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Corn Supplies Still Likely To Be Abundant Even With The Weather Related Losses
DR. AARON SMITH
KNOXVILLE, TENN.
Last week’s gains in corn, soybeans, and wheat were given back this week as all three commodities finished down double digits for the week. Weather conditions did improve corn maturity and harvest progress, however, projected yields remain uncertain with below trend line yields possible for key production states such as Iowa. Corn supplies are still likely to be abundant even with the weather related losses from windstorms, hurricanes, and regional flash droughts. USDAs September WASDE report projected corn carryover into the 2020/21 marketing year at 2.503 billion bushels. Even if stocks are reduced by a combination of reduced production and increased exports/domestic demand (ethanol and feed use) it seems unlikely stocks will breach 2 billion bushels.
Soybeans pulled back 41 cents this week in spite of continued strong export sales. Next week will be critical to see if prices consolidate near $10, test the current high of $10.46 ¾, or retreat to key resistance at $9.80. Currently, there are a lot of uncertain variables dictating soybean prices with exchange rates (Brazilian Real/USD/Chinese Yuan), export sales, U.S. projected production, and Brazilian planting intentions dictating market direction. 2020 sales of remaining soybean production (cash or futures) should be strongly considered with prices above $10.00. For most Tennessee producers a combination of CFAP 2.0 payments and crop revenue at prices above $10 will result in a profitable outcome for this crop year. Holding out for higher prices comes with substantial risk.
Cotton was the lone commodity to finish up this week, with modest gains across contracts. The 5-month trend remains up. Over this period the December contract has gained over 14 cents; however, prices have flattened out since August 24 and a sideways trend between 64-67 cents has emerged. With harvest progressing, yield/production estimates and export sales will dictate market direction.
In September, December wheat traded between $5.30 and $5.80. The intermediate term uptrend, starting June 29, remains in place. Sales with futures near the upper limit should be considered for those with wheat in storage (basis could remain unset).
Corn
Ethanol production for the week ending September 18 was 0.906 million barrels per day, down 20,000 barrels from the previous week. Ethanol stocks were 19.997 million barrels, up 0.199 million barrels compared to last week. Corn net sales reported by exporters for September 11-17 were up compared to last week with net sales of 84.2 million bushels for the 2020/21 marketing year. Exports for the same time period were down 6 percent from last week at 33.3 million bushels. Corn export sales and commitments were 38 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 26 percent.
Nationally the Crop Progress report estimated corn condition at 61 percent good-to-excellent and 14 percent poor-to-very poor; corn dented at 95 percent compared to 89 percent last week, 76 percent last year, and a 5-year average of 90 percent; corn mature at 59 percent compared to 41 percent last week, 26 percent last year, and a 5-year average of 49 percent; and corn harvested at 8 percent compared to 5 percent last week, 6 percent last year, and a 5-year average of 10 percent. In Tennessee, the Crop Progress report estimated corn condition at 75 percent good-to-excellent and 4 percent poor-to-very poor; corn dented at 98 percent compared to 96 percent last week, 98 percent last year, and a 5-year average of 98 percent; corn mature at 78 percent compared to 61 percent last week, 92 percent last year, and a 5-year average of 91 percent; and corn harvested at 27 percent compared to 12 percent last week, 52 percent last year, and a 5-year average of 53 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 19 over, with an average of 3 over the December futures. December 2020 corn futures closed at $3.65, down 13 cents since last Friday. For the week, December 2020 corn futures traded between $3.63 and $3.78. Dec/Mar and Dec/Dec future spreads were 8 and 19 cents. Downside price protection could be obtained by purchasing a $3.70 December 2020 Put Option costing 13 cents establishing a $3.57 futures floor. In Tennessee, new crop cash corn contracts ranged from $3.43 to $3.99. March 2021 corn futures closed at $3.73, down 14 cents since last Friday. December 2021 corn futures closed at $3.84, down 9 cents since last Friday.
Soybeans
Net sales reported by exporters were up compared to last week with net sales of 117.4 million bushels for the 2020/21 marketing year. Exports for the same period were down 26 percent compared to last week at 47.1 million bushels. Soybean export sales and commitments were 61 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 36 percent.
Nationally the Crop Progress report estimated soybean condition at 63 percent good-to-excellent and 10 percent poor-to-very poor; soybeans dropping leaves at 59 percent compared to 37 percent last week, 29 percent last year, and a 5-year average of 50 percent; and soybeans harvested at 6 percent compared to 2 percent last year and a 5-year average of 6 percent. In Tennessee, soybean condition was estimated at 74 percent good-to-excellent and 6 percent poor-to-very poor; soybeans setting pods at 100 percent compared to 97 percent last week, 99 percent last year, and a 5-year average of 100 percent; soybeans dropping leaves at 37 percent compared to 24 percent last week, 52 percent last year, and a 5-year average of 51 percent; and soybeans harvested at 7 percent compared to 2 percent last week, 15 percent last year, and a 5-year average of 9 percent. Across Tennessee, average soybean basis weakened at Mississippi River and West and strengthened or remained unchanged at North-Central, Northwest, and West-Central elevators and barge points. Basis ranged from 13 under to 37 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 $10.02, down 41 cents since last Friday. For the week, November 2020 soybean futures traded between $9.95 and $10.45. Nov/Jan and Nov/Nov future spreads were 4 and -54 cents. November/December soybean-to-corn price ratio was 2.75 at the end of the week. Downside price protection could be achieved by purchasing a $10.20 November 2020 Put Option which would cost 41 cents and set a $9.79 futures floor. In Tennessee, new crop soybean cash contracts ranged from $9.86 to $10.59. January 2021 soybean futures closed at $10.06, down 41 cents since last Friday. November 2021 soybean futures closed at $9.48, down 28 cents since last Friday. Nov/Dec 2021 soybean-to-corn price ratio was 2.47 at the end of the week.
Cotton
Net sales reported by exporters were down compared to last week with net sales of 92,700 bales for the 2020/21 marketing year and 50,600 bales for the 2021/22 marketing year. Exports for the same time period were up 50 percent compared to last week at 281,900 bales. Upland cotton export sales were 57 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 50 percent. Delta upland cotton spot price quotes for September 24 were 61.46 cents/lb (41-4-34) and 63.71 cents/lb (31-3-35). Adjusted World Price (AWP) decreased 0.43 cents to 50.45 cents.
Nationally, the Crop Progress report estimated cotton condition at 45 percent good-to-excellent and 27 percent poor-to-very poor; cotton bolls opening at 57 percent compared to 47 percent last week, 61 percent last year, and a 5-year average of 55 percent; and cotton harvested at 11 percent compared to 6 percent last week, 10 percent last year, and a 5-year average of 10 percent. In Tennessee, cotton condition was estimated at 64 percent good-to-excellent and 18 percent poor-to-very poor; cotton bolls opening at 50 percent compared to 29 percent last week, 63 percent last year, and a 5-year average of 67 percent; and cotton harvested at 1 percent compared to 4 percent last year and a 5-year average 4 percent. December 2020 cotton futures closed at 65.95, up 0.29 cents since last Friday. For the week, December 2020 cotton futures traded between 64.65 and 66.23 cents. Dec/Mar and Dec/Dec cotton futures spreads were 0.71 cent and 0.09 cents. Downside price protection could be obtained by purchasing a 66 cent December 2020 Put Option costing 1.98 cents establishing a 64.02 cent futures floor. March 2021 cotton futures closed at 66.66 cents, up 0.08 cents since last Friday. December 2021 cotton futures closed at 66.04 cents, up 0.07 cents since last Friday.
Wheat
Wheat net sales reported by exporters were up compared to last week with net sales of 12.9 million bushels for the 2020/21 marketing year. Exports for the same time period were down 17 percent from last week at 17.2 million bushels. Wheat export sales were 51 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 52 percent.
Nationally the Crop Progress report estimated winter wheat planted at 20 percent compared to 10 percent last week, 18 percent last year, and a 5-year average of 19 percent; winter wheat emerged at 3 percent compared to 2 percent last year and 5-year average of 2 percent; and spring wheat harvested at 96 percent compared to 92 percent last week, 84 percent last year, and a 5-year average of 96 percent. In Tennessee winter wheat planted was estimated at 4 percent compared to 1 percent last week, 3 percent last year, and a 5-year average of 2 percent; and winter wheat emerged at 1 percent. In Tennessee, September 2020 wheat cash contracts ranged from $5.74 to $5.88. December 2020 wheat futures closed at $5.44, down 31 cents since last Friday. December 2020 wheat futures traded between $5.41 and $5.78 this week. December wheat-to-corn price ratio was 1.49. Dec/Mar and Dec/Jul future spreads were 7 and 12 cents. March 2021 wheat futures closed at $5.51, down 31 cents since last Friday. July 2021 wheat futures closed at $5.56, down 26 cents since last Friday. Downside price protection could be obtained by purchasing a $5.60 July 2021 Put Option costing 35 cents establishing a $5.25 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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