Weekly Crop Comments by Dr. Aaron Smith

Overview

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

On Thursday and Friday the USDA hosted its 97th annual Agricultural Outlook Forum. Overall the outlook was positive for row crop prices. The two major themes conveyed in the presentations (in addition to the positive price outlook) were: continuation of large purchases of grains, oilseeds, and cotton by China; and weather uncertainty, specifically the influence of La Nina on South American and US 2021 growing seasons and prevented planting returning to “normal”. 2019 and 2020 had historically large prevented planting acres, so for 2021 this will be a key factor in total US supply, as the current price incentive is to plant additional acres.

As part of the Forum, the USDA presented 2021 crop projections. Corn acres planted were projected at 92.0 million acres, yield at 179.5 bu/acre, production at 15.15 billion bushels; ethanol use at 5.2 billion bushels, exports at 2.65 billion bushels, and marketing year ending stocks at 1.552 billion bushels. Soybean acres planted were projected at 90 million acres, yield at 50.8 bu/acre, production at 4.525 billion bushels; domestic crush at 2.21 billion bushels, exports at 2.2 billion bushels, and marketing year ending stocks at 145 million bushels. Wheat acres planted were projected at 45 million acres, yield at 49.1 bu/acre, production at 1.827 billion bushels; food and seed use at 1.03 billion bushels, exports at 925 million bushels, and marketing year ending stocks at 698 million bushels. Cotton acres planted were projected at 12 million acres, yield at 840 lb/acre, production at 17.5 million bales; exports at 15.5 million bales, and marketing year ending stocks at 3.8 million bales.

2021/22 marketing year average national prices (compared to 2020/21) were projected at: corn $4.20 (down $0.10); cotton 75 cents (up 7 cents); soybeans $11.25 (up $0.10); and wheat $5.50 (up $0.50). Two takeaways from the USDA price projections: 1) the four row crops are projected to maintain and potentially improve marketing year average prices; and 2) the current projections suggest no PLC payments (sign up deadline for ARC/PLC is March 15).

The updated projections for the 2021 crops will continue to be refined as the year progresses, so these estimates should be interpreted cautiously. With that being said, projected ending stocks, stocks-to-use, and national marketing year average prices should provide optimism for the upcoming season --- which is better than the alternative.

Corn

Ethanol production for the week ending February 12 was 0.911 million barrels per day, down 26,000 barrels from the previous week. Ethanol stocks were 24.297 million barrels, up 0.501 million barrels compared to last week. Corn net sales reported by exporters for February 5-11 were down compared to last week with net sales of 39.3 million bushels for the 2020/21 marketing year and 7.2 million bushels for the 2021/22 marketing year. Exports for the same time period were down 11% from last week at 54.6 million bushels. Corn export sales and commitments were 89% 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 66%. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at Northwest, North-Central, West-Central, West, and Mississippi River elevators and barge points. Overall, basis for the week ranged from 5 over to 41 over, with an average of 25 over the March futures at elevators and barge points. March 2021 corn futures closed at $5.42, up 4 cents since last Friday. For the week, March 2021 corn futures traded between $5.38 and $5.55. Mar/May and Mar/Dec future spreads were -1 and -82 cents. May 2021 corn futures closed at $5.41, up 5 since last Friday.

December 2021 corn futures closed at $4.60, up 12 cents since last Friday. Downside price protection could be obtained by purchasing a $4.60 December 2021 Put Option costing 44 cents establishing a $4.16 futures floor.

Soybeans

Net sales reported by exporters were down compared to last week with net sales of 39.3 million bushels for the 2020/21 marketing year and 6.2 million bushels for the 2021/22 marketing year. Exports for the same period were down 55% compared to last week at 36.8 million bushels. Soybean export sales and commitments were 98% 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 81%. Across Tennessee, average soybean basis strengthened or remained unchanged at West-Central, West, North-Central, Northwest and Mississippi River elevators and barge points. Basis ranged from 3 under to 37 over the March futures contract. Average basis at the end of the week was 19 over the March futures contract. March 2021 soybean futures closed at $13.77, up 5 cents since last Friday. For the week, March 2021 soybean futures traded between $13.66 and $13.94. Mar/May and Mar/Nov future spreads were 3 and -181 cents. May 2021 soybean futures closed at $13.80, up 9 cents since last Friday. March 2021 soybean-to-corn price ratio was 2.54 at the end of the week.

November 2021 soybean futures closed at $11.96, up 23 cents since last Friday. Downside price protection could be achieved by purchasing a $12.00 November 2021 Put Option which would cost 90 cents and set an $11.10 futures floor.  Nov/Dec 2021 soybean-to-corn price ratio was 2.60 at the end of the week.

Cotton

Net sales reported by exporters were down compared to last week with net sales of 119,500 bales for the 2020/21 marketing year and 2,100 bales for the 2021/22 marketing year. Exports for the same time period were down 28% compared to last week at 311,800 bales. Upland cotton export sales were 92% 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 84%. Delta upland cotton spot price quotes for February 18 were 87.55 cents/lb (41-4-34) and 89.80 cents/lb (31-3-35). Adjusted World Price (AWP) increased 2.81 cents to 73.13 cents. March 2021 cotton futures closed at 88.95, up 1.68 cents since last Friday. For the week, March 2021 cotton futures traded between 87.3 and 89.36 cents. Mar/May and Mar/Dec cotton futures spreads were 1.53 cents and -3.45 cents. May 2021 cotton futures closed at 90.48 cents, up 1.82 cents since last Friday.

December 2021 cotton futures closed at 85.5 cents, up 1.61 cents since last Friday. Downside price protection could be obtained by purchasing an 86 cent December 2021 Put Option costing 7.43 cents establishing a 78.57 cent futures floor.

Wheat

Wheat net sales reported by exporters were down compared to last week with net sales of 14.7 million bushels for the 2020/21 marketing year and 7.9 million bushels for the 2021/22 marketing year. Exports for the same time period were down 14% from last week at 14 million bushels. Wheat export sales were 88% 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 90%. In Tennessee, spot wheat prices ranged from $6.74 to $6.93. March 2021 wheat futures closed at $6.50, up 14 cents since last Friday. March 2021 wheat futures traded between $6.38 and $6.69 this week. March wheat-to-corn price ratio was 1.20. Mar/May and Mar/Jul future spreads were 5 and -7 cents. May 2021 wheat futures closed at $6.55, up 14 cents since last Friday.

In Tennessee, new crop wheat cash contracts ranged from $6.24 to $6.74. July 2021 wheat futures closed at $6.43, up 13 cents since last Friday. Downside price protection could be obtained by purchasing a $6.50 July 2021 Put Option costing 49 cents establishing a $6.01 futures floor.