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USDA NASS Estimates Corn, Cotton, Soybean And Wheat Planted Acres For 2019 At 225.3 Million Acres
DR. AARON SMITH
KNOXVILLE, TENN.
Looking toward 2020, what would a return to 239 million planted acres for corn, cotton, soybeans, and wheat potentially do to new crop prices?
Currently, USDA NASS estimates corn, cotton, soybean, and wheat planted acres for 2019 at 225.3 million acres, compared to 240.2, 239.1, and 237.6 million acres for 2018, 2017, and 2016 or an average of 13.7 million acres less than the three year average. Spring flooding throughout the Corn Belt and Mid-south was the primary cause for the reduction in acreage in 2019. Prevented planted acres of the same magnitude in 2020 is unlikely (not impossible).
To examine likely outcomes from the increased acres, consider the three year average planted acres (and percent harvested) from 2016-2018 for corn, cotton, soybeans, and wheat were 91.1 (91 percent), 12.3 (83 percent), 87.6 (98 percent), and 48.0 (82 percent) million acres. Combining projected harvested acres with 2020 projected 25-year national trend line yields of 175.7 bu/acre, 894.6 lb/acre, 49.5 bu/acre, and 49.3 bu/acre for corn, cotton, soybeans, and wheat; national production would be: corn – 14.57 billion bushels; cotton – 18.9 million bales; soybeans 4.25 billion bushels; and wheat – 1.96 billion bushels. If realized (and assuming the same consumption as 2019) corn and soybean stocks would increase 651 and 240 million bushels, while cotton and wheat stocks would decrease 0.53 million bales and 143 million bushels.
Projected increased stocks of corn and soybeans and moderate decreases for cotton and wheat do not bode well for dramatic price increases. As such, it is reasonable to expect a similar to slightly weaker price environment for row crops in 2020. Global weather, production, and trade will influence price direction as we enter 2020 and move through the production year, however currently it is difficult to project substantial improvements in prices giving the likely increase in acres planted.
Reasonable early 2020 cash price ranges in Tennessee are: corn – $3.50-$4.25; cotton – 62-70 cents; soybeans – $8.50-$9.75; and wheat – $4.75-$5.75.
Corn
Ethanol production for the week ending November 29 was 1.060 million barrels per day, up 1,000 from the previous week. Ethanol stocks were 20.639 million barrels, up 0.362 million barrels compare to last week. Corn net sales reported by exporters for November 22-28 were down compared to last week with net sales of 21.5 million bushels for the 2019/20 marketing year and 0.09 million bushels for the 2020/21 marketing year. Exports for the same time period were down 22 percent from last week at 19.5 million bushels. Corn export sales and commitments were 31 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 48 percent. Nationally, the Crop Progress report estimated corn harvested at 89 percent compared to 84 percent last week, 97 percent last year, and a 5-year average of 98 percent. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened at Memphis, Northwest Barge Points, Northwest, and Upper-middle Tennessee. Overall, basis for the week ranged from 11 under to 16 over with an average of 6 under the March futures at elevators and barge points. In Tennessee, January corn cash contracts averaged $3.94 with a range of $3.81 to $4.04. March 2020 corn futures closed at $3.76, down 5 cents since last Friday. For the week, March 2020 corn futures traded between $3.75 and $3.84. Mar/May and Mar/Dec future spreads were 6 and 14 cents. May 2020 corn futures closed at $3.82, down 3 cents since last Friday.
In Memphis, new crop cash corn contracts ranged from $3.74 to $3.81. December 2020 corn futures closed at $3.90, down 1 cent since last Friday. Downside price protection could be obtained by purchasing a $4.00 December 2020 Put Option costing 31 cents establishing a $3.69 futures floor.
Soybeans
Net sales reported by exporters were down compared to last week with net sales of 25.1 million bushels for the 2019/20 marketing year. Exports for the same period were down 33 percent compared to last week at 55.0 million bushels. Soybean export sales and commitments were 54 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 67 percent. Nationally, the Crop Progress report estimated soybeans harvested at 96 percent compared to 94 percent last week, 97 percent last year, and a 5-year average of 99 percent. In Tennessee, the Crop Progress report estimated soybeans harvested at 95 percent compared to 91 percent last week, 88 percent last year, and a 5-year average of 99 percent. Average soybean basis strengthened at Memphis and weakened or remained unchanged at Northwest Barge Points, Northwest, and Upper-middle Tennessee. Basis ranged from 36 under to 22 over the January futures contract at elevators and barge points. Average basis at the end of the week was 1 over the January futures contract. January 2020 soybean futures closed at $8.89, up 13 cents since last Friday. For the week, January 2020 soybean futures traded between $8.67 and $8.94. In Tennessee, January 2020 cash contracts ranged from $8.62 to $8.98. Jan/Mar and Jan/Nov future spreads were 14 and 42 cents. March 2020 soybean futures closed at $9.03, up 12 cents since last Fri-day. March soybean-to-corn price ratio was 2.40 at the end of the week.
In Memphis, new crop corn cash contracts ranged from $8.99 to $9.18. Nov/Dec 2020 soybean-to-corn price ratio was 2.39 at the end of the week. November 2020 soybean futures closed at $9.31, up 4 cents since last Friday. Downside price protection could be achieved by purchasing a $9.40 November 2020 Put Option which would cost 47 cents and set an $8.93 futures floor.
Cotton
Net sales reported by exporters were down compared to last week with net sales of 163,700 bales for the 2019/20 marketing year and 2,200 bales for the 2020/21 marketing year. Exports for the same time period were down 10 percent compared to last week at 166,700 bales. Upland cotton export sales were 69 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 63 percent. Nationally, the Crop Progress report estimated cotton harvested at 83 percent compared to 78 percent last week, 74 percent last year, and a 5-year average of 81 percent. In Tennessee, the Crop Progress report estimated cotton harvested at 95 percent compared to 88 percent last week, 95 percent last year, and a 5-year average of 96 percent. Delta upland cotton spot price quotes for December 5 were 62.01 cents/lb (41-4-34) and 64.26 cents/lb (31-3-35). Adjusted World Price (AWP) decreased 0.23 cents to 55.97 cents. March 2020 cotton futures closed at 66 cents, up 0.64 cents since last Friday. For the week, March 2020 cotton futures traded between 64.02 and 66.32 cents. Mar/May and Mar/Dec cotton futures spreads were 0.85 cents and 1.64 cents. May 2020 cotton futures closed at 66.85, up 0.46 cents since last Friday.
December 2020 cotton futures closed at 67.64, up 0.8 cents since last Friday. Downside price protection could be obtained by purchasing a 68 cent December 2020 Put Option costing 4.28 cents establishing a 63.72 cent futures floor.
Wheat
Wheat net sales reported by exporters were down compared to last week with net sales of 8.4 million bushels for the 2019/20 marketing year. Exports for the same time period were down 48 percent from last week at 8.5 million bushels. Wheat export sales were 64 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 73 percent. In Tennessee, December 2019 wheat cash contracts ranged from $5.31 to $5.69 for the week. March 2020 wheat futures closed at $5.24, down 17 cents since last Friday. March 2020 wheat futures traded between $5.19 and $5.44 this week. March wheat-to-corn price ratio was 1.39. Mar/May and Mar/Jul future spreads were 3 and 6 cents. May 2020 wheat futures closed at $5.27, down 17 cents since last Friday. May wheat-to-corn price ratio was 1.38.
In Memphis, June/July 2020 cash contracts ranged from $5.35 to $5.44. July 2020 wheat futures closed at $5.30, down 12 cents since last Friday. Downside price protection could be obtained by purchasing a $5.40 July 2020 Put Option costing 36 cents establishing a $5.04 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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