Thursday’s USDA’s Acreage Report Is Very Likely To Be A Market Mover
DR. AARON SMITH
KNOXVILLE, TENNESSEE
In four trading days this week, December corn was down 57 cents (7.8 percent), December cotton was down 20.24 cents (17.1 percent); November soybean was down 113 cents (7.4 percent); and July wheat was down 111 cents (10.7 percent). Dramatic declines, that may collapse profit margins if price protection was not secured, and markets do not recover. This type of correction can be stomach wrenching for producers, however kneejerk marketing reactions can compound the problem. At this point, it is prudent for marketers to evaluate where they are on pricing the 2022 crop, what they have invested in the crop, and estimate production potential. Well thought out marketing and risk management decisions, based on available data are imperative.
Next week has the potential to provide another shock to the market (up or down), with the release of USDA’s Acreage report on Thursday. The Acreage report provides planted acreage estimates for commodities.
This year, there is a great deal of uncertainty due to high inputs, delayed planting in the Northern Corn Belt, and drought in the west.
Given high input prices and late planting the bias in markets would be for greater soybean acres at the expense of corn, but how much of this bias is already factored into current prices? Thursday’s report is very likely to be a market mover.
Cotton markets had the most substantial move of any commodity this week. The largest weekly decline since 2011. Economic uncertainty and drought relief in the Southern Plains sent bullish speculators heading for the exits and December prices dropped 4.44 cents on Tuesday, 5.78 cents on Wednesday, 6.06 cents of Thursday, and 3.96 cents on Friday, closing below $1 for the first time since January 28. Cotton prices are currently very unpredictable and volatility is likely to continue in the short term.
Corn
Corn net sales reported by exporters for June 10-16, 2022, were up compared to last week with net sales of 26.5 million bushels for the 2021/22 marketing year and 14.1 million bushels for the 2022/23 marketing year. Exports for the same period were down 17 percent from last week at 45.2 million bushels. Corn export sales and commitments were 97 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 100 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 28 under to 5 over, with an average of 9 under the July futures at elevators and barge points. July 2022 corn futures closed at $7.50, down 34 cents since last Friday. For the week, July 2022 corn futures traded between $7.34 and $7.78. Jul/Sep and Jul/Dec future spreads were -68 and -76 cents.
Nationally, the Crop Progress report estimated corn condition at 70 percent good-to-excellent and 6 percent poor-to-very-poor; and corn emerged at 95 percent compared to 88 percent last week, 99 percent last year, and a 5-year average of 95 percent. In Tennessee, corn condition was estimated at 69 percent good-to-excellent and 6 percent poor-to-very poor; and corn silking at 11 percent compared to 2 percent last week, 8 percent last year, and a 5-year average of 12 percent. September 2022 corn futures closed at $6.82, down 55 cents since last Friday. New crop cash prices at elevators and barge points ranged from $6.25 to $7.13. December 2022 corn futures closed at $6.74, down 57 cents since last Friday. Downside price protection could be obtained by purchasing a $6.80 December 2022 Put Option costing 63 cents establishing a $6.17 futures floor.
Soybeans
Net sales reported by exporters were down compared to last week with net sales of 1.1 million bushels for the 2021/22 marketing year and 9.7 million bushes for the 2022/23 marketing year. Exports for the same period were down 30 percent compared to last week at 18.2 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 101 percent. Across Tennessee, average soybean basis strengthened or remained unchanged at West, Northwest, West-Central, North-Central, and Mississippi River elevators and barge points. Basis ranged from even to 15 over, with an average basis of 5 over the July futures contract. July 2022 soybean futures closed at $16.10, down 92 cents since last Friday. For the week, July 2022 soybean futures traded between $15.83 and $17.02. Jul/Aug and Jul/Nov future spreads were -90 and -186 cents. July 2022 soybean-to-corn price ratio was 2.15 at the end of the week. August 2022 soybean futures closed at $15.20, down 102 cents since last Friday.
Nationally, the Crop Progress report estimated soybean condition at 68 percent good-to-excellent and 6 percent poor-to-very poor; soybeans planted at 94 percent compared to 88 percent last week, 97 percent last year, and a 5-year average of 93 percent; and soybeans emerged at 83 percent compared to 70 percent last week, 90 percent last year, and a 5-year average of 84 percent. In Tennessee, soybean condition was estimated at 70 percent good-to-excellent and 7 percent poor-to-very poor; soybeans planted at 86 percent compared to 81 percent last week, 85 percent last year, and a 5-year average of 86 percent; soybeans emerged at 77 percent compared to 70 percent last week, 74 percent last year, and a 5-year average of 72 percent; and soybeans blooming at 3 percent compared to 2 percent last year and a 5-year average of 3 percent. Nov/Dec 2022 soybean-to-corn price ratio was 2.11 at the end of the week. New crop cash soybean prices at elevators and barge points ranged from $13.88 to $15.50. November 2022 soybean futures closed at $14.24, down 113 cents since last Friday. Downside price protection could be achieved by purchasing a $14.40 November 2022 Put Option which would cost 88 cents and set a $13.52 futures floor.
Cotton
Net sales reported by exporters were down compared to last week with net sales of 16,200 bales for the 2021/22 marketing year – a marketing year low – and 277,300 bales for the 2022/23 marketing year. Exports for the same period were up 11 percent compared to last week at 371,900 bales. Upland cotton export sales were 112 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 110 percent. Delta upland cotton spot price quotes for June 23 were 118.01 cents/lb. (41-4-34) and 120.26 cents/lb. (31-3-35). Adjusted world price (AWP) was down 4.52 cents at 135.95 cents. July 2022 cotton futures closed at 103.76 cents, down 39.69 cents since last Friday. For the week, July 2022 cotton futures traded between 100 and 146 cents. Jul/Dec and Jul/Mar cotton futures spreads were -5.71 cents and-10.24 cents.
Nationally, the Crop Progress report estimated cotton condition at 40 percent good-to-excellent and 26 percent poor-to-very poor; cotton planted at 96 percent compared to 90 percent last week, 95 percent last year, and a 5-year average of 95 percent; cotton squaring at 22 percent compared to 14 percent last week, 20 percent last year, and a 5-year average of 23 percent; and cotton setting bolls at 6 percent compared to 4 percent last year and a 5-year average of 4 percent. In Tennessee, cotton condition was estimated at 58 percent good-to- excellent and 11 percent poor-to-very poor; cotton squaring at 25 percent compared to 14 percent last week, 25 percent last year, and a 5-year average of 27 percent; and cotton setting bolls at 1 percent.
December 2022 cotton futures closed at 98.05 cents, down 20.24 cents since last Friday. Downside price protection could be obtained by purchasing a 99 cent December 2022 Put Option costing 7.31 cents establishing a 91.69 cent futures floor. March 2023 cotton futures closed at 93.52 cents, down 20.63 cents since last Friday.
Wheat
Wheat net sales reported by exporters were up compared to last week at 17.6 million bushels for the 2022/23 marketing year. Exports for the week were down 9 percent compared to last week at 12.4 million bushels. Wheat export sales were 25 percent of the USDA estimated total annual exports for the 2022/23 marketing year (June 1 to May 31), compared to the previous 5-year average of 28 percent.
Nationally, the Crop Progress report estimated winter wheat condition at 30 percent good-to-excellent and 43 percent poor-to-very poor; winter wheat headed at 91 percent compared to 86 percent last week, 95 percent last year, and a 5-year average of 95 percent; winter wheat harvested at 25 percent compared to 10 percent last week, 15 percent last year, and a 5-year average of 22 percent; spring wheat condition at 59 percent good-to-excellent and 6 percent poor-to-very poor; spring wheat planted at 98 percent compared to 94 percent last week, 100 percent last year, and a 5-year average of 100 percent; and spring wheat emerged at 89 percent compared to 72 percent last week, 98 percent last year, and a 5-year average of 97 percent. In Tennessee, winter wheat condition was estimated at 66 percent good-to-excellent and 5 percent poor-to-very poor; winter wheat mature at 94 percent compared to 50 percent last week, 85 percent last year, and a 5-year average of 91 percent; and winter wheat harvested at 43 percent compared to 7 percent last week, 47 percent last year, and a 5-year average of 60 percent. Wheat cash prices at elevators and barge points ranged from $8.37 to $9.48. July 2022 wheat futures closed at $9.23, down 111 cents since last Friday. July 2022 wheat futures traded between $9.21 and $10.33 this week. July wheat-to-corn price ratio was 1.23. Jul/Sep and Jul/Dec future spreads were 13 and 29 cents.
September 2022 wheat futures closed at $9.36, down 110 cents since last Friday. Downside price protection could be obtained by purchasing a $9.40 September 2022 Put Option costing 61 cents establishing an $8.79 futures floor. September wheat-to-corn price ratio was 1.37. December 2022 wheat futures closed at $9.52, down 109 cents since last Friday. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee