Weekly Crop Comments by Dr. Aaron Smith

Overview

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

Last week’s gains in corn, soybeans, and wheat were given back this week as all three commodities finished down double digits for the week. Weather conditions did improve corn maturity and harvest progress, however, projected yields remain uncertain with below trend line yields possible for key production states such as Iowa. Corn supplies are still likely to be abundant even with the weather related losses from windstorms, hurricanes, and regional flash droughts. USDAs September WASDE report projected corn carryover into the 2020/21 marketing year at 2.503 billion bushels. Even if stocks are reduced by a combination of reduced production and increased exports/domestic demand (ethanol and feed use) it seems unlikely stocks will breach 2 billion bushels.

Soybeans pulled back 41 cents this week in spite of continued strong export sales. Next week will be critical to see if prices consolidate near $10, test the current high of $10.46 ¾, or retreat to key resistance at $9.80. Currently, there are a lot of uncertain variables dictating soybean prices with exchange rates (Brazilian Real/USD/Chinese Yuan), export sales, U.S. projected production, and Brazilian planting intentions dictating market direction. 2020 sales of remaining soybean production (cash or futures) should be strongly considered with prices above $10.00. For most Tennessee producers a combination of CFAP 2.0 payments and crop revenue at prices above $10 will result in a profitable outcome for this crop year. Holding out for higher prices comes with substantial risk.

Cotton was the lone commodity to finish up this week, with modest gains across contracts. The 5-month trend remains up. Over this period the December contract has gained over 14 cents; however, prices have flattened out since August 24 and a sideways trend between 64-67 cents has emerged. With harvest progressing, yield/production estimates and export sales will dictate market direction.

In September, December wheat traded between $5.30 and $5.80. The intermediate term uptrend, starting June 29, remains in place. Sales with futures near the upper limit should be considered for those with wheat in storage (basis could remain unset).

Corn

Ethanol production for the week ending September 18 was 0.906 million barrels per day, down 20,000 barrels from the previous week. Ethanol stocks were 19.997 million barrels, up 0.199 million barrels compared to last week. Corn net sales reported by exporters for September 11-17 were up compared to last week with net sales of 84.2 million bushels for the 2020/21 marketing year. Exports for the same time period were down 6% from last week at 33.3 million bushels. Corn export sales and commitments were 38% of the USDA estimated total exports for the 2020/21 marketing year (September 1 to August 31) compared to the previous 5-year average of 26%.

Nationally the Crop Progress report estimated corn condition at 61% good-to-excellent and 14% poor-to-very poor; corn dented at 95% compared to 89% last week, 76% last year, and a 5-year average of 90%; corn mature at 59% compared to 41% last week, 26% last year, and a 5-year average of 49%; and corn harvested at 8% compared to 5% last week, 6% last year, and a 5-year average of 10%. In Tennessee, the Crop Progress report estimated corn condition at 75% good-to-excellent and 4% poor-to-very poor; corn dented at 98% compared to 96% last week, 98% last year, and a 5-year average of 98%; corn mature at 78% compared to 61% last week, 92% last year, and a 5-year average of 91%; and corn harvested at 27% compared to 12% last week, 52% last year, and a 5-year average of 53%. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at Mississippi River, West-Central, North-Central, Northwest, and West elevators and barge point. Overall, basis for the week ranged from 25 under to 19 over, with an average of 3 over the December futures. December 2020 corn futures closed at $3.65, down 13 cents since last Friday. For the week, December 2020 corn futures traded between $3.63 and $3.78. Dec/Mar and Dec/Dec future spreads were 8 and 19 cents. Downside price protection could be obtained by purchasing a $3.70 December 2020 Put Option costing 13 cents establishing a $3.57 futures floor. In Tennessee, new crop cash corn contracts ranged from $3.43 to $3.99. March 2021 corn futures closed at $3.73, down 14 cents since last Friday. December 2021 corn futures closed at $3.84, down 9 cents since last Friday.

Soybeans

Net sales reported by exporters were up compared to last week with net sales of 117.4 million bushels for the 2020/21 marketing year. Exports for the same period were down 26% compared to last week at 47.1 million bushels. Soybean export sales and commitments were 61% of the USDA estimated total annual exports for the 2020/21 marketing year (September 1 to August 31), compared to the previous 5-year average of 36%.

Nationally the Crop Progress report estimated soybean condition at 63% good-to-excellent and 10% poor-to-very poor; soybeans dropping leaves at 59% compared to 37% last week, 29% last year, and a 5-year average of 50%; and soybeans harvested at 6% compared to 2% last year and a 5-year average of 6%. In Tennessee, soybean condition was estimated at 74% good-to-excellent and 6% poor-to-very poor; soybeans setting pods at 100% compared to 97% last week, 99% last year, and a 5-year average of 100%; soybeans dropping leaves at 37% compared to 24% last week, 52% last year, and a 5-year average of 51%; and soybeans harvested at 7% compared to 2% last week, 15% last year, and a 5-year average of 9%. Across Tennessee, average soybean basis weakened at Mississippi River and West and strengthened or remained unchanged at North-Central, Northwest, and West-Central elevators and barge points. Basis ranged from 13 under to 37 over the November futures contract. Average basis at the end of the week was 9 over the November futures contract. November 2020 soybean futures closed at $10.02, down 41 cents since last Friday. For the week, November 2020 soybean futures traded between $9.95 and $10.45. Nov/Jan and Nov/Nov future spreads were 4 and -54 cents. November/December soybean-to-corn price ratio was 2.75 at the end of the week. Downside price protection could be achieved by purchasing a $10.20 November 2020 Put Option which would cost 41 cents and set a $9.79 futures floor. In Tennessee, new crop soybean cash contracts ranged from $9.86 to $10.59. January 2021 soybean futures closed at $10.06, down 41 cents since last Friday. November 2021 soybean futures closed at $9.48, down 28 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 92,700 bales for the 2020/21 marketing year and 50,600 bales for the 2021/22 marketing year. Exports for the same time period were up 50% compared to last week at 281,900 bales. Upland cotton export sales were 57% 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 50%. Delta upland cotton spot price quotes for September 24 were 61.46 cents/lb (41-4-34) and 63.71 cents/lb (31-3-35). Adjusted World Price (AWP) decreased 0.43 cents to 50.45 cents.

Nationally, the Crop Progress report estimated cotton condition at 45% good-to-excellent and 27% poor-to-very poor; cotton bolls opening at 57% compared to 47% last week, 61% last year, and a 5-year average of 55%; and cotton harvested at 11% compared to 6% last week, 10% last year, and a 5-year average of 10%. In Tennessee, cotton condition was estimated at 64% good-to-excellent and 18% poor-to-very poor; cotton bolls opening at 50% compared to 29% last week, 63% last year, and a 5-year average of 67%; and cotton harvested at 1% compared to 4% last year and a 5-year average 4%. December 2020 cotton futures closed at 65.95, up 0.29 cents since last Friday. For the week, December 2020 cotton futures traded between 64.65 and 66.23 cents. Dec/Mar and Dec/Dec cotton futures spreads were 0.71 cent and 0.09 cents. Downside price protection could be obtained by purchasing a 66 cent December 2020 Put Option costing 1.98 cents establishing a 64.02 cent futures floor. March 2021 cotton futures closed at 66.66 cents, up 0.08 cents since last Friday. December 2021 cotton futures closed at 66.04 cents, up 0.07 cents since last Friday.

Wheat

Wheat net sales reported by exporters were up compared to last week with net sales of 12.9 million bushels for the 2020/21 marketing year. Exports for the same time period were down 17% from last week at 17.2 million bushels. Wheat export sales were 51% 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 52%.

Nationally the Crop Progress report estimated winter wheat planted at 20% compared to 10% last week, 18% last year, and a 5-year average of 19%; winter wheat emerged at 3% compared to 2% last year and 5-year average of 2%; and spring wheat harvested at 96% compared to 92% last week, 84% last year, and a 5-year average of 96%. In Tennessee winter wheat planted was estimated at 4% compared to 1% last week, 3% last year, and a 5-year average of 2%; and winter wheat emerged at 1%. In Tennessee, September 2020 wheat cash contracts ranged from $5.74 to $5.88. December 2020 wheat futures closed at $5.44, down 31 cents since last Friday. December 2020 wheat futures traded between $5.41 and $5.78 this week. December wheat-to-corn price ratio was 1.49. Dec/Mar and Dec/Jul future spreads were 7 and 12 cents. March 2021 wheat futures closed at $5.51, down 31 cents since last Friday. July 2021 wheat futures closed at $5.56, down 26 cents since last Friday. Downside price protection could be obtained by purchasing a $5.60 July 2021 Put Option costing 35 cents establishing a $5.25 futures floor.