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The USDA Crop Production Report Reduced Estimated National Corn Yield
DR. AARON SMITH
KNOXVILLE, TENN.
December corn futures broke through resistance at $3.65/bu, closing on Friday at $3.68 ½. Prices are now at the highest point since the end of March. In Iowa, 95 percent of the state is classified as abnormally dry by the US drought monitor, with 14 percent in extreme drought. Drought conditions around the rest of the Corn Belt are not as severe as Iowa but the drought affected area has grown substantially in the past month.
November soybeans have rallied $1.22 ¾ since August 10. The rally has been triggered by modest reductions in projected US production, but mostly by large export sales, principally to China. The current rally represents an excellent opportunity for producers to sell soybeans near $10.00. Above trend line yields at $10.00/bu plus government payments will provide profitable opportunities for many farms in Tennessee.
December cotton futures have pulled back after the six month high of 66.45 on August 25, 2020. U.S. cotton abandonment is currently projected at 25.7 percent. Despite reduced US production carry over into the next marketing year is projected at over 7 million bales which is prohibitive for prices to move higher. Strong export sales are likely the only path for cotton futures to move above 70 cents.
The USDA Crop Production report reduced estimated national corn yield 3.3 bu/acre to 178.5 bu/acre and Tennessee average yield was dropped 4 bu/acre to 174 bu/acre; national soybean yield was decreased 1.4 bu/acre to 51.9 bu/acre and Tennessee yield was increased 1 bu/acre to 50 bu/acre; and national upland cotton yield was decreased 30 lb/acre to 899 lb/acre and Tennessee yield was increased 57 lb/acre to 1,135 lb/acre.
Corn
Ethanol production for the week ending September 4 was 0.941 million barrels per day, up 19,000 barrels from the previous week. Ethanol stocks were 19.993 million barrels, down 0.889 million barrels compared to last week. Corn net sales reported by exporters for August 31-September 3 were down compared to last week with net sales of 71.8 million bushels for the 2020/21 marketing year. Exports for the same time period were up 93 percent from last week at 35.3 million bushels. A total of 49.2 million bushels in sales were carried over from the 2019/2020 marketing year, which ended August 31. Accumulated exports for the 2019/20 marketing year were 1.703 billion bushels, down 14 percent from the prior year’s total of 1.937 billion bushels. Corn export sales and commitments were 41 percent of the USDA estimated total exports for the 2020/21 marketing year (September 1 to August 31) compared to the previous 5-year average of 23 percent.
Nationally the Crop Progress report estimated corn condition at 61 percent good-to-excellent and 14 percent poor-to-very poor; corn dough at 97 percent compared to 94 percent last week, 87 percent last year, and a 5-year average of 94 percent; corn dented at 79 percent compared to 63 percent last week, 51 percent last year, and a 5-year average of 71 percent; and corn mature at 25 percent compared to 12 percent last week, 10 percent last year, and a 5-year average of 19 percent. In Tennessee, the Crop Progress report estimated corn condition at 71 percent good-to-excellent and 5 percent poor-to-very poor; corn dough at 100 percent compared to 97 percent last week, 99 percent last year, and a 5-year average of 99 percent; corn dented at 88 percent compared to 77 percent last week, 92 percent last year, and a 5-year average of 94 percent; corn mature at 45 percent compared to 22 percent last week, 57 percent last year, and a 5-year average of 62 percent; and corn harvested at 4 percent compared to 1 percent last week, 13 percent last year, and a 5-year average of 14 percent. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at Mississippi River, West-Central, North-Central, Northwest, and West elevators and barge point. Overall, basis for the week ranged from 25 under to 11 over, with an average of 7 under the December futures. December 2020 corn futures closed at $3.68, up 10 cents since last Friday. For the week, December 2020 corn futures traded between $3.56 and $3.69. Dec/Mar and Dec/Dec future spreads were 10 and 21 cents. Downside price protection could be obtained by purchasing a $3.70 December 2020 Put Option costing 15 cents establishing a $3.55 futures floor. In Tennessee, new crop cash corn contracts ranged from $3.33 to $3.93. March 2021 corn futures closed at $3.78, up 10 cents since last Friday. December 2021 corn futures closed at $3.89, up 5 cents since last Friday.
Soybeans
Net sales reported by exporters were up compared to last week with net sales of 116.2 million bushels for the 2020/21 marketing year. Exports for the same period were up 91 percent compared to last week at 61.6 million bushels. A total of 93.3 million bushels in sales were carried over from the 2019/2020 marketing year, which ended August 31. Accumulated exports totaled 1.651 billion bushels, down 4 percent from the prior year’s total of 1.719 billion bushels. Soybean export sales and commitments were 67 percent of the USDA estimated total annual exports for the 2020/21 marketing year (September 1 to August 31), compared to the previous 5-year average of 32 percent.
Nationally the Crop Progress report estimated soybean condition at 65 percent good-to-excellent and 10 percent poor-to-very poor; and soybeans dropping leaves at 20 percent compared to 8 percent last week, 7 percent last year, and a 5-year average of 16 percent. In Tennessee, soybean condition was estimated at 74 percent good-to-excellent and 6 percent poor-to-very poor; soybeans setting pods at 94 percent compared to 91 percent last week, 93 percent last year, and a 5-year average of 95 percent; and soybeans dropping leaves at 15 percent compared to 8 percent last week, 24 percent last year, and a 5-year average of 19 percent. Across Tennessee, average soybean basis weakened at North-Central and Northwest and strengthened at West-Central, West, and Mississippi River elevators and barge points. Basis ranged from 14 under to 30 over the November futures contract. Average basis at the end of the week was 9 over the November futures contract. November 2020 soybean futures closed at $9.96, up 28 cents since last Friday. For the week, November 2020 soybean futures traded between $9.60 and $9.98. Nov/Jan and Nov/Nov future spreads were 3 and -45 cents. November/December soybean-to-corn price ratio was 2.71 at the end of the week. Downside price protection could be achieved by purchasing a $10.00 November 2020 Put Option which would cost 28 cents and set a $9.72 futures floor. In Tennessee, new crop soybean cash contracts ranged from $9.59 to $10.13. January 2021 soybean futures closed at $9.99, up 26 cents since last Friday. November 2021 soybean futures closed at $9.51, up 1 cent since last Friday. Nov/Dec 2021 soybean-to-corn price ratio was 2.44 at the end of the week.
Cotton
Net sales reported by exporters were up compared to last week with net sales of 126,700 bales for the 2020/21 marketing year and 70,400 bales for the 2021/22 marketing year. Exports for the same time period were down 16 percent compared to last week at 230,500 bales. Upland cotton export sales were 51 percent of the USDA estimated total annual exports for the 2020/21 marketing year (August 1 to July 31), compared to the previous 5-year average of 49 percent. Delta upland cotton spot price quotes for September 10 were 59.46 cents/lb (41-4-34) and 61.71 cents/lb (31-3-35). Adjusted World Price (AWP) decreased 0.67 cents to 49.77 cents.
Nationally, the Crop Progress report estimated cotton condition at 45 percent good-to-excellent and 27 percent poor-to-very poor; cotton setting bolls at 96 percent compared to 93 percent last week, 98 percent last year, and a 5-year average of 97 percent; and cotton bolls opening at 37 percent compared to 29 percent last week, 41 percent last year, and a 5-year average of 34 percent. In Tennessee, cotton condition was estimated at 64 percent good-to-excellent and 19 percent poor-to-very poor; cotton setting bolls at 100 percent compared to 97 percent last week, 100 percent last year, and a 5-year average of 99 percent; and cotton bolls opening at 15 percent compared to 9 percent last week, 23 percent last year, and a 5-year average of 33 percent. December 2020 cotton futures closed at 64.81, down 0.18 cents since last Friday. For the week, December 2020 cotton futures traded between 63.4 and 65.61 cents. Dec/Mar and Dec/Dec cotton futures spreads were 0.97 cent and 0.39 cents. Downside price protection could be obtained by purchasing a 65 cent December 2020 Put Option costing 2.2 cents establishing a 62.8 cent futures floor. March 2021 cotton futures closed at 65.78 cents, down 0.19 cents since last Friday. December 2021 cotton futures closed at 65.2 cents, down 0.48 cents since last Friday.
Wheat
Wheat net sales reported by exporters were down compared to last week with net sales of 17.8 million bushels for the 2020/21 marketing year. Exports for the same time period were up 50 percent from last week at 26.7 million bushels. Wheat export sales were 49 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 49 percent.
Nationally the Crop Progress report estimated spring wheat harvested at 82 percent compared to 69 percent last week, 66 percent last year, and a 5-year average of 87 percent. In Tennessee, September 2020 wheat cash contracts ranged from $5.43 to $5.58. December 2020 wheat futures closed at $5.42, down 8 cents since last Friday. December 2020 wheat futures traded between $5.39 and $5.56 this week. December wheat-to-corn price ratio was 1.47. Dec/Mar and Dec/Jul future spreads were 8 and 15 cents. March 21 wheat futures closed at $5.50, down 8 cents since last Friday. July 2021 wheat futures closed at $5.57, down 4 cents since last Friday. Downside price protection could be obtained by purchasing a $5.60 July 2021 Put Option costing 32 cents establishing a $5.28 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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