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Soybean Prices Likely Tightly Tied To Export Sales And Potential Purchases From China
DR. AARON SMITH
KNOXVILLE, TENN.
The May WASDE, released contained projections for the 2020 crop. Corn acres planted were 97 million (89.6 million harvested) and weather adjusted trend line yield was projected at 178.5 bu/acre. If realized U.S. production would be 15.995 billion bushels. A rebound in ethanol demand (5.2 billion), feed and residual use (6.05 billion) and exports (2.15 billion) to pre-COVID-19 levels would not offset increased production causing estimated ending stocks for the 2020/21 marketing year to balloon to 3.318 billion bushels, up 1.22 billion bushels compared to the projected ending stocks for the current marketing year (ending August 31, 2020). The season average price is projected at $3.20 down 40 cents year over year. It is important to point out that these are initial estimates and revisions are likely. Some estimates already have corn acres planted 2-3 million acres lower than the current USDA projections.
Soybean planted acres were projected at 83.5 million acres with a trend line yield of 49.8 bu/acre resulting in U.S. production of 4.125 billion bushels. Production, if realized, would be above last year’s prevented planting influenced estimate of 3.557, but below 2018’s estimate of 4.428 billion bushels. Continued strong domestic crush (2.13 billion bushels) and a rebound in exports (2.05 billion bushels) is projected to leave ending stocks at 405 million bushels down from the current marketing year projection of 580 million. Season average price is projected down 30 cents to $8.20/bu. Soybean acreage may increase due to reduced expected corn planting but ultimately soybean prices will be tightly tied to export sales and potential purchases from China.
Cotton planted acres were projected at 13.7 million (11.35 million harvested) and trend yield at 825 lb/acre, resulting in production of 19.5 million bales. Exports (16 million bales) and domestic use (2.9 million) are projected up year-over-year. However, domestic stocks are projected to increase 600,000 bales to 7.7 million. Season average price is projected at 57 cents, down 2 cents. Cotton prices will be driven by how quickly consumer purchasing and the global economy can recover from COVID-19 and if China imports additional U.S. cotton to replenish its reserves.
Wheat planted acres are projected at 44.7 million (37.3 million harvested) and trend yield at 49.5 bu/acre resulting in U.S. production of 1.866 billion bushels. Total use is projected at 2.075 billion, down 52 million compared to the current marketing year. 2020/21 ending stocks are projected at 909 million, down 69 million year-over-year. Season average price is projected at $4.60, unchanged from the current marketing year. Domestic production continues to decline, however global stocks are projected at a new all-time high.
Corn
Ethanol production for the week ending May 8 was 0.617 million barrels per day, up 19,000 barrels from the previous week. Ethanol stocks were 24.190 million barrels, down 1.422 million barrels compare to last week. Corn net sales reported by exporters for May 1-7 were up compared to last week with net sales of 42.3 million bushels for the 2019/20 marketing year and 21.8 million bushels for the 2020/21 marketing year. Exports for the same time period were down 6 percent from last week at 51.6 million bushels. Corn export sales and commitments were 71 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 91 percent. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at Memphis, Northwest, and Upper-middle Tennessee and weakened at Northwest Barge Points. Overall, basis for the week ranged from 12 under to 20 over, with an average of 6 over the July futures at elevators and barge points. July 2020 corn futures closed at $3.19, unchanged since last Friday. For the week, July 2020 corn futures traded between $3.14 and $3.24. Jul/Sep and Jul/Dec future spreads were 4 and 13 cents.
Nationally the Crop Progress report estimated corn planting at 67 percent compared to 51 percent last week, 28 percent last year, and a 5-year average of 56 percent; and corn emerged at 24 percent compared to 8 percent last week, 9 percent last year, and a 5-year average of 22 percent. In Tennessee, the Crop Progress report estimated corn planted at 67 percent compared to 54 percent last week, 75 percent last year, and a 5-year average of 82 percent; and corn emerged at 44 percent compared to 26 percent last week, 51 percent last year, and a 5-year average of 55 percent. In Tennessee, new crop cash corn contracts ranged from $3.03 to $3.29. September 2020 corn futures closed at $3.23, down 1 cent since last Friday. December 2020 corn futures closed at $3.32, down 3 cents since last Friday. Downside price protection could be obtained by purchasing a $3.40 December 2020 Put Option costing 26 cents establishing a $3.14 futures floor.
Soybeans
Net sales reported by exporters were up compared to last week with net sales of 24.1 million bushels for the 2019/20 marketing year and 16.2 million bushels for the 2020/21 marketing year. Exports for the same period were up 8 percent compared to last week at 17.4 million bushels. Soybean export sales and commitments were 72 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 97 percent. Average soybean basis strengthened at Memphis, Northwest Barge Points, Northwest, and Upper-middle Tennessee. Basis ranged from 20 under to 28 over the July futures contract at elevators and barge points. Average basis at the end of the week was 13 over the July futures contract. July 2020 soybean futures closed at $8.38, down 12 cents since last Friday. For the week, July 2020 soybean futures traded between $8.35 and $8.61. Jul/Aug and Jul/Nov future spreads were 2 and 7 cents. August 2020 soybean futures closed at $8.40, down 12 cents since last Friday. July soybean-to-corn price ratio was 2.63 at the end of the week.
Nationally the Crop Progress report estimated soybean planting at 38 percent compared to 23 percent last week, 8 percent last year, and a 5-year average of 23 percent and soybeans emerged at 7 percent compared to 1 percent last year and a 5-year average of 4 percent. In Tennessee, soybeans planted were estimated at 20 percent compared to 14 percent last week, 17 percent last year, and a 5-year average of 19 percent and soybeans emerged at 6 percent compared to 3 percent last year and a 5-year average of 2 percent. In Tennessee, new crop soybean cash contracts ranged from $8.14 to $8.77. Nov/Dec 2020 soybean-to-corn price ratio was 2.55 at the end of the week. November 2020 soybean futures closed at $8.45, down 10 cents since last Friday. Downside price protection could be achieved by purchasing an $8.60 November 2020 Put Option which would cost 46 cents and set an $8.14 futures floor.
Cotton
Net sales reported by exporters were down compared to last week with net sales of 238,100 bales for the 2019/20 marketing year and 93,300 bales for the 2020/21 marketing year. Exports for the same time period were down 35 percent compared to last week at 241,700 bales. Upland cotton export sales were 109 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 102 percent. Delta upland cotton spot price quotes for May 14 were 55.10 cents/lb (41-4-34) and 57.35 cents/lb (31-3-35). Adjusted World Price (AWP) increased 1.35 cents to 47.36 cents. July 2020 cotton futures closed at 58.25 cents, up 1.98 cents since last Friday. For the week, July 2020 cotton futures traded between 55.75 and 58.86 cents. Jul/Dec and Jul/Mar cotton futures spreads were 0.62 cents and -0.08 cents.
Nationally, the Crop Progress report estimated cotton planted at 32%, compared to 18 percent last week, 24 percent last year, and a 5-year average of 27 percent. In Tennessee, cotton planted was estimated at 10 percent compared to 4 percent last week, 28 percent last year, and a 5-year average of 27 percent. December 2020 cotton futures closed at 58.17, up 0.55 cents since last Friday. Downside price protection could be obtained by purchasing a 59 cent December 2020 Put Option costing 4.83 cents establishing a 54.17 cent futures floor. March 2021 cotton futures closed at 58.87 cents, up 0.43 cents since last Friday.
Wheat
Wheat net sales reported by exporters were down compared to last week with net sales of 7.5 million bushels for the 2019/20 marketing year and 5.5 million bushels for the 2020/21 marketing year. Exports for the same time period were down 35 percent from last week at 13.5 million bushels. Wheat export sales were 102 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 105 percent.
Nationally the Crop Progress report estimated winter wheat condition at 53 percent good-to-excellent and 16 percent poor-to-very poor; winter wheat headed at 44 percent compared to 32 percent last week, 38 percent last year, and a 5-year average of 50 percent; spring wheat planted at 42 percent compared to 29 percent last week, 38 percent last year, and a 5-year average of 63 percent; and spring wheat emerged at 16 percent compared to 6 percent last week, 8 percent last year, and a 5-year average of 29 percent. In Tennessee, winter wheat condition was estimated at 62 percent good-to-excellent and 4 percent poor-to-very poor; and winter wheat headed at 92 percent compared to 81 percent last week, 89 percent last year, and a 5-year average of 87 percent. In Tennessee, June/July 2020 cash contracts ranged from $4.83 to $5.37. July 2020 wheat futures closed at $5.00, down 22 cents since last Friday. July 2020 wheat futures traded between $4.96 and $5.28 this week. July wheat-to-corn price ratio was 1.57. Jul/Sept and Jul/Jul future spreads were 3 and 22 cents. September 2020 wheat futures closed at $5.03, down 22 cents since last Fri-day. September wheat-to-corn price ratio was 1.56. July 2021 wheat futures closed at $5.22, down 15 cents since last Friday. Downside price protection could be obtained by purchasing a $5.10 July 2021 Put Option costing 32 cents establishing a $4.78 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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