Looking Forward There Remains A Great Deal Of Uncertainty With The 2022 Crop And Prices
DR. AARON SMITH
KNOXVILLE, TENNESSEE
On June 30th the USDA released the June Acreage and Grain Stocks reports. Nationally, comparing estimated June 2022 to last year’s final planted acreage estimates: corn was down 3.4 million acres, soybeans up 1.1 million acres, wheat up 0.4 million acres, and cotton up 1.2 million acres. Compared to USDA’s March Prospective Plantings report, the June Acreage Report indicated an increase of 431,000 acres of corn, soybean acres decreased 2.63 million acres, wheat decreased 259,000 acres, and cotton increased 264,000 acres. In Tennessee, corn, soybean, wheat, and cotton acres planted were estimated at 970,000, 1.8 million, 420,000, and 320,000.
Year-over-year, corn stocks were up 5.7 percent and implied disbursement from March 1 to June 1 was down 4.9 percent; soybean stocks were up 26.3 percent and implied disbursement from March 1 to June 1 was up 21.1 percent; and wheat stocks were down 21.9 percent and implied disbursement from March 1 to June 1 was down 21.8 percent.
Recent market declines can be attributed to global economic concerns, improved weather forecasts, higher global production estimates, and a reduction in long speculative money in futures markets. Looking forward there remains a great deal of uncertainty with the 2022 crop and prices. However, it is likely that the preharvest highs for corn, soybeans, cotton, and wheat have already been set. As such, producers should evaluate the amount of projected production that is unpriced (or does not have downside price protection), storage availability, and investment in the crop growing.
Crop insurance provides some protection and will be an important risk management and marketing consideration moving forward – particularly for farms that are experiencing drought. The harvest crop insurance price for wheat was set at $10.11 compared to a current (July 8) futures price of $8.79. The projected crop insurance price for corn – $5.90 – is below the current harvest futures price of $6.23. Cotton harvest futures are 8 cents below the crop insurance price of $1.03 and soybean futures are $0.37 below the crop insurance price of $14.33.
Corn
Ethanol production for the week ending July 1 was 1.044 million barrels per day, down 7,000 from the previous week. Ethanol stocks were 23.49 million barrels, up 744,000 compared to last week. Corn net sales reported by exporters for June 24-30, 2022, were down compared to last week with net sales cancellations of 2.6 million bushels for the 2021/22 marketing year – a marketing year low – and net sales of 4.3 million bushels for the 2022/23 marketing year. Exports for the same period were down 18 percent from last week at 40.4 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 101 percent.
Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at West, West-Central, North- Central, and Mississippi River elevators and barge points and weakened at Northwest elevators and barge points. Over-all, basis for the week ranged from 25 to 75 over, with an average of 55 over the September futures at elevators and barge points. September 2022 corn futures closed at $6.33, up 14 cents since last Friday. For the week, September 2022 corn futures traded between $5.82 and $6.35. Sep/Dec and Sep/Mar future spreads were -10 and -5 cents.
Nationally, the Crop Progress report estimated corn condition at 64 percent good-to-excellent and 9 percent poor-to-very-poor; and corn silking at 7 percent compared to 4 percent last week, 9 percent last year, and a 5-year average of 11 percent. In Tennessee, corn condition was estimated at 52 percent good-to-excellent and 18 percent poor-to- very poor; corn silking at 44 percent compared to 24 percent last week, 40 percent last year, and a 5-year average of 53 percent; and corn dough at 2 percent compared to 5 percent last year and a 5-year average of 7 percent. New crop cash prices at elevators and barge points ranged from $5.53 to $6.08. December 2022 corn futures closed at $6.23, up 16 cents since last Friday. Downside price protection could be obtained by purchasing a $6.30 December 2022 Put Option costing 63 cents establishing a $5.67 futures floor. March 2023 corn futures closed at $6.28, up 15 cents since last Friday.
Soybeans
Net sales reported by exporters were up compared to last week with net sales cancellations of 5.9 million bushels for the 2021/22 marketing year and net sales of 8.8 million bushels for the 2022/23 marketing year. Exports for the same period were down 3 percent compared to last week at 18.6 million bushels. Soybean export sales and commitments were 101 percent of the USDA estimated total annual exports for the 2021/22 marketing year (September 1 to August 31), compared to the previous 5-year average of 102 percent. Across Tennessee, average soybean basis weakened or remained unchanged at West, Northwest, West- Central, North-Central, and Mississippi River elevators and barge points. Basis ranged from 53 to 123 over, with an average basis of 84 over the August futures contract. August 2022 soybean futures closed at $15.13, up 4 cents since last Friday. For the week, August 2022 soybean futures traded between $14.24 and $15.16. Aug/Sep and Aug/Nov future spreads were -99 and -117 cents. September 2022 soybean-to-corn price ratio was 2.23 at the end of the week. September 2022 soybean futures closed at $14.14, down 2 cents since last Friday.
Nationally, the Crop Progress report estimated soybean condition at 63 percent good-to-excellent and 9 percent poor-to-very poor; soybeans emerged at 96 percent compared to 91 percent last week, 98 percent last year, and a 5-year average of 96 percent; soybeans blooming at 16 percent compared to 7 percent last week, 27 percent last year, and a 5- year average of 22 percent; and soybeans setting pods at 3 percent compared to 3 percent last year and a 5-year average of 3 percent. In Tennessee, soybean condition was estimated at 48 percent good-to- excellent and 18 percent poor-to-very poor; soybeans planted at 97 percent compared to 93 percent last week, 95 percent last year, and a 5-year average of 96 percent; soybeans emerged at 91 percent compared to 83 percent last week, 89 percent last year, and a 5-year average of 89 percent; soybeans blooming at 23 percent compared to 12 percent last week, 16 percent last year, and a 5-year average of 21 percent; and soybean setting pods 1 percent compared to 3 percent last year and a 5-year average of 2 percent. Nov/Dec 2022 soybean-to-corn price ratio was 2.24 at the end of the week. New crop cash soybean prices at elevators and barge points ranged from $12.89 to $13.95. November 2022 soybean futures closed at $13.96, up 1 cent since last Friday.
Downside price protection could be achieved by purchasing a $14.00 November 2022 Put Option which would cost 85 cents and set a $13.15 futures floor.
Cotton
Net sales reported by exporters were up compared to last week with net sales of 37,400 bales for the 2021/22 marketing year and 381,900 bales for the 2022/23 marketing year. Exports for the same period were up 4 percent compared to last week at 377,800 bales. Upland cotton export sales were 113 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 112 percent. Delta upland cotton spot price quotes for July 7 were 108.82 cents/lb (41-4-34) and 111.07 cents/lb (31-3-35). Adjusted world price (AWP) was down 3.46 cents at 113.37 cents.
Nationally, the Crop Progress report estimated cotton condition at 36 percent good-to-excellent and 31 percent poor-to-very poor; cotton squaring at 44 percent compared to 33 percent last week, 42 percent last year, and a 5-year average of 44 percent; and cotton setting bolls at 13 percent compared to 8 percent last week, 10 percent last year, and a 5-year average of 12 percent. In Tennessee, cotton condition was estimated at 48 percent good-to-excellent and 26 percent poor-to-very poor; cotton squaring at 43 percent compared to 33 percent last week, 44 percent last year, and a 5-year average of 54 percent; and cotton setting bolls at 10 percent compared to 3 percent last week, 3 percent last year, and a 5-year average of 8 percent.
December 2022 cotton futures closed at 95.63 cents, down 1.85 cents since last Friday. For the week, December 2022 cotton futures traded between 88.1 and 97.47 cents. Dec/Mar and Dec/May cotton futures spreads were -3.82 cents and -5.9 cents. Downside price protection could be obtained by purchasing a 96 cent December 2022 Put Option costing 11.59 cents establishing an 84.41 cent futures floor. March 2023 cotton futures closed at 91.81 cents, down 1.56 cents since last Friday. May 2023 cotton futures closed at 89.73 cents, down 1.17 cents since last Friday.
Wheat
Wheat net sales reported by exporters were down compared to last week at 10.5 million bushels for the 2022/23 marketing year. Exports for the week were up 19 percent compared to last week at 10.5 million bushels. Wheat export sales were 29 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 31 percent.
Nationally, the Crop Progress report estimated winter wheat condition at 31 percent good-to-excellent and 43 percent poor-to-very poor; winter wheat harvested at 54 percent compared to 41 percent last week, 43 percent last year, and a 5-year average of 48 percent; spring wheat condition at 66 percent good-to-excellent and 8 percent poor-to-very poor; and spring wheat headed at 20 percent compared to 8 percent last week, 66 percent last year, and a 5-year average of 57 percent. In Tennessee, winter wheat harvested was estimated at 97 percent compared to 81 percent last week, 92 percent last year, and a 5-year average of 94 percent. Wheat cash prices at elevators and barge points ranged from $7.14 to $7.98. September 2022 wheat futures closed at $8.91, up 45 cents since last Friday. September 2022 wheat futures traded between $7.85 and $8.94 this week. September wheat-to-corn price ratio was 1.41. Sep/Dec and Sep/Jul future spreads were 15 and 15 cents.
Downside price protection could be obtained by purchasing an $8.95 September 2022 Put Option costing 63 cents establishing an $8.32 futures floor. December 2022 wheat futures closed at $9.06, up 44 cents since last Friday. July 2023 wheat futures closed at $9.06, up 31 cents since last Friday. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee