Weekly Crop Comments by Dr. Aaron Smith

Overview

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

A combination of reduced projected U.S. production and large export sales continues to support improved corn and soybean prices. U.S. average yield is expected to decrease between 2-4 bu/acre for corn and 1-2 bu/acres for soybeans on the September WASDE report scheduled to be released next Friday. Reduced yields would result in production reductions of 168 to 332 million bushels of corn and 83 to 259 million bushels of soybeans, assuming harvested acreage remains unchanged. It is possible that USDA also adjusts harvested acreage, currently estimated at 84.023 million acres of corn and 83.02 million acres of soybeans, due to the derecho damage across Iowa, Illinois and Wisconsin, but harvested acreage adjustments may be more likely on the October report. For now, December corn futures are likely to continue to trade between $3.45 and $3.65 and November soybeans between $9.40 and $9.85. Key resistance levels are just below $3.65 for corn and $9.80 for soybeans.

December cotton futures topped out with a six-month high of 66.45 on August 25 and have started to move lower, continued strong export sales will be required to hold the current 62-66 cent trading range. Chinese purchases will be key if a move towards 70 cents is to occur. A test of the 62-cent price level seems more likely than an advance over 66 cents. An estimated carry over from last marketing year of 7.2 million bales is projected to expand to 7.6 million bales at the end of the current marketing year. Unless U.S stocks are adjusted downward (closer to 6 million bales), through a combination of reduced production and increased exports, 70 cent plus futures prices will be difficult to obtain. Currently, projected abandonment is projected at 24% (mostly in Texas); national average upland cotton yield is projected at 929 lb/acre.

December wheat continues to move between $5.00 and $5.70. This week prices peaked on Tuesday at $5.68 ½ before retreating to $5.50 ¼. For wheat in storage, securing a futures price near current offerings should be considered for unpriced inventory, leaving the basis unfixed at this time is a reasonable course of action in Tennessee for producers able and willing to store wheat into the winter.

Corn

Ethanol production for the week ending August 28 was 0.922 million barrels per day, down 9,000 barrels from the previous week. Ethanol stocks were 20.882 million barrels, up 0.473 million barrels compared to last week. Corn net sales reported by exporters for August 21-27 were up compared to last week with net sales of 3.8 million bushels for the 2019/20 marketing year and 94.1 million bushels for the 2020/21 marketing year. Exports for the same time period were down 51% from last week at 18.3 million bushels. Corn export sales and commitments were 98% of the USDA estimated total exports for the 2019/20 marketing year (September 1 to August 31) compared to the previous 5-year average of 104%.

Nationally the Crop Progress report estimated corn condition at 62% good-to-excellent and 14% poor-to-very poor; corn dough at 94% compared to 88% last week, 78% last year, and a 5-year average of 89%; corn dented at 63% compared to 44% last week, 37% last year, and a 5-year average of 56%; and corn mature at 12% compared to 5% last week, 5% last year, and a 5-year average of 10%. In Tennessee, the Crop Progress report estimated corn condition at 71% good-to-excellent and 6% poor-to-very poor; corn dough at 97% compared to 94% last week, 97% last year, and a 5-year average of 98%; corn dented at 77% compared to 62% last week, 85% last year, and a 5-year average of 88%; and corn mature at 22% compared to 6% last week, 36% last year, and a 5-year average of 40%. Across Tennessee, average corn basis (cash price-nearby futures price) weakened at Northwest and strengthened or remained unchanged at Mississippi River, West-Central, North-Central, and West elevators and barge point. Overall, basis for the week ranged from 18 under to 11 over, with an average of even the December futures. December 2020 corn futures closed at $3.58, down 1 cent since last Friday. For the week, December 2020 corn futures traded between $3.51 and $3.64. Dec/Mar and Dec/Dec future spreads were 10 and 26 cents. Downside price protection could be obtained by purchasing a $3.60 December 2020 Put Option costing 14 cents establishing a $3.46 futures floor. In Tennessee, new crop cash corn contracts ranged from $3.28 to $3.92. March 2021 corn futures closed at $3.68, down 1 cent since last Friday. December 2021 corn futures closed at $3.84, up 2 cents since last Friday.

Soybeans

Net sales reported by exporters were down compared to last week with net sales of 3.2 million bushels for the 2019/20 marketing year and 64.8 million bushels for the 2020/21 marketing year. Exports for the same period were down 31% compared to last week at 32.3 million bushels. Soybean export sales and commitments were 106% 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 104%.

Nationally the Crop Progress report estimated soybean condition at 66% good-to-excellent and 10% poor-to-very poor; soybeans setting pods at 95% compared to 92% last week, 84% last year, and a 5-year average of 93%; and soybeans dropping leaves at 8% compared to 4% last week, 3% last year, and a 5-year average of 8%. In Tennessee, soybean condition was estimated at 74% good-to-excellent and 7% poor-to-very poor; soybeans setting pods at 91% compared to 82% last week, 87% last year, and a 5-year average of 92%; and soybeans dropping leaves at 8% compared to 2% last week, 13% last year, and a 5-year average of 7%. Across Tennessee, average soybean basis weakened at North-Central, Northwest, West-Central, West, and Mississippi River elevators and barge points. Basis ranged from 13 under to 25 over the November futures contract. Average basis at the end of the week was 6 over the November futures contract. November 2020 soybean futures closed at $9.68, up 18 cents since last Friday. For the week, November 2020 soybean futures traded between $9.42 and $9.68. Nov/Jan and Nov/Nov future spreads were 5 and -18 cents. November/December soybean-to-corn price ratio was 2.70 at the end of the week. Downside price protection could be achieved by purchasing a $9.70 November 2020 Put Option which would cost 24 cents and set a $9.46 futures floor. In Tennessee, new crop soybean cash contracts ranged from $9.40 to $10.00. January 2021 soybean futures closed at $9.73, up 17 cents since last Friday. November 2021 soybean futures closed at $9.50, up 13 cents since last Friday. Nov/Dec 2021 soybean-to-corn price ratio was 2.47 at the end of the week.

Cotton

Net sales reported by exporters were down compared to last week with net sales of 131,500 bales for the 2020/21 marketing year. Exports for the same time period were down 1% compared to last week at 273,900 bales. Upland cotton export sales were 50% 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 47%. Delta upland cotton spot price quotes for September 3 were 59.06 cents/lb (41-4-34) and 61.31 cents/lb (31-3-35). Adjusted World Price (AWP) decreased 0.06 cents to 50.44 cents.

Nationally, the Crop Progress report estimated cotton condition at 44% good-to-excellent and 28% poor-to-very poor; cotton setting bolls at 93% compared to 88% last week, 95% last year, and a 5-year average of 95%; and cotton bolls opening at 29% compared to 22% last week, 34% last year, and a 5-year average of 26%. In Tennessee, cotton condition was estimated at 66% good-to-excellent and 17% poor-to-very poor; cotton setting bolls at 97% compared to 95% last week, 99% last year, and a 5-year average of 98%; and cotton bolls opening at 9% compared to 2% last week, 12% last year, and a 5-year average of 19%. December 2020 cotton futures closed at 64.99, down 0.09 cents since last Friday. For the week, December 2020 cotton futures traded between 63.9 and 66.44 cents. Dec/Mar and Dec/Dec cotton futures spreads were 0.98 cent and 0.69 cent. Downside price protection could be obtained by purchasing a 65 cent December 2020 Put Option costing 2.67 cents establishing a 62.33 cent futures floor. March 2021 cotton futures closed at 65.97 cents, up 0.04 cents since last Friday. December 2021 cotton futures closed at 65.68 cents, up 0.47 cents since last Friday.

Wheat

Wheat net sales reported by exporters were down compared to last week with net sales of 21.5 million bushels for the 2020/21 marketing year. Exports for the same time period were down 25% from last week at 17.8 million bushels. Wheat export sales were 47% 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 47%.

Nationally the Crop Progress report estimated spring wheat harvested at 69% compared to 49% last week, 50% last year, and a 5-year average of 77%. In Tennessee, September 2020 wheat cash contracts ranged from $5.48 to $5.66. December 2020 wheat futures closed at $5.50, up 2 cents since last Friday. December 2020 wheat futures traded between $5.46 and $5.68 this week. December wheat-to-corn price ratio was 1.54. Dec/Mar and Dec/Jul future spreads were 8 and 11 cents. March 21 wheat futures closed at $5.58, up 2 cents since last Friday. July 2021 wheat futures closed at $5.61, unchanged since last Friday. Downside price protection could be obtained by purchasing a $5.70 July 2021 Put Option costing 38 cents establishing a $5.32 futures floor.