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December Corn Set A New Contract Low
DR. AARON SMITH
KNOXVILLE, TENN.
Commodity prices took a step backward this week as increased COVID-19 cases in several states has led to concerns over a slowing economic recovery or pausing/reversing of phased reopening. The demand disruptions caused by COVID-19 and trade uncertainty with China coupled with large global stocks and good growing conditions in the US continues to provide downward pressure for grain and oilseeds prices. Right now bearish market forces overwhelming outweigh bullish considerations. The unpredictability of the COVID-19 pandemic and the geopolitical relationship with China make price forecasting incredibly difficult. However, right now the trend for prices is sideways to lower. Expecting 2020 crop prices to get back to January 2020 levels seems unrealistic at this juncture.
December corn set a new contract low on Friday at $3.22/bu and July wheat traded within ¼ of cent of the September 3, 2019 contract low of $4.68/bu.
CFAP payments have continued to be made to producers, providing some much needed financial relief. As at June 22, USDA FSA indicated payments of $15.66 million based 1,617 non-specialty crop producer applications in Tennessee. Nationally, non-specialty crop producers have received $1.04 billion for 146,424 applications. Producers have until August 28 to sign up for CFAP payments. Call your local FSA service center to make arrangements to complete the applications or visit https://www.farmers.gov/cfap.
On a slightly positive note, ethanol production rose for the 8th consecutive week, from a low of 537,000 barrels per day for the week ending April 24 to 893,000 barrels per day for the week ending June 19. Ethanol production is still 16.6 percent lower than this week last year. Ethanol stocks have reduced for the 9th consecutive week decreasing from 27.689 million barrels on April 19 to 21.034 million barrels on June 19. Ethanol stocks are 2.5 percent lower than this week last year. Lower stocks and increased production will help with corn demand, but the recent increases in COVID-19 cases in Texas and Florida could slow the economic recovery and reduce fuel demand.
Corn
Ethanol production for the week ending June 19 was 0.893 million barrels per day, up 52,000 barrels from the previous week. Ethanol stocks were 21.034 million barrels, down 0.312 million barrels compared to last week. Corn net sales reported by exporters for June 12-18 were up compared to last week with net sales of 18.2 million bushels for the 2019/20 marketing year and 3.0 million bushels for the 2020/21 marketing year. Exports for the same time period were up 50 percent from last week at 51.7 million bushels. Corn export sales and commitments were 93 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 99 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 5 under to 26 over, with an average of 17 over the July futures at elevators and barge points. July 2020 corn futures closed at $3.17, down 15 cents since last Friday. For the week, July 2020 corn futures traded between $3.13 and $3.32. Jul/Sep and Jul/Dec future spreads were 2 and 8 cents.
Nationally the Crop Progress report estimated corn condition at 72 percent good-to-excellent and 5 percent poor-to-very poor; and corn silking at 2 percent compared to 1 percent last year and a 5-year average of 2 percent. In Tennessee, the Crop Progress report estimated corn condition at 73 percent good-to-excellent and 5 percent poor-to-very poor; and corn silking at 5 percent compared to 2 percent last week, 23 percent last year, and a 5-year average of 16 percent. In Tennessee, new crop cash corn contracts ranged from $3.04 to $3.48. September 2020 corn futures closed at $3.19, down 18 cents since last Friday. December 2020 corn futures closed at $3.25, down 20 cents since last Friday. Downside price protection could be obtained by purchasing a $3.30 December 2020 Put Option costing 20 cents establishing a $3.10 futures floor.
Soybeans
Net sales reported by exporters were down compared to last week with net sales of 22.1 million bushels for the 2019/20 marketing year and 20.6 million bushels for the 2020/21 marketing year. Exports for the same period were down 22 percent compared to last week at 11.1 million bushels. Soybean export sales and commitments were 100 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 101 percent. Average soybean basis strengthened or remained unchanged at Memphis, Northwest Barge Points, Upper-middle, and Northwest Tennessee. Basis ranged from 16 under to 34 over the July futures contract at elevators and barge points. Average basis at the end of the week was 14 over the July futures contract. July 2020 soybean futures closed at $8.65, down 11 cents since last Friday. For the week, July 2020 soybean futures traded between $8.61 and $8.79. Jul/Aug and Jul/Nov future spreads were -5 and -4 cents. August 2020 soybean futures closed at $8.60, down 16 cents since last Friday. July soybean-to-corn price ratio was 2.73 at the end of the week.
Nationally the Crop Progress report estimated soybean condition at 70 percent good-to-excellent and 5 percent poor-to-very poor; soybeans planted at 96 percent compared to 93 percent last week, 83 percent last year, and a 5-year average of 93 percent; soybeans emerged at 89 percent compared to 81 percent last week, 66 percent last year, and a 5-year average of 85 percent; and soybeans blooming at 5 percent compared to 1 percent last year and a 5-year average of 5 percent. In Tennessee, soybean condition was estimated at 74 percent good-to-excellent and 4 percent poor-to-very poor; soybeans planted at 86 percent compared to 75 percent last week, 89 percent last year, and a 5-year average of 87 percent; soybeans emerged at 70 percent compared to 58 percent last week, 77 percent last year, and a 5-year average of 73 percent; and soybeans blooming at 2 percent compared to 4 percent last year and a 5-year average of 4 percent. In Tennessee, new crop soybean cash contracts ranged from $8.46 to $9.04. Nov/Dec 2020 soybean-to-corn price ratio was 2.65 at the end of the week. November 2020 soybean futures closed at $8.61, down 19 cents since last Friday. Downside price protection could be achieved by purchasing an $8.80 November 2020 Put Option which would cost 40 cents and set an $8.40 futures floor.
Cotton
Net sales reported by exporters were down compared to last week with net sales of 102,700 bales for the 2019/20 marketing year and 67,900 bales for the 2020/21 marketing year. Exports for the same time period were down 9 percent compared to last week at 316,100 bales. Upland cotton export sales were 121 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 25 were 58.14 cents/lb (41-4-34) and 60.39 cents/lb (31-3-35). Adjusted World Price (AWP) increased 0.73 cents to 49.6 cents. July 2020 cotton futures closed at 60.55 cents, down 1.01 cents since last Friday. For the week, July 2020 cotton futures traded between 60.01 and 63.14 cents. Jul/Dec and Jul/Mar cotton futures spreads were -0.39 cent and -1.05 cents.
Nationally, the Crop Progress report estimated cotton condition at 40 percent good-to-excellent and 25 percent poor-to-very poor; cotton planted at 96 percent compared to 89 percent last week, 94 percent last year, and a 5-year average of 96 percent; cotton squaring at 27 percent compared to 16 percent last week, 27 percent last year, and a 5-year average of 26 percent; and cotton setting bolls at 6 percent compared to 2 percent last year and a 5-year average of 4 percent. In Tennessee, cotton condition was estimated at 60 percent good-to-excellent and 14 percent poor-to-very poor; cotton planted at 96 percent compared to 93 percent last week, 100 percent last year, and a 5-year average of 100 percent; and cotton squaring at 17 percent compared to 12 percent last week, 33 percent last year, and a 5-year average of 31 percent. December 2020 cotton futures closed at 59.5, down 0.31 cents since last Friday. Downside price protection could be obtained by purchasing a 60 cent December 2020 Put Option costing 3.5 cents establishing a 56.5 cent futures floor. March 2021 cotton futures closed at 60.16 cents, down 0.4 cents since last Friday.
Wheat
Wheat net sales reported by exporters were up compared to last week with net sales of 19.1 million bushels for the 2020/21 marketing year. Exports for the same time period were up 46 percent from last week at 26.1 million bushels. Wheat export sales were 27 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 28 percent.
Nationally the Crop Progress report estimated winter wheat condition at 52 percent good-to-excellent and 17 percent poor-to-very poor; winter wheat headed at 96 percent compared to 91 percent last week, 93 percent last year, and a 5-year average of 97 percent; winter wheat harvested at 29 percent compared to 15 percent last week, 13 percent last year, and a 5-year average of 26 percent; spring wheat condition at 75 percent good-to-excellent and 4 percent poor-to-very poor; and spring wheat headed at 12 percent compared to 4 percent last week, 6 percent last year, and a 5-year average of 22 percent. In Tennessee, winter wheat condition was estimated at 53 percent good-to-excellent and 13 percent poor-to-very poor; winter wheat mature at 95 percent compared to 69 percent last week, 95 percent last year, and a 5-year average of 92 percent; and winter wheat harvest at 62 percent compared to 19 percent last week, 69 percent last year, and a 5-year average of 68 percent. In Tennessee, June/July 2020 cash contracts ranged from $4.66 to $5.03. July 2020 wheat futures closed at $4.74, down 7 cents since last Friday. July 2020 wheat futures traded between $4.68 and $4.89 this week. July wheat-to-corn price ratio was 1.50. Jul/Sept and Jul/Jul future spreads were 1 and 26 cents. September 2020 wheat futures closed at $4.75, down 10 cents since last Friday. September wheat-to-corn price ratio was 1.49. July 2021 wheat futures closed at $5.00, down 12 cents since last Friday. Downside price protection could be obtained by purchasing a $5.00 July 2021 Put Option costing 33 cents establishing a $4.77 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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