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Moderate Changes In Supply And Demand Numbers Compared To May
DR. AARON SMITH
KNOXVILLE, TENN.
The USDA released updated supply and demand numbers. Overall the report provided only moderate changes compared to May’s report and was slightly bearish for corn and cotton and slightly bullish for soybeans. Projected planted acres and yields for corn, cotton, and soybeans were left unchanged from the May WASDE and will be updated following the Acreage Report scheduled to be released at the end of June.
2020/21 corn ending stocks were projected up 5 million bushels at 3.323 billion bushels. For corn, USDA is projecting bounce backs in exports and ethanol use for the upcoming marketing year. Corn exports are projected up 375 million bushels year over year, at 2.15 billion. Ethanol use is projected at 5.2 billion bushels, up 300 million compared to the current marketing year. National season average prices were left unchanged with old crop at $3.60 per bushel and new crop at $3.20 per bushel.
2020/21 soybean ending stocks were projected at 395 million bushels, down 10 million compared to last month. Soybean exports are also expected to rebound 400 million bushels to 2.05 billion bushels for the 2020/2021 marketing year. National season average prices were left unchanged with old crop at $8.50 per bushel and new crop at $8.20 per bushel.
2020/21 cotton ending stocks were increase 300,000 bales to 8 million bales. The increase was largely due to greater carry in from the current marketing year and reduced domestic consumption. National season average prices were left unchanged with old crop at 59 cents per pound and new crop at 57 cents per pound.
A great deal of uncertainty remains regarding projections for the remainder of the current marketing year and for 2020/21. The unpredictability in demand, due to COVID-19, the good growing conditions to date across the Corn Belt, and abundant national and global supplies will continue to provide head winds for price improvements.
Corn
Ethanol production for the week ending June 5 was 0.837 million barrels per day, up 72,000 barrels from the previous week. Ethanol stocks were 21.802 million barrels, down 0.674 million barrels compare to last week. Corn net sales reported by exporters for May 29-June 4 were up compared to last week with net sales of 26 million bushels for the 2019/20 marketing year and 1.0 million bushels for the 2020/21 marketing year. Exports for the same time period were down 8 percent from last week at 48.9 million bushels. Corn export sales and commitments were 91 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 97 percent. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at Memphis, Northwest Barge Points, Northwest, and Upper-middle Tennessee. Overall, basis for the week ranged from even to 21 over, with an average of 12 over the July futures at elevators and barge points. July 2020 corn futures closed at $3.30, down 1 cent since last Friday. For the week, July 2020 corn futures traded between $3.24 and $3.34. Jul/Sep and Jul/Dec future spreads were 4 and 12 cents.
Corn
Nationally the Crop Progress report estimated corn condition at 75 percent good-to-excellent and 4 percent poor-to-very poor; corn planting at 97 percent compared to 93 percent last week, 78 percent last year, and a 5-year average of 94 percent; and corn emerged at 89 percent compared to 78 percent last week, 57 percent last year, and a 5-year average of 84 percent. In Tennessee, the Crop Progress report estimated corn condition at 73 percent good-to-excellent and 4 percent poor-to-very poor; corn planted at 96 percent compared to 90 percent last week, 98 percent last year, and a 5-year average of 99 percent; and corn emerged at 86 percent compared to 78 percent last week, 92 percent last year, and a 5-year average of 95 percent. In Tennessee, new crop cash corn contracts ranged from $3.16 to $3.48. September 2020 corn futures closed at $3.34, down 1 cent since last Friday. December 2020 corn futures closed at $3.42, down 3 cents since last Friday. Downside price protection could be obtained by purchasing a $3.50 December 2020 Put Option costing 24 cents establishing a $3.26 futures floor.
Soybeans
Net sales reported by exporters were up compared to last week with net sales of 36.9 million bushels for the 2019/20 marketing year and 44.6 million bushels for the 2020/21 marketing year. Exports for the same period were down 39 percent compared to last week at 10.8 million bushels. Soybean export sales and commitments were 96 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 99 percent. Average soybean basis strengthened or remained unchanged at Memphis, Northwest Barge Points, and Northwest Tennessee and weakened at Upper-middle Tennessee. Basis ranged from 7 under to 30 over the July futures contract at elevators and barge points. Average basis at the end of the week was 17 over the July futures contract. July 2020 soybean futures closed at $8.71, up 4 cents since last Friday. For the week, July 2020 soybean futures traded between $8.56 and $8.73. Jul/Aug and Jul/Nov future spreads were 1 and 8 cents. August 2020 soybean futures closed at $8.72, up 2 cents since last Friday. July soybean-to-corn price ratio was 2.64 at the end of the week.
Nationally the Crop Progress report estimated soybean condition at 72 percent good-to-excellent and 4 percent poor-to-very poor; soybeans planted at 86 percent compared to 75 percent last week, 54 percent last year, and a 5-year average of 79 percent; and soybeans emerged at 67 percent compared to 52 percent last week, 30 percent last year, and a 5-year average of 61 percent. In Tennessee, soybean condition was estimated at 75 percent good-to-excellent and 4 percent poor-to-very poor; soybeans planted at 63 percent compared to 49 percent last week, 73 percent last year, and a 5-year average of 69 percent; and soybeans emerged at 44 percent compared to 31 percent last week, 54 percent last year, and a 5-year average of 51 percent. In Tennessee, new crop soybean cash contracts ranged from $8.50 to $9.00. Nov/Dec 2020 soybean-to-corn price ratio was 2.57 at the end of the week. November 2020 soybean futures closed at $8.79, unchanged since last Friday. Downside price protection could be achieved by purchasing an $8.80 November 2020 Put Option which would cost 34 cents and set an $8.46 futures floor.
Cotton
Net sales reported by exporters were up compared to last week with net sales of 399,600 bales for the 2019/20 marketing year and 193,400 bales for the 2020/21 marketing year. Exports for the same time period were up 24 percent compared to last week at 294,300 bales. Upland cotton export sales were 120 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 106 percent. Delta upland cotton spot price quotes for June 11 were 57.27 cents/lb (41-4-34) and 59.52 cents/lb (31-3-35). Adjusted World Price (AWP) increased 1.28 cents to 49.06 cents. July 2020 cotton futures closed at 59.84 cents, down 1.95 cents since last Friday. For the week, July 2020 cotton futures traded between 59.35 and 62.16 cents. Jul/Dec and Jul/Mar cotton futures spreads were -0.26 cents and -0.81 cents.
Nationally, the Crop Progress report estimated cotton condition at 43 percent good-to-excellent and 13 percent poor-to-very poor; cotton planted at 78 percent compared to 66 percent last week, 74 percent last year, and a 5-year average of 81 percent; and cotton squaring at 13 percent compared to 8 percent last week, 10 percent last year, and a 5-year average of 10 percent. In Tennessee, cotton condition was estimated at 86 percent good-to-excellent and 11 percent poor-to-very poor; cotton planted at 86 percent compared to 64 percent last week, 95 percent last year, and a 5-year average of 96 percent; and cotton squaring at 5 percent compared to 2 percent last week, 12 percent last year, and a 5-year average of 9 percent. December 2020 cotton futures closed at 59.03, down 1.95 cents since last Friday. Downside price protection could be obtained by purchasing a 60 cent December 2020 Put Option costing 4.08 cents establishing a 55.92 cent futures floor. March 2021 cotton futures closed at 59.58 cents, down 1.81 cents since last Friday.
Wheat
Wheat net sales reported by exporters were down compared to last week with net sales of 9.9 million bushels for the 2020/21 marketing year. Exports for the same time period were down 33 percent from last week at 18.6 million bushels. 76.7 million bushels of sales were carried over from the 2019/2020 marketing year, which ended May 31. Total exports for the 2019/20 marketing year were 911.7 million bushels. Wheat export sales were 22 percent of the USDA estimated total annual exports for the 2020/21 marketing year (June 1 to May 31), compared to the previous 5-year average of 24 percent.
Nationally the Crop Progress report estimated winter wheat condition at 51 percent good-to-excellent and 19 percent poor-to-very poor; winter wheat headed at 85 percent compared to 77 percent last week, 81 percent last year, and a 5-year average of 88 percent; winter wheat harvest at 7 percent compared to 3 percent last week, 3 percent last year, and a 5-year average of 7 percent; spring wheat condition at 82 percent good-to-excellent and 1 percent poor-to-very poor; spring wheat planted at 97 percent compared to 91 percent last week, 96 percent last year, and a 5-year average of 99 percent; and spring wheat emerged at 81 percent compared to 67 percent last week, 80 percent last year, and a 5-year average of 91 percent. In Tennessee, winter wheat condition was estimated at 51 percent good-to-excellent and 11 percent poor-to-very poor; winter wheat coloring at 94 percent compared to 79 percent last week, 92 percent last year, and a 5-year average of 92 percent; and winter wheat harvest at 7 percent compared to 12 percent last year and a 5-year average of 10 percent. In Tennessee, June/July 2020 cash contracts ranged from $4.81 to $5.32. July 2020 wheat futures closed at $5.02, down 13 cents since last Friday. July 2020 wheat futures traded between $4.95 and $5.17 this week. July wheat-to-corn price ratio was 1.52. Jul/Sept and Jul/Jul future spreads were 5 and 28 cents. September 2020 wheat futures closed at $5.07, down 13 cents since last Friday. September wheat-to-corn price ratio was 1.52. July 2021 wheat futures closed at $5.30, down 12 cents since last Friday. Downside price protection could be obtained by purchasing a $5.30 July 2021 Put Option costing 38 cents establishing a $4.92 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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