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Similar To Corn, Soybean Stocks Were Revised Down From Sept. WASDE Estimate
DR. AARON SMIT
KNOXVILLE, TENN.
Another USDA report surprise sparked daily gains for corn, soybeans, and wheat of 14 ¼, 30 ½, and 28 ½ cents on Wednesday, September 30, 2020.
The major surprise was a reduction in corn socks to 1.995 billion bushels, a 258 million bushel reduction compared to the September WASDE. The new stocks number implies corn disappearance from March 1 to September 1, 2020 of 5.956 billion bushels, compared to 6.392 billion in 2019. This was much better than predicted given the issues with COVID-19/ethanol. 1.995 billion bushels of carry over into the marketing year beginning September 1 is the lowest carryover since 2016 at 1.737 billion bushels. Moving forward December corn has support near $3.60 and resistance at $3.90.
Similar to corn, soybean stocks were revised down from the September WASDE estimate from 575 million bushels to 523 million bushels, down 52 million bushels. Implied demand from March 1 to September 1 was down 87 million bushels compared to 2019, but given the challenges faced from the COVID-19 pandemic demand exceed expectations. The main market mover for soybeans continues to be large export sales for the 2020/21 soybean marketing year.
USDA currently projects total marketing year exports of 2.125 billion bushels, in just over three weeks of the current marketing year the US has exported 170 million bushels and has outstanding sales of 1.232 billion. Price direction will be dictated by export sales/shipments and crop progress in South America.
All wheat stocks were down 186 million bushels compared to last September 1, at 2.159 billion bushels. Wheat prices this week were buoyed by dry conditions in the southern plains and drought concerns in Russia in some of their major wheat producing regions.
December cotton futures have traded between 64.65 and 66.93 the last 15 trading days. The rally that started back in April has lost momentum in the past month. Continued declines in US production and strong export sales are the most likely path to break above the current trading range, however a fall back to 62 cents cannot be ruled out at this time. U.S. and global stocks continue to be substantial hurdles to further price improvements.
Corn
Ethanol production for the week ending September 25 was 0.881 million barrels per day, down 25,000 barrels from the previous week. Ethanol stocks were 19.691 million barrels, down 0.306 million barrels compared to last week. Corn net sales reported by exporters for September 18-24 were down compared to last week with net sales of 79.8 million bushels for the 2020/21 marketing year. Exports for the same time period were down 11 percent from last week at 29.5 million bushels. Corn export sales and commitments were 42 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 28 percent.
Nationally the Crop Progress report estimated corn condition at 61 percent good-to-excellent and 14 percent poor-to-very poor; corn mature at 75 percent compared to 59 percent last week, 39 percent last year, and a 5-year average of 65 percent; and corn harvested at 15 percent compared to 8 percent last week, 10 percent last year, and a 5-year average of 16 percent. In Tennessee, the Crop Progress report estimated corn condition at 74 percent good-to-excellent and 4 percent poor-to-very poor; corn dented at 100 percent compared to 98 percent last week, 99 percent last year, and a 5-year average of 100 percent; corn mature at 88 percent compared to 78 percent last week, 97 percent last year, and a 5-year average of 96 percent; and corn harvested at 40 percent compared to 27 percent last week, 69 percent last year, and a 5-year average of 69 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 20 under to 25 over, with an average of 6 over the December futures. December 2020 corn futures closed at $3.79, up 14 cents since last Friday. For the week, December 2020 corn futures traded between $3.60 and $3.85. Dec/Mar and Dec/Dec future spreads were 10 and 12 cents. Downside price protection could be obtained by purchasing a $3.80 December 2020 Put Option costing 10 cents establishing a $3.70 futures floor. In Tennessee, new crop cash corn contracts ranged from $3.47 to $4.15. March 2021 corn futures closed at $3.89, up 16 cents since last Friday. December 2021 corn futures closed at $3.91, up 7 cents since last Friday.
Soybeans
Net sales reported by exporters were down compared to last week with net sales of 95.2 million bushels for the 2020/21 marketing year. Exports for the same period were down 11 percent compared to last week at 41.9 million bushels. Soybean export sales and commitments were 66 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 40 percent.
Nationally the Crop Progress report estimated soybean condition at 64 percent good-to-excellent and 10 percent poor-to-very poor; soybeans dropping leaves at 74 percent compared to 59 percent last week, 49 percent last year, and a 5-year average of 69 percent; and soybeans harvested at 20 percent compared to 6 percent last week, 6 percent last year, and a 5-year average of 15 percent. In Tennessee, soybean condition was estimated at 75 percent good-to-excellent and 4 percent poor-to-very poor; soybeans dropping leaves at 52 percent compared to 37 percent last week, 67 percent last year, and a 5-year average of 66 percent; and soybeans harvested at 12 percent compared to 7 percent last week, 24 percent last year, and a 5-year average of 17 percent. Across Tennessee, average soybean basis weakened at West and strengthened or remained unchanged at Mississippi River, North-Central, Northwest, and West-Central elevators and barge points. Basis ranged from 13 under to 29 over the November futures contract. Average basis at the end of the week was 10 over the November futures contract. November 2020 soybean futures closed at $10.20, up 18 cents since last Friday. For the week, November 2020 soybean futures traded between $9.85 and $10.35. Nov/Jan and Nov/Nov future spreads were 4 and -50 cents. November/December soybean-to-corn price ratio was 2.69 at the end of the week. Downside price protection could be achieved by purchasing a $10.30 November 2020 Put Option which would cost 24 cents and set a $10.06 futures floor. In Tennessee, new crop soybean cash contracts ranged from $9.81 to $10.61. January 2021 soybean futures closed at $10.24, up 18 cents since last Friday. November 2021 soybean futures closed at $9.70, up 22 cents since last Friday. Nov/Dec 2021 soybean-to-corn price ratio was 2.48 at the end of the week.
Cotton
Net sales reported by exporters were up compared to last week with net sales of 233,800 bales for the 2020/21 marketing year and 20,600 bales for the 2021/22 marketing year. Exports for the same time period were down 23 percent compared to last week at 218,200 bales. Upland cotton export sales were 59 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 51 percent. Delta upland cotton spot price quotes for October 1 were 61.91 cents/lb (41-4-34) and 64.16 cents/lb (31-3-35). Adjusted World Price (AWP) increased 0.22 cents to 50.67 cents.
Nationally, the Crop Progress report estimated cotton condition at 43 percent good-to-excellent and 24 percent poor-to-very poor; cotton bolls opening at 66 percent compared to 57 percent last week, 73 percent last year, and a 5-year average of 66 percent; and cotton harvested at 13 percent compared to 11 percent last week, 15 percent last year, and a 5-year average of 14 percent. In Tennessee, cotton condition was estimated at 62 percent good-to-excellent and 20 percent poor-to-very poor; cotton bolls opening at 66 percent compared to 50 percent last week, 78 percent last year, and a 5-year average of 79 percent; and cotton harvested at 2 percent compared to 1 percent last week, 10 percent last year, and a 5-year average 7 percent. December 2020 cotton futures closed at 65.82, down 0.13 cents since last Friday. For the week, December 2020 cotton futures traded between 64.7 and 66.6 cents. Dec/Mar and Dec/Dec cotton futures spreads were 0.81 cents and 0.14 cents. Downside price protection could be obtained by purchasing a 66 cent December 2020 Put Option costing 2.19 cents establishing a 63.81 cent futures floor. March 2021 cotton futures closed at 66.63 cents, down 0.03 cents since last Friday. December 2021 cotton futures closed at 65.96 cents, down 0.08 cents since last Friday.
Wheat
Wheat net sales reported by exporters were up compared to last week with net sales of 18.6 million bushels for the 2020/21 marketing year and 0.05 million bushels for the 2021/22 marketing year. Exports for the same time period were up 38 percent from last week at 23.7 million bushels. Wheat export sales were 53 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 53 percent.
Nationally the Crop Progress report estimated winter wheat planted at 35 percent compared to 20 percent last week, 34 percent last year, and a 5-year average of 33 percent; and winter wheat emerged at 10 percent compared to 3 percent last week, 8 percent last year, and 5-year average of 8 percent. In Tennessee winter wheat planted was estimated at 5 percent compared to 4 percent last week, 8 percent last year, and a 5-year average of 5 percent; and winter wheat emerged at 3 percent compared to 1 percent last week, 1 percent last year, and a 5-year average of 1 percent. December 2020 wheat futures closed at $5.73, up 29 cents since last Friday. December 2020 wheat futures traded between $5.37 and $5.87 this week. December wheat-to-corn price ratio was 1.51. Dec/Mar and Dec/Jul future spreads were 6 and 8 cents. March 2021 wheat futures closed at $5.79, up 28 cents since last Friday. In Tennessee, new crop wheat cash contracts ranged from $5.64 to $5.87. July 2021 wheat futures closed at $5.81, up 25 cents since last Friday. Downside price protection could be obtained by purchasing a $5.90 July 2021 Put Option costing 45 cents establishing a $5.45 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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