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USDA Monthly Report Indicated Reduced Domestic And Global Stocks
DR. AARON SMITH
KNOXVILLE, TENN.
Prices received another boost this week when the USDA released its monthly supply and demand estimates. The report indicated reduced domestic and global stocks. Corn (10.7 percent) and soybean (3 percent) stocks-to-use ratios are now estimated at the lowest level since the 2013/14 marketing year. The tight ending stocks will continue to support old crop prices and contribute to volatility. New crop prices were pulled higher with December corn at $4.60, November soybeans at $12.00, and December cotton at 77 cents. Current prices are providing producers with pre-planting pricing opportunities not seen since 2014.
Highlights of the USDA report were:
Corn: U.S. average yield was decreased 3.8 bu/acre to 172 bu/acre. The yield revision caused 2020 production to decreased 325 million bushels. Ethanol use was decreased 100 million bushels as ethanol production remains below pre-COVID levels. Feed use was decreased 50 million. U.S. corn ending stocks for the 2020/21 marketing year were estimated at 1.552 billion, down 150 million bushels and foreign ending stocks were estimated at 9.622 billion, down 52 million.
Soybeans: U.S. production was reduced 35 million bushels due to a 0.5 bu/acre reduction in national average yield to 50.2 bu/acre. Exports were increased 30 million bushels causing ending stocks to be decreased to 140 million bushels, down 35 million bushels compared to last month.
Cotton: Estimated U.S. cotton production was decreased 1 million bales to 14.95 million. Exports were increased 250,000 and domestic cotton use was decreased 150,000 bales. U.S. cotton ending stocks are now estimated at 4.6 million bales, down 1.1 million bales compared to the November estimate.
Wheat: Feed use was increased 25 million bushels causing estimated ending stocks to decrease 26 million bushels to 836 million bushels. Foreign wheat stocks ending stocks were decreased 97 million bushels but remain at near record levels (10.671 billion bushels).
Corn
Ethanol production for the week ending January 8 was 0.941 million barrels per day, up 6,000 barrels from the previous week. Ethanol stocks were 23.692 million barrels, up 0.408 million barrels compared to last week. Corn net sales reported by exporters for January 1-7 were up compared to last week with net sales of 56.6 million bushels for the 2020/21 marketing year. Exports for the same time period were up 43 percent from last week at 57.6 million bushels. Corn export sales and commitments were 70 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 54 percent. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at Northwest, North-Central, West-Central, and West and weakened at Mississippi River elevators and barge points. Overall, basis for the week ranged from 5 over to 46 over, with an average of 26 over the March futures at elevators and barge points. March 2021 corn futures closed at $5.31, up 35 cents since last Friday. For the week, March 2021 corn futures traded between $4.89 and $5.41. Mar/May and Mar/Dec future spreads were 3 and -71 cents. May 2021 corn futures closed at $5.34, up 37 cents since last Friday.
December 2021 corn futures closed at $4.60, up 20 cents since last Friday. Downside price protection could be obtained by purchasing a $4.70 December 2021 Put Option costing 52 cents establishing a $4.18 futures floor.
Soybeans
Net sales reported by exporters were up compared to last week with net sales of 33.4 million bushels for the 2020/21 marketing year and 12.0 million bushels for the 2021/22 marketing year. Exports for the same period were up 10 percent compared to last week at 75.0 million bushels. Soybean export sales and commitments were 92 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 74 percent. Across Tennessee, average soybean basis strengthened or remained unchanged at West-Central, Mississippi River, West, North-Central, and Northwest elevators and barge points. Basis ranged from 3 under to 42 over the March futures contract. Average basis at the end of the week was 27 over the March futures contract. March 2021 soybean futures closed at $14.16, up 42 cents since last Friday. For the week, March 2021 soybean futures traded between $13.54 and $14.36. Mar/May and Mar/Nov future spreads were -2 and -219 cents. May 2021 soybean futures closed at $14.14, up 43 cents since last Friday. March 2021 soybean-to-corn price ratio was 2.67 at the end of the week.
November 2021 soybean futures closed at $11.97, up 36 cents since last Friday. Downside price protection could be achieved by purchasing a $12.00 November 2021 Put Option which would cost 209 cents and set an $11.11 futures floor. Nov/Dec 2021 soybean-to-corn price ratio was 2.60 at the end of the week.
Cotton
Net sales reported by exporters were up compared to last week with net sales of 326,000 bales for the 2020/21 marketing year and 50,300 bales for the 2021/22 marketing year. Exports for the same time period were up 2 percent compared to last week at 274,600 bales. Upland cotton export sales were 84 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 74 percent. Delta upland cotton spot price quotes for January 14 were 79.15 cents/lb (41-4-34) and 81.40 cents/lb (31-3-35). Adjusted World Price (AWP) increased 0.98 cents to 66.23 cents. March 2021 cotton futures closed at 80.7, up 0.93 cents since last Friday. For the week, March 2021 cotton futures traded between 78.65 and 82.08 cents. Mar/May and Mar/Dec cotton futures spreads were 0.92 cents and -3.68 cents. May 2021 cotton futures closed at 81.62 cents, up 1.07 cents since last Friday.
December 2021 cotton futures closed at 77.02 cents, up 0.83 cents since last Friday. Downside price protection could be obtained by purchasing a 78 cent December 2021 Put Option costing 6.53 cents establishing a 71.47 cent futures floor.
Wheat
Wheat net sales reported by exporters were down compared to last week with net sales of 8.2 million bushels for the 2020/21 marketing year and 0.4 million bushels for 2021/22 marketing year. Exports for the same time period were down 14 percent from last week at 13.2 million bushels. Wheat export sales were 79 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 81 percent. March 2021 wheat futures closed at $6.75, up 37 cents since last Friday. March 2021 wheat futures traded between $6.28 and $6.93 this week. March wheat-to-corn price ratio was 1.27. Mar/May and Mar/Jul future spreads were 1 and -18 cents. May 2021 wheat futures closed at $6.76, up 36 cents since last Friday.
In Tennessee, new crop wheat cash contracts ranged from $6.42 to $6.69. July 2021 wheat futures closed at $6.57, up 26 cents since last Friday. Downside price protection could be obtained by purchasing a $6.60 July 2021 Put Option costing 56 cents establishing a $6.04 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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