Additional Soybean Planted Acreage Seems Likely To Fill Demand
DR. AARON SMITH
KNOXVILLE, TENNESSEE
Harvest corn futures are now over 40 cents lower than the May 17th high of $7.65 ½. Planting has progressed substantially the past two weeks and is now approaching the 5-year average nationally.
Additionally, most of the corn belt has favorable soil moisture. There is still a lot of time in the growing season, and late planting could affect national average yield, but crop conditions have improved.
Weather will continue to dictate market direction until the next major USDA report, which will be the June 30th Acreage report.
November soybean futures set a new contract high this week at $15.44 ¾. Domestic crush, fueled by high soybean oil prices, continues to be the long-term story in soybean markets, with an estimated 500-600 million bushels of crushing capacity coming online in the next 2-3 year. New crushing demand will set up an interesting market dynamic as domestic soybean oil production will compete with strong export demand. Additional planted acreage seems likely to fill demand, however, where will these acres come from with high corn, cotton, and wheat prices?
After last week’s move above $1.30, new crop cotton futures pulled back to $1.25 this week. It remains to be seen if this is merely a consolidation before prices seek to establish new highs or if a pull back to $1.15 to $1.20 will materialize. The weather in Texas over the next few weeks will be crucial as without some timely rains USDA’s abandonment project may be increased.
Wheat futures continued its rollercoaster ride this week. The trend in wheat futures remains up, however the volatility makes projecting the future exceedingly difficult. The ability of Ukraine to access global markets for the crop in storage and the planted crop remains unpredictable. Accessible global wheat supplies are in short order with stocks tightening for many wheat exporting nations.
Price quotes are As of Thursday May 26.
Corn
Ethanol production for the week ending May 20 was 1.014 million barrels per day, up 23,000 from the previous week. Ethanol stocks were 23.712 million barrels, down 79,000 compared to last week. Corn net sales reported by exporters for May 13-19, 2022, were down compared to last week with net sales of 6.0 million bushels for the 2021/22 marketing year – a marketing year low – and 2.3 million bushels for the 2022/23 marketing year. Exports for the same period were up 34 percent from last week at 71.7 million bushels. Corn export sales and commitments were 93 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 96 percent. Across Tennessee, average corn basis (cash price-nearby futures price) weakened 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 13 over, with an average of 3 under the July futures at elevators and barge points. July 2022 corn futures closed at $7.65, down 13 cents since last Friday. For the week, July 2022 corn futures traded between $7.55 and $7.88. Jul/Sep and Jul/Dec future spreads were -31 and -47 cents.
Nationally, the Crop Progress report estimated corn planted at 72 percent compared to 49 percent last week, 89 percent2 last year, and a 5-year average of 79 percent; and corn emerged at 39 percent compared to 14 percent last week, 61 percent last year, and a 5-year average of 51 percent. In Tennessee, corn planted was estimated at 93 percent compared to 84 percent last week, 93 percent last year, and a 5-year average of 91 percent; and corn emerged at 67 percent compared to 48 percent last week, 76 percent last year, and a 5-year average of 77 percent. September 2022 corn futures closed at $7.34, down 13 cents since last Friday. New crop cash prices at elevators and barge points ranged from $6.88 to $7.50. December 2022 corn futures closed at $7.18, down 14 cents since last Friday. Downside price protection could be obtained by purchasing a $7.20 December 2022 Put Option costing 65 cents establishing a $6.55 futures floor.
Soybeans
Net sales reported by exporters were down compared to last week with net sales of 10.2 million bushels for the 2021/22 marketing year and 16.3 million bushes for the 2022/23 marketing year. Exports for the same period were down 44 percent compared to last week at 19.8 million bushels. Soybean export sales and commitments were 102 percent of the USDA estimated total annual ex-ports for the 2021/22 marketing year (September 1 to August 31), compared to the previous 5-year average of 98 percent. Across Tennessee, average soybean basis weakened or remained unchanged at West, Northwest, West-Central, North-Central, and Mississippi River elevators and barge points. Basis ranged from 5 under to 39 over, with an average basis of 17 over the July futures contract. July 2022 soybean futures closed at $17.26, up 21 cents since last Friday. For the week, July 2022 soybean futures traded between $16.65 and $17.37. Jul/Aug and Jul/Nov future spreads were -67 and -182 cents. July 2022 soybean-to-corn price ratio was 2.26 at the end of the week. August 2022 soybean futures closed at $16.59, up 18 cents since last Friday.
Nationally, the Crop Progress report estimated soybeans planted at 50 percent compared to 30 percent last week, 73 percent last year, and a 5-year average of 55 percent; and soybeans emerged at 21 percent compared to 9 percent last week, 38 percent last year, and a 5-year average of 26 percent. In Tennessee, soybeans planted were estimated at 53 percent compared to 36 percent last week, 53 percent last year, and a 5-year average of 44 percent; and soybeans emerged at 30 percent compared to 16 percent last week, 31 percent last year, and a 5-year average of 23 percent. Nov/Dec 2022 soybean-to-corn price ratio was 2.15 at the end of the week. New crop cash soybean prices at elevators and barge points ranged from $14.86 to $15.56. November 2022 soybean futures closed at $15.44, up 23 cents since last Friday.
Downside price protection could be achieved by purchasing a $15.60 November 2022 Put Option which would cost 104 cents and set a $14.56 futures floor.
Cotton
Net sales reported by exporters were down compared to last week with net sales of 37,000 bales for the 2021/22 marketing year and 95,400 bales for the 2022/23 marketing year. Exports for the same period were down 7 percent compared to last week at 318,500 bales. Upland cotton export sales were 107 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 108 percent. Delta upland cotton spot price quotes for May 25 were 144.16 cents/lb (41-4-34) and 146.41 cents/lb (31-3-35). Adjusted world price (AWP) was down 3.38 cents at 139.86 cents. July 2022 cotton futures closed at 140.61 cents, down 1.66 cents since last Friday. For the week, July 2022 cotton futures traded between 140.36 and 147.14 cents. Jul/Dec and Jul/Mar cotton futures spreads were -16.28 cents and -21.07 cents.
Nationally, the Crop Progress report estimated cotton planted at 54 percent compared to 37 percent last week, 47 percent last year, and a 5-year average of 51 percent. In Tennessee, cotton planted was estimated at 78 percent, compared to 49 percent last week, 63 percent last year, and a 5-year average of 63 percent. December 2022 cotton futures closed at 124.33 cents, down 0.85 cents since last Friday. Downside price protection could be obtained by purchasing a 125 cent December 2022 Put Option costing 11.73 cents establishing a 113.27 cent futures floor. March 2023 cotton futures closed at 119.54 cents, down 1.3 cents since last Friday.
Wheat
Wheat net sales reported by exporters were down compared to last week with net sales cancellations of 0.08 million bushels for the 2021/22 marketing year and net sales of 9.0 million bushels for the 2022/23 marketing year. Exports for the same peri-od were down 14 percent from last week at 11.0 million bushels. Wheat export sales were 90 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 106 percent. Nationally, the Crop Progress report estimated winter wheat condition at 28 percent good-to-excellent and 40 percent poor-to- very poor; winter wheat headed at 63 percent compared to 48 percent last week, 65 percent last year, and a 5-year average of 65 percent; spring wheat planted at 49 percent compared to 39 percent last week, 93 percent last year, and a 5-year average of 83 percent; and spring wheat emerged at 29 percent compared to 16 percent last week, 63 percent last year, and a 5-year average of 50 percent. In Tennessee, winter wheat condition was estimated at 58 percent good-to-excellent and 7 percent poor-to-very poor; winter wheat heading at 96 percent compared to 92 percent last week, 96 percent last year, and a 5-year average of 98 percent; and winter wheat coloring at 48 percent compared to 7 percent last week, 35 percent last year, and a 5-year average of 40 percent. Wheat cash prices at elevators and barge points ranged from $10.48 to $11.50. July 2022 wheat futures closed at $11.43, down 25 cents since last Friday. July 2022 wheat futures traded between $11.14 and $12.08 this week. Downside price protection could be obtained by purchasing an $11.50 July 2022 Put Option costing 50 cents establishing an $11.00 futures floor. July wheat-to-corn price ratio was 1.49. Jul/Sep and Jul/Dec future spreads were 9 and 15 cents. New crop wheat cash prices at elevators and barge points ranged from $10.63 to $11.50.
September 2022 wheat futures closed at $11.52, down 22 cents since last Friday. December 2022 wheat futures closed at $11.58 down 21 cents since last Friday. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee