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October WASDE and Crop Production Reports Provided Additional Bullish News For Corn, Soybean Markets
DR. AARON SMITH
KNOXVILLE, TENN.
Another large daily increase in corn and soybean futures prices was triggered by a USDA report release on Friday. The October WASDE and Crop Production reports provided additional bullish news for corn and soybean markets. U.S. corn production was projected down 178 million bushels from last month at 14.722 billion bushels. Ethanol and feed and residual use were decreased 50 million bushels each. Overall, U.S. stocks were projected down 336 million bushels from the previous month. Soybeans surpassed even the bullish pre-report expectations. U.S. production was decreased 45 million bushels, beginning stocks decreased 52 million bushels, and exports increased 75 million bushels. The net result was a 170 million bushel reduction in projected ending stocks to 290 million bushels for the 2020/21 marketing year. This would be the lowest ending stocks level in 5-years. For the day, corn futures were up 4 ¼ to 8 cents and soybeans were up 15 ½ to 26 ¾ cents.
The WASDE report was neutral for cotton with minor changes to U.S. production and no changes to use. The cotton market mover this week was hurricane Delta. Cotton prices were up nearly 2 cents for the week. While the world still has large stocks of cotton, there will be strong demand and price premiums for higher quality cotton.
July wheat bumped up to $6.00 on the futures this week which represents a good starting point for Tennessee producers to start pricing 2021 production, if they have not already done so.
Compared to last month, national corn yield was decreased 0.1 bu/acre to 178.4 bu/acre; upland cotton yields were estimated unchanged at 899 lb/acre; and soybeans were estimated unchanged at 51.9 bu/acre. Tennessee corn yields were projected down 5 bu/acre, at 169 bu/acre; soybeans down 2 bu/acre, at 48 bu/acre; and cotton down 70 lbs/acre, at 1,065 lbs.
Analysis of the October WASDE report can be found on our Monthly Crop Comments page.
Corn
Ethanol production for the week ending October 2 was 0.923 million barrels per day, down 42,000 barrels from the previous week. Ethanol stocks were 19.672 million barrels, down 0.019 million barrels compared to last week. Corn net sales reported by exporters for September 25-October 1 were down compared to last week with net sales of 48.3 million bushels for the 2020/21 marketing year. Exports for the same time period were up 25 percent from last week at 36.8 million bushels. Corn export sales and commitments were 44 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 30 percent.
Nationally the Crop Progress report estimated corn condition at 62 percent good-to-excellent and 13 percent poor-to-very poor; corn mature at 87 percent compared to 75 percent last week, 54 percent last year, and a 5-year average of 78 percent; and corn harvested at 25 percent compared to 15 percent last week, 14 percent last year, and a 5-year average of 24 percent. In Tennessee, the Crop Progress report estimated corn condition at 73 percent good-to-excellent and 4 percent poor-to-very poor; corn mature at 96 percent compared to 88 percent last week, 99 percent last year, and a 5-year average of 98 percent; and corn harvested at 60 percent compared to 40 percent last week, 84 percent last year, and a 5-year average of 80 percent. Across Tennessee, average corn basis (cash price-nearby futures price) weakened or remained unchanged at Mississippi River, West-Central, North-Central, Northwest, and West elevators and barge point. Overall, basis for the week ranged from 15 under to 23 over, with an average of 5 over the December futures. December 2020 corn futures closed at $3.95, up 16 cents since last Friday. For the week, December 2020 corn futures traded between $3.77 and $3.98. Dec/Mar and Dec/Dec future spreads were 7 and 1 cents. Downside price protection could be obtained by purchasing a $4.00 December 2020 Put Option costing 16 cents establishing a $3.84 futures floor. In Tennessee, new crop cash corn contracts ranged from $3.64 to $4.22. March 2021 corn futures closed at $4.02, up 13 cents since last Friday. December 2021 corn futures closed at $3.96, up 5 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 up 82 percent compared to last week at 76.0 million bushels. Soybean export sales and commitments were 70 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 43 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 85 percent compared to 74 percent last week, 67 percent last year, and a 5-year average of 82 percent; and soybeans harvested at 38 percent compared to 20 percent last week, 12 percent last year, and a 5-year average of 28 percent. In Tennessee, soybean condition was estimated at 75 percent good-to-excellent and 4 percent poor-to-very poor; soybeans dropping leaves at 69 percent compared to 52 percent last week, 81 percent last year, and a 5-year average of 79 percent; and soybeans harvested at 21 percent compared to 12 percent last week, 36 percent last year, and a 5-year average of 27 percent. Across Tennessee, average soybean basis weakened at Mississippi River, West, and West-Central and strengthened or remained unchanged at North-Central and Northwest elevators and barge points. Basis ranged from 10 under to 26 over the November futures contract. Average basis at the end of the week was 11 over the November futures contract. November 2020 soybean futures closed at $10.65, up 45 cents since last Friday. For the week, November 2020 soybean futures traded between $10.16 and $10.79. Nov/Jan and Nov/Nov future spreads were 0 and -85 cents. November/December soybean-to-corn price ratio was 2.70 at the end of the week. Downside price protection could be achieved by purchasing a $10.70 November 2020 Put Option which would cost 20 cents and set a $10.50 futures floor. In Tennessee, new crop soybean cash contracts ranged from $10.12 to $10.88. January 2021 soybean futures closed at $10.65, up 41 cents since last Friday. November 2021 soybean futures closed at $9.80, up 10 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 178,400 bales for the 2020/21 marketing year and 15,000 bales for the 2021/22 marketing year. Exports for the same time period were down 35 percent compared to last week at 142,300 bales. Upland cotton export sales were 60 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 53 percent. Delta upland cotton spot price quotes for October 8 were 63.74 cents/lb (41-4-34) and 65.99 cents/lb (31-3-35). Adjusted World Price (AWP) increased 0.81 cents to 51.48 cents.
Nationally, the Crop Progress report estimated cotton condition at 40 percent good-to-excellent and 27 percent poor-to-very poor; cotton bolls opening at 83 percent compared to 66 percent last week, 81 percent last year, and a 5-year average of 75 percent; and cotton harvested at 17 percent compared to 13 percent last week, 22 percent last year, and a 5-year average of 20 percent. In Tennessee, cotton condition was estimated at 61 percent good-to-excellent and 20 percent poor-to-very poor; cotton bolls opening at 85 percent compared to 66 percent last week, 88 percent last year, and a 5-year average of 87 percent; and cotton harvested at 7 percent compared to 2 percent last week, 19 percent last year, and a 5-year average 16 percent. December 2020 cotton futures closed at 67.64, up 1.82 cents since last Friday. For the week, December 2020 cotton futures traded between 65.65 and 68.68 cents. Dec/Mar and Dec/Dec cotton futures spreads were 0.78 cents and -0.11 cents. Downside price protection could be obtained by purchasing a 68 cent December 2020 Put Option costing 1.75 cents establishing a 66.25 cent futures floor. March 2021 cotton futures closed at 68.42 cents, up 1.79 cents since last Friday. December 2021 cotton futures closed at 67.53 cents, up 1.57 cents since last Friday.
Wheat
Wheat net sales reported by exporters were up compared to last week with net sales of 19.5 million bushels for the 2020/21 marketing year and 1.4 million bushels for the 2021/22 marketing year. Exports for the same time period were up 9 percent from last week at 25.8 million bushels. Wheat export sales were 55 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 55 percent.
Nationally the Crop Progress report estimated winter wheat planted at 52 percent compared to 35 percent last week, 48 percent last year, and a 5-year average of 47 percent; and winter wheat emerged at 24 percent compared to 10 percent last week, 22 percent last year, and 5-year average of 21 percent. In Tennessee winter wheat planted was estimated at 11 percent compared to 5 percent last week, 14 percent last year, and a 5-year average of 13 percent; and winter wheat emerged at 5 percent compared to 3 percent last week, 3 percent last year, and a 5-year average of 3 percent. December 2020 wheat futures closed at $5.93, up 20 cents since last Friday. December 2020 wheat futures traded between $5.73 and $6.16 this week. December wheat-to-corn price ratio was 1.50. Dec/Mar and Dec/Jul future spreads were 4 and 1 cents. March 2021 wheat futures closed at $5.97, up 18 cents since last Friday. In Tennessee, new crop wheat cash contracts ranged from $5.76 to $6.16. July 2021 wheat futures closed at $5.94, up 13 cents since last Friday. Downside price protection could be obtained by purchasing a $6.00 July 2021 Put Option costing 42 cents establishing a $5.58 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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