged from $9.29 to $9.57. Nov/Dec 2020 soybean-to-corn price ratio was 2.38 at the end of the week. November 2020 soybean futures closed at $9.67, down 5 cents since last Friday. Downside price protection could be achieved by purchasing a $9.80 November 2020 Put Option which would cost 56 cents and set a $9.24 futures floor.
Cotton
Net sales reported by exporters were down compared to last week with net sales of 140,500 bales for the 2019/20 marketing year and 8,400 bales for the 2020/21 marketing year. Exports for the same time period were down 2 percent compared to last week at 148,600 bales. Upland cotton export sales were 60 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 53 percent. Nationally, the Crop Progress report estimated cotton condition at 41 percent good-to-excellent and 23 percent poor-to-very poor; cotton bolls opening at 93 percent compared to 87 percent last week, 88 percent last year, and a 5-year average of 89 percent; and cotton harvested at 40 percent compared to 32 percent last week, 38 percent last year, and a 5-year average of 35 percent. In Tennessee, the Crop Progress report estimated cotton condition at 67 percent good-to-excellent and 11 percent poor-to-very poor; cotton bolls opening at 97 percent compared to 92 percent last week, 91 percent last year, and a 5-year average of 93 percent; and cotton harvested at 52 percent compared to 35 percent last week, 59 percent last year, and a 5-year average of 43 percent. Delta upland cotton spot price quotes for October 24 were 64.15 cents/lb (41-4-34) and 66.40 cents/lb (31-3-35). Adjusted World Price (AWP) increased 1.85 cents to 57.11 cents. December 2019 cotton futures closed at 64.9, down 0.26 cents since last Friday. For the week, December 2019 cotton futures traded between 63.96 and 65.7 cents.
Dec/Mar and Dec/Dec cotton futures spreads were 0.93 cents and 2.22 cents. March 2020 cotton futures closed at 65.83, up 0.02 cents since last Friday. December 2020 cotton futures closed at 67.12, up 0.24 cents since last Friday. Downside price protection could be obtained by purchasing a 68 cent December 2020 Put Option costing 4.98 cents establishing a 63.02 cent futures floor.
Wheat
Nationally, the Crop Progress report estimated spring wheat harvested at 96 percent compared to 94 percent last week, 100 percent last year, and a 5-year average of 100 percent; winter wheat planted at 77 percent compared to 65 percent last week, 71 percent last year, and a 5-year average of 75 percent; and winter wheat emerged at 53 percent compared to 41 percent last week, 52 percent last year, and a 5-year average of 53 percent. In Tennessee, winter wheat condition was estimated at 69 percent good-to-excellent and 5 percent poor-to-very poor; winter wheat planted was estimated at 34 percent compared to 23 percent last week, 35 percent last year, and a 5-year average of 38 percent; and winter wheat emerged at 11 percent compared to 7 percent last week, 19 percent last year, and a 5-year average of 15 percent. Wheat net sales reported by exporters were down compared to last week with net sales of 9.6 million bushels for the 2019/20 marketing year. Exports for the same time period were down 3 percent from last week at 18.3 million bushels. Wheat export sales were 54 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 61 percent. In Tennessee, October 2019 wheat cash contracts ranged from $5.10 to $5.65 for the week. December 2019 wheat futures closed at $5.17, down 15 cents since last Friday. December 2019 wheat futures traded between $5.14 and $5.35 this week. December wheat-to-corn price ratio was 1.34.
Dec/Mar and Dec/Jul future spreads were 6 and 15 cents. March 2020 wheat futures closed at $5.23, down 14 cents since last Friday. March wheat-to-corn price ratio was 1.32. In Memphis, June/July 2020 cash contracts ranged from $5.22 to $5.44. July 2020 wheat futures closed at $5.32, down 12 cents since last Friday. Downside price protection could be obtained by purchasing a $5.50 July 2020 Put Option costing 38 cents establishing a $5.12 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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