Weekly Crop Comments by Dr. Aaron Smith

​Corn was down; cotton was up; and soybeans and wheat were mixed for the week.

 

Are new crop prices higher than this time last year? Looking at 2020 harvest contracts compared to 2019 harvest contracts as of closing December 31: July wheat was 45 cents higher; November soybeans were 43 ½ cents higher; December corn was 5 cents higher; and December cotton was 2.94 cents lower. Wheat, soybeans, and corn were up 8.6%, 4.7%, and 1.3%; and cotton was down 4.0%.

 

December corn contracts, in 2019 and 2020, averaged $4.01 and $3.97 for the month of December. Currently, December 2020 corn prices have traded between $3.85 and $4.15, continued trading in this range should be anticipated. Export sales pace, estimated at 39% of USDA projected marketing year exports compared to a five year average of 56%, and the likelihood of increased US planted acres in 2020 provide some concern that prices could decline. Commencing 2020 corn sales with harvest futures greater than $4.10 is a prudent risk management strategy.

 

There is not much new in soybeans to begin 2020. Trade / U.S. export sales and South American production will continue to provide market direction. On Friday, the USDA released weekly export sales – a marketing year low for soybeans – resulting in double digit declines in soybean futures. Details of the Phase 1 agreement with China will be closely monitored by soybean traders. Expect continued volatility with the potential for abrupt and dramatic price movements. A wide trading range of $9.20 to $10.20 early in 2020 should be anticipated.

 

Cotton is currently moving in the opposite direction as a year ago. The 2019 harvest contract decreased from 78.04 cents on December 3, 2018 to 73.3 cents on December 31, 2018, down 4.74 cents. The 2020 harvest contact appreciated from 67.33 on December 2, 2019 to 70.36 cents on December 31, 2019, up 3.03 cents. Looking forward continued price appreciation will be contingent on final U.S. production estimates, export sales pace, and global economic growth. A trading range of 68 to 74 cents in the short term should be expected.

 

July wheat futures are up over $1.00 since September 3rd. With cash prices in Tennessee above $6 sales new crop wheat should be strongly considered.

 

 

 

Ethanol production for the week ending December 20 was 1.083 million barrels per day, up 19,000 from the previous week. Ethanol stocks were 21.469 million barrels, down 329,000 barrels compare to last week. Corn net sales reported by exporters for December 20-26 were down compared to last week with net sales of 20.9 million bushels for the 2019/20 marketing year and 0.3 million bushels for the 2020/21 marketing year. Exports for the same time period were up 35% from last week at 17.6 million bushels. Corn export sales and commitments were 39% of the USDA estimated total annual exports for the 2019/20 marketing year (September 1 to August 31) compared to the previous 5-year average of 56%. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened at Memphis, Northwest Barge Points, Northwest, and Upper-middle Tennessee. Overall, basis for the week ranged from 11 under to 22 over with an average of 15 over the March futures at elevators and barge points. In Tennessee, January corn cash contracts averaged $4.06 with a range of $3.97 to $4.16. March 2020 corn futures closed at $3.86, down 4 cents since last Friday. For the week, March 2020 corn futures traded between $3.85 and $3.92. Mar/May and Mar/Dec future spreads were 7 and 14 cents. May 2020 corn futures closed at $3.93, down 3 cents since last Friday.

 

 

In Memphis, new crop cash corn contracts ranged from $3.93 to $3.98. December 2020 corn futures closed at $4.00, down 3 cents since last Friday. Downside price protection could be obtained by purchasing a $4.10 December 2020 Put Option costing 32 cents establishing a $3.78 futures floor.

 

 

 

Net sales reported by exporters were down compared to last week with net sales of 12.1 million bushels for the 2019/20 marketing year and 0.06 million bushels for the 2020/21 marketing year. Exports for the same period were up 7% compared to last week at 39.6 million bushels. Soybean export sales and commitments were 61% of the USDA estimated total annual exports for the 2019/20 marketing year (September 1 to August 31), compared to the previous 5-year average of 76%. Average soybean basis strengthened or remained unchanged at Memphis and weakened at Northwest Barge Points, Northwest, and Upper-middle Tennessee. Basis ranged from 46 under to 18 over the March futures contract at elevators and barge points. Average basis at the end of the week was even the March futures contract. In Tennessee, January 2020 cash contracts ranged from $9.24 to $9.70. March 2020 soybean futures closed at $9.41, unchanged since last Friday. For the week, March 2020 soybean futures traded between $9.37 and $9.61. Mar/May and Mar/Nov future spreads were 14 and 30 cents. May 2020 soybean futures closed at $9.55, unchanged since last Friday. March soybean-to-corn price ratio was 2.44 at the end of the week.

 

 

In Memphis, new crop soybean cash contracts ranged from $9.46 to $9.71. Nov/Dec 2020 soybean-to-corn price ratio was 2.43 at the end of the week. November 2020 soybean futures closed at $9.71, up 2 cents since last Friday. Downside price protection could be achieved by purchasing a $9.80 November 2020 Put Option which would cost 51 cents and set a $9.29 futures floor.

 

 

 

Net sales reported by exporters were up compared to last week with net sales of 246,200 bales for the 2019/20 marketing year and 19,400 bales for the 2020/21 marketing year. Exports for the same time period were up 11% compared to last week at 224,500 bales. Upland cotton export sales were 75% of the USDA estimated total annual exports for the 2019/20 marketing year (August 1 to July 31), compared to the previous 5-year average of 69%. Delta upland cotton spot price quotes for January 2 were 66.52 cents/lb (41-4-34) and 68.77 cents/lb (31-3-35). Adjusted World Price (AWP) increased 1.9 cents to 59.63 cents. March 2020 cotton futures closed at 69.2 cents, up 0.28 cents since last Friday. For the week, March 2020 cotton futures traded between 68.5 and 69.74 cents. Mar/May and Mar/Dec cotton futures spreads were 1.18 cents and 2.04 cents. May 2020 cotton futures closed at 70.38, up 0.3 cents since last Friday.

 

 

December 2020 cotton futures closed at 71.24, up 1.18 cents since last Friday. Downside price protection could be obtained by purchasing a 72 cent December 2020 Put Option costing 4.62 cents establishing a 67.38 cent futures floor.

 

 

 

Wheat net sales reported by exporters were down compared to last week with net sales of 11.5 million bushels for the 2019/20 marketing year and 0.7 million bushels for the 20/21 marketing year. Exports for the same time period were up 33% from last week at 12.5 million bushels. Wheat export sales were 71% of the USDA estimated total annual exports for the 2019/20 marketing year (June 1 to May 31), compared to the previous 5-year average of 80%. March 2020 wheat futures closed at $5.54, down 2 cents since last Friday. March 2020 wheat futures traded between $5.51 and $5.67 this week. March wheat-to-corn price ratio was 1.44. Mar/May and Mar/Jul future spreads were 3 and 6 cents. May 2020 wheat futures closed at $5.57, down 1 cent since last Friday. May wheat-to-corn price ratio was 1.42.   

 

 

In Tennessee, June/July 2020 cash contracts ranged from $5.64 to $6.06. July 2020 wheat futures closed at $5.60, up 1 cent since last Friday. Downside price protection could be obtained by purchasing a $5.70 July 2020 Put Option costing 40 cents establishing a $5.30 futures floor.