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WASDE Report Overall Neutral For Corn, Soybeans And Bearish For Cotton, Wheat
DR. AARON SMITH
KNOXVILLE, TENN.
The February WASDE report was released on Tuesday. Overall the report was neutral for corn and soybeans and bearish for cotton and wheat.
U.S. corn ending stocks were unchanged, as a 50 million bushel increase in ethanol use was offset by a 50 million bushel decrease in exports. Foreign corn ending stocks for the 2019/20 marketing year were decreased 38 million bushels compared to January. Global corn stocks are now projected at 11.686 billion bushels, 931 million bushels lower than last year.
Projected US soybean exports were increased 50 million bushels to 1.825 billion bushels. Brazil’s soybean production was increased to 4.593 billion, surpassing 2019 US production by over a billion bushels. With a record large crop, Brazil will continue to provide significant export competition with US soybeans. Global soybean stocks are projected at 3.633 billion bushels, down from over 4 billion bushels for the previous marketing year.
No revisions were made to domestic cotton production, however foreign stocks were increased by 2.53 million bales and China consumption was dropped 1 million bales to 37.5 million, the lowest since 2015/16.
Wheat was the biggest report loser with nearby futures down 10 cents for the day. Global stocks are now estimated at 10.583 billion bushels up 358 million year-over-year. Large stocks and stagnant global demand for wheat will create head-winds for wheat prices despite the lowest US winter wheat planted acreage since 1907.
Details of the February WASDE can be found at: https://ag.tennessee.edu/arec/Pages/MonthlyCropComments.aspx
Projected crop insurance prices as of February 14 were: corn - $3.92; cotton - $0.69; and soybeans - $9.20. The price discovery process will conclude February 29.
Corn
Ethanol production for the week ending February 7 was 1.033 million barrels per day, down 48,000 barrels from the previous week. Ethanol stocks were 24.358 million barrels, up 0.884 million barrels compare to last week. Corn net sales reported by exporters for January 31 to February 6 were down compared to last week with net sales of 38.1 million bushels for the 2019/20 marketing year. Exports for the same time period were up 31 percent from last week at 30.8 million bushels. Corn export sales and commitments were 54 percent of the USDA estimated total exports for the 2019/20 marketing year (September 1 to August 31) compared to the previous 5-year average of 66 percent. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at Northwest Barge Points, Northwest, and Upper-middle Tennessee and weakened at Memphis. Overall, basis for the week ranged from 6 over to 25 over, with an average of 17 over the March futures at elevators and barge points. March 2020 corn futures closed at $3.77, down 6 cents since last Friday. For the week, March 2020 corn futures traded between $3.76 and $3.83. Mar/May and Mar/Dec future spreads were 5 and 11 cents. May 2020 corn futures closed at $3.82, down 6 cents since last Friday.
In Tennessee, new crop cash corn contracts ranged from $3.88 to $4.10. December 2020 corn futures closed at $3.88, down 6 cents since last Friday. Downside price protection could be obtained by purchasing a $3.90 December 2020 Put Option costing 24 cents establishing a $3.66 futures floor.
Soybeans
Net sales reported by exporters were down compared to last week with net sales of 23.7 million bushels for the 2019/20 marketing year and 0.2 million bushels for the 2020/21 marketing year. Exports for the same period were down 58 percent compared to last week at 22.5 million bushels. Soybean export sales and commitments were 66 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 82 percent. Average soybean basis strengthened at Memphis, Northwest Barge Points, and Upper-middle Tennessee and weakened at Northwest Tennessee. Basis ranged from 24 under to 28 over the March futures contract at elevators and barge points. Average basis at the end of the week was 10 over the March futures contract. March 2020 soybean futures closed at $8.93, up 11 cents since last Friday. For the week, March 2020 soybean futures traded between $8.78 and $8.99. Mar/May and Mar/Nov future spreads were 10 and 29 cents. May 2020 soybean futures closed at $8.95, up 9 cents since last Friday. March soybean-to-corn price ratio was 2.37 at the end of the week.
In Tennessee, new crop soybean cash contracts ranged from $8.84 to $9.34. Nov/Dec 2020 soybean-to-corn price ratio was 2.38 at the end of the week. November 2020 soybean futures closed at $9.22, up 4 cents since last Friday. Downside price protection could be achieved by purchasing a $9.40 November 2020 Put Option which would cost 52 cents and set an $8.88 futures floor.
Cotton
Net sales reported by exporters were up compared to last week with net sales of 350,900 bales for the 2019/20 marketing year and 57,300 bales for the 2020/21 marketing year. Exports for the same time period were down 4 percent compared to last week at 400,500 bales. Upland cotton export sales were 86 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 81 percent. Delta upland cotton spot price quotes for February 13 were 65.00 cents/lb (41-4-34) and 67.25 cents/lb (31-3-35). Adjusted World Price (AWP) increased 0.38 cents to 58.82 cents. March 2020 cotton futures closed at 67.41 cents, down 0.34 cents since last Friday. For the week, March 2020 cotton futures traded between 67.21 and 68.79 cents. Mar/May and Mar/Dec cotton futures spreads were 1 cent and 1.65 cents. May 2020 cotton futures closed at 68.41, up 0.27 cents since last Friday.
December 2020 cotton futures closed at 69.06, up 0.2 cents since last Friday. Downside price protection could be obtained by purchasing a 70 cent December 2020 Put Option costing 4.37 cents establishing a 65.63 cent futures floor.
Wheat
Wheat net sales reported by exporters were up compared to last week with net sales of 23.7 million bushels for the 2019/20 marketing year and 1.6 million bushels for the 2020/21 marketing year. Exports for the same time period were up 25 percent from last week at 18.6 million bushels. Wheat export sales were 80 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 88 percent. March 2020 wheat futures closed at $5.42, down 16 cents since last Friday. March 2020 wheat futures traded between $5.38 and $5.60 this week. March wheat-to-corn price ratio was 1.44. Mar/May and Mar/Jul future spreads were -1 and -1 cent. May 2020 wheat futures closed at $5.41, down 15 cents since last Friday. May wheat-to-corn price ratio was 1.42.
In Tennessee, June/July 2020 cash contracts ranged from $5.50 to $5.96. July 2020 wheat futures closed at $5.41, down 16 cents since last Friday. Downside price protection could be obtained by purchasing a $5.50 July 2020 Put Option costing 34 cents establishing a $5.16 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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