U.S. Cotton Production Was Estimated Down 1.02 Million Bales
DR. AARON SMITH
KNOXVILLE, TENNESSEE
On May 12, USDA released it monthly WASDE report. The report provided initial estimates for the 2022 crop (2022/23 marketing year). U.S. corn production was estimated at 14.46 billion bushels, down 655 million compared to last year. National average yield was decreased 4 bu/acre compared to the February Outlook projection of 181 bu/acre. Planted acres were projected at 89.5 million down 3.9 million compared to 2021. Compared to last year, total use was projected to decrease 370 million bushels based on a 100-million-bushel decline in exports, a 275-million-bushel decrease in feed and a residual use, and a 5- million-bushel increase in food, seed, and industrial use. Ending stocks are projected to be 1.36 billion, 80 million lower than the current marketing year. Stocks-to-use are estimated at 9.34 percent.
Internationally, Ukraine’s corn production was projected to decline 891 million bushels and exports to fall 551 million bushels. Global corn ending stocks are projected to decline 168 million bushels to 12.012 billion bushels.
U.S. soybean production was projected up 205 million bushels at 4.64 billion bushels. Planted acreage and national average yield were projected at 91 million acres and 51.5 bu/acre. Domestic crushing and exports were increased 40 million and 60 million bushels compared to last year. Ending stocks are projected up 75 million bushels to 310 million bushels. Stocks-to-use was estimated at 6.77 percent.
Internationally, Brazil and Argentina are projected to increase production 1.213 billion bushels, compared to last years drought reduced crop. World ending stocks are projected to rebound to 3.66 billion bushels, up 528 million bushels compared to 2021/22.
U.S. cotton production was estimated down 1.02 million bales, at 16.5 million bales. Yield and planted acreage were projected up at 867 lbs/ acre and 12.23 million acres, however harvested-to-planted acres were projected at 74.7 percent compared to 91.5 percent in 2021, due primarily to the Southern Plains drought. Exports and domestic use were down 300,000 bales and ending stocks were projected to decline 500,000 bales to 2.9 million bales. Foreign stocks were also projected down 330,000 bales, compared to last year, at 79.92 million bales. China cotton use was projected to decline 500,000 bales year-over-year.
All wheat production is projected up 83 million bushels year-over-year at 1.729 billion bushels. National average yield is projected at 46.6 bu/acre and planted acres at 47.4 million acres. U.S. wheat stocks are projected at its lowest level since 2013/14 at 619 million bushels. Foreign stocks are projected to fall 430 million bushels based largely on a 423-million-bushel reduction in Ukraine’s production. Overall, the report was bullish, and futures markets closed up for the day. U.S. growing conditions will be very important as tight global stocks necessitate a good crop to meet global demand and replenish stocks.
Corn
Ethanol production for the week ending May 6 was 0.991 million barrels per day, up 22,000 from the previous week. Ethanol stocks were 24.14 million barrels, up 253,000 compared to last week. Corn net sales reported by exporters for April 29-May 5, 2022, were down compared to last week with net sales of 7.6 million bushels for the 2021/22 marketing year – a marketing year low – and 1.8 million bushels for the 2022/23 marketing year. Exports for the same period were down 21 percent from last week at 59.2 million bushels. Corn export sales and commitments were 92 percent of the USDA estimated total exports for the 2021/22 marketing year (September 1 to August 31) compared to the previous 5-year average of 94 percent. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at West, Northwest, West-Central, North-Central, and Mississippi River elevators and barge points. Overall, basis for the week ranged from 35 under to 19 over, with an average of 1 over the July futures at elevators and barge points. July 2022 corn futures closed at $7.81, down 3 cents since last Friday. For the week, July 2022 corn futures traded between $7.69 and $8.00. Jul/Sep and Jul/Dec future spreads were -24 and -33 cents.
Nationally, the Crop Progress report estimated corn planted at 22 percent compared to 14 percent last week, 64 percent last year, and a 5-year average of 50 percent; and corn emerged at 5 percent compared to 3 percent last week, 18 percent last year, and a 5-year average of 15 percent. In Tennessee, corn planted was estimated at 64 percent compared to 42 percent last week, 74 percent last year, and a 5-year average of 72 percent; and corn emerged at 25 percent compared to 10 percent last week, 50 percent last year, and a 5-year average of 46 percent. September 2022 corn futures closed at $7.57, up 15 cents since last Friday. New crop cash prices at elevators and barge points ranged from $6.75 to $7.64. December 2022 corn futures closed at $7.48, up 28 cents since last Friday. Downside price protection could be obtained by purchasing a $7.50 December 2022 Put Option costing 70 cents establishing a $6.80 futures floor.
Soybeans
Net sales reported by exporters were down compared to last week with net sales of 5.3 million bushels for the 2021/22 marketing year – a marketing year low – and 2.8 million bushes for the 2022/23 marketing year. Exports for the same period were down 16 percent compared to last week at 17.3 million bushels. Soybean export sales and commitments were 102 percent of the USDA estimated total annual exports for the 2021/22 marketing year (September 1 to August 31), compared to the previous 5-year average of 97 percent. Across Tennessee, average soybean basis weakened or remained unchanged at West, Northwest, West-Central, and North-Central elevators and barge points and strengthened at Mississippi River elevators and barge points. Basis ranged from 1 under to 41 over, with an average basis of 26 over the July futures contract. July 2022 soybean futures closed at $16.46, up 24 cents since last Friday. For the week, July 2022 soybean futures traded between $15.78 and $16.51. Jul/Aug and Jul/Nov future spreads were -51 and -148 cents. July 2022 soybean-to-corn price ratio was 2.11 at the end of the week. August 2022 soybean futures closed at $15.95, up 24 cents since last Friday.
Nationally, the Crop Progress report estimated soybeans planted at 12 percent compared to 8 percent last week, 39 percent last year, and a 5- year average of 24 percent and soybeans emerged at 3 percent compared to 9 percent last year and a 5-year average of 4 percent. In Tennessee, soybeans planted were estimated at 19 percent compared to 9 percent last week, 24 percent last year, and a 5-year average of 16 percent and soybeans emerged at 4 percent compared to 7 percent last year and a 5-year average of 3 percent. Nov/Dec 2022 soybean-to-corn price ratio was 2.00 at the end of the week. New crop cash soybean prices at elevators and barge points ranged from $14.20 to $15.11.
November 2022 soybean futures closed at $14.98, up 28 cents since last Friday. Downside price protection could be achieved by purchasing a $15.00 November 2022 Put Option which would cost 95 cents and set a $14.05 futures floor.
Cotton
Net sales reported by exporters were down compared to last week with net sales of 27,500 bales for the 2021/22 marketing year – a marketing year low – and 90,600 bales for the 2022/23 marketing year.
Exports for the same period were down 15 percent compared to last week at 364,500 bales. Upland cotton export sales were 106 percent of the USDA estimated total annual exports for the 2021/22 marketing year (August 1 to July 31), compared to the previous 5-year average of 106 percent. Delta upland cotton spot price quotes for May 12 were 144.53 cents/lb (41-4-34) and 146.78 cents/lb (31-3-35). Adjusted world price (AWP) was down 6.28 cents at 140.82 cents. July 2022 cotton futures closed at 145.2 cents, up 1.59 cents since last Friday. For the week, July 2022 cotton futures traded between 142.1 and 148.17 cents. Jul/ Dec and Jul/Mar cotton futures spreads were -17.21 cents and -22.38 cents.
Nationally, the Crop Progress report estimated cotton planted at 24 percent compared to 16 percent last week, 24 percent last year, and a 5-year average of 24 percent. In Tennessee, cotton planted was estimated at 13 percent, compared to 3 percent last week, 3 percent last year, and a 5-year average of 13 percent. December 2022 cotton futures closed at 127.99 cents, up 4.25 cents since last Friday.
Downside price protection could be obtained by purchasing a 128 cent December 2022 Put Option costing 13.01 cents establishing a 114.99 cent futures floor. March 2023 cotton futures closed at 122.82 cents, up 4.48 cents since last Friday.
Wheat
Wheat net sales reported by exporters were down compared to last week with net sales of 0.5 million bushels for the 2021/22 marketing year and 4.6 million bushels for the 2022/23 marketing year. Exports for the same period were down 36 percent from last week at 8.8 million bushels. Wheat export sales were 92 percent of the USDA estimated total annual exports for the 2021/22 marketing year (June 1 to May 31), compared to the previous 5-year average of 105 percent.
Nationally, the Crop Progress report estimated winter wheat condition at 29 percent good-to-excellent and 39 percent poor-to-very poor; winter wheat headed at 33 percent compared to 23 percent last week, 36 percent last year, and a 5-year average of 40 percent; spring wheat planted at 27 percent compared to 19 percent last week, 67 percent last year, and a 5-year average of 47 percent; and spring wheat emerged at 9 percent compared to 5 percent last week, 27 percent last year, and a 5-year average of 15 percent. In Tennessee, winter wheat condition was estimated at 59 percent good-to-excellent and 8 percent poor-to-very poor; winter wheat jointing at 98 percent compared to 94 percent last week and 97 percent last year; and winter wheat heading at 82 percent compared to 56 percent last week, 77 percent last year, and a 5-year average of 84 percent. Wheat cash prices at elevators and barge points ranged from $9.92 to $11.39. July 2022 wheat futures closed at $11.77, up 69 cents since last Friday. July 2022 wheat futures traded between $10.83 and $11.98 this week. Downside price protection could be obtained by purchasing an $11.80 July 2022 Put Option costing 65 cents establishing a $11.15 futures floor. July wheat-to-corn price ratio was 1.51. Jul/Sep and Jul/Dec future spreads were 4 and 8 cents. New crop wheat cash prices at elevators and barge points ranged from $10.14 to $11.43. September 2022 wheat futures closed at $11.81, up 72 cents since last Friday. December 2022 wheat futures closed at $11.85, up 73 cents since last Friday. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee