AgWatch


Global Corn Stocks, U.S. Production Down For 2017-18

DR. AARON SMITH

KNOXVILLE, TENN.
   Corn was up; soybeans and wheat were down; and cotton was mixed for the week. On May 10, the USDA released its May WASDE report. The report provided revised estimates for the 2016/17 marketing year and its first projections for the 2017/18 marketing year. A complete analysis of the report for corn, soybeans, cotton, and wheat and the estimated changes in Tennessee enterprise profitability can be accessed on our monthly outlook page.
   For corn, the report contained both good and bad news. The good news, for improved price prospects, was: U.S. production was projected down 1.083 billion bushels for the upcoming marketing year; global stocks were estimated down 1.127 billion bushels for the 2017/18 marketing year. The decrease in U.S. production is contingent upon a 3.9 bu/acre reduction in yield and a 4.3 million acre reduction in corn harvested area. Whether these reductions materialize or not will depend on planting and growing conditions. The projected reduction in global stocks is largely driven by reduced U.S. production and moderate growth in global demand (approximately 343 million bushels greater than 2016/17). The bad news is domestic ending stocks are still projected to be in excess of 2 billion bushels and exports are projected to take a step back (down 350 million bushels from 2016/17).
   For soybeans, U.S. production was projected down from the current marketing year as an increase in harvested acreage, of 5.9 million acres, is more than offset by a 4.1 bu/acre projected yield reduction. Global demand is projected to increase 475 million bushels with an additional 100 million bushels expected to be exported from the U.S. (2.150 billion total for the 2017/18 marketing year). South American production is projected to decrease 202 million bushels from this year’s record. China’s soybean production is estimated to increase 33 million bushels.
For cotton, domestic production was estimated up 2.03 million bales due to an increase of 1.87 million harvested acres. Average U.S. yield was estimated at 810 lbs/acre, down 57 lbs/acre.  Global cotton production is estimated up 7.34 million bales and use is estimated up 2.55 million bales. 2017/18 marketing year use is projected to exceed production resulting in ending stocks decreasing 2.38 million bales to 87.14.
   For wheat, U.S. production is projected down 490 million bushels due to reductions in harvested acreage (down 5.4 million acres) and yield (down 5.4 bu/acre). In spite of the decrease in U.S. production global wheat stocks are projected to increase 109 million bushels to a new all-time high of 9.491 billion bushels. Global wheat production (27.111 billion bushels) continues to exceed use (27.003 billion bushels).
   Corn
   July 2017 corn futures closed at $3.71 up 1 cent since last Friday. For the week, July 2017 corn futures traded between $3.65 and $3.74. Across Tennessee, average basis (cash price-nearby futures price) strengthened or remained unchanged at Memphis, Northwest Barge Points, Northwest, and Lower-middle Tennessee and weakened at Upper-middle Tennessee. Overall, basis for the week ranged from 13 under to 25 over the July futures contract with an average of 3 over at the end of the week. Corn net sales reported by exporters from April 28-May 4 were below expectations with net sales of 10.9 million bushels for the 2016/17 marketing year and net sales cancellations of 2.2 million bushels for the 2017/18 marketing year. Exports for the same time period were down from last week at 28.5 million bushels. Corn export sales and commitments were 92 percent of the USDA estimated total annual exports for the 2016/17 marketing year (September 1 to August 31) compared to a 5-year average of 91 percent. Ethanol production for the week ending May 5 was 1.006 million barrels per day up 20,000 from last week. Ethanol stocks were 23.055 million barrels, down 158,000 barrels. Jul/Sep and Jul/Dec future spreads were 8 and 17 cents, respectively. September 2017 corn futures closed at $3.79 up 1 cent since last Friday.
   Nationally, the Crop Progress report estimated corn planted at 47 percent compared to 34 percent last week, 61 percent last year, and a 5-year average of 52 percent; and corn emerged at 15 percent compared to 9 percent last week, 25 percent last year, and a 5-year average of 19 percent. In Tennessee, the Crop Progress report estimated corn planted at 77 percent compared to 66 percent last week, 88 percent last year, and a 5-year average of 78 percent; and corn emerged at 61 percent compared to 40 percent last week, 66 percent last year, and a 5-year average of 53 percent. In Tennessee, September 2017 cash forward contracts averaged $3.67 with a range of $3.40 to $3.91. December 2017 corn futures closed at $3.88 the same as last Friday. Downside price protection could be obtained by purchasing a $3.90 December 2017 Put Option costing 27 cents establishing a $3.63 futures floor.
   Soybeans 
   July 2017 soybean futures closed at $9.63 down 10 cents since last Friday. For the week, July 2017 soybean futures traded between $9.60 and $9.89. Average soybean basis strengthened at Memphis and weakened at Northwest Barge Points, Northwest, Lower-middle, and Upper-middle Tennessee. Basis ranged from 45 under to 12 over the July futures contract at elevators and barge points. Average basis at the end of the week was 10 under the July futures contract. Net sales reported by exporters were within expectations with net sales of 14.0 million bushels for the 2016/17 marketing year and 2.6 million bushels for the 2017/18 marketing year. Exports for the same period were down from last week at 12.7 million bushels. Soybean export sales and commitments were 102 percent of the USDA estimated total annual exports for the 2016/17 marketing year (September 1 to August 31), compared to a 5-year average of 97 percent. July soybean-to-corn futures price ratio was 2.60 at the end of the week. Jul/Aug and Jul/Nov future spreads were 1 cent and -4 cents, respectively. August 2017 soybean futures closed at $9.64 down 9 cents since last Friday.
   Nationally, the Crop Progress report estimated soybeans planted at 14 percent compared to 10 percent last week, 21 percent last year, and a 5-year average of 17 percent. In Tennessee, the Crop Progress report estimated soybeans planted at 8 percent compared to 6 percent last week, 21 percent last year, and a 5-year average of 14 percent. In Tennessee, October / November 2017 soybean cash contracts average $9.55 with a range of $9.21 to $9.76.  November/December 2017 soybean-to-corn price ratio was 2.47 at the end of the week. November 2017 soybean futures closed at $9.59 down 7 cents since last Friday. Downside price protection could be achieved by purchasing a $9.60 November 2017 Put Option which would cost 46 cents and set a $9.14 futures floor.
   Cotton 
   July 2017 cotton futures closed at 82.18 cents up 4.41 cents since last Friday. For the week, July 2017 cotton futures traded between 76.17 and 82.18 cents. Delta upland cotton spot price quotes for May 11 were 77.68 cents/lb (41-4-34) and 78.93 cents/lb (31-3-35). Adjusted world price (AWP) decreased 1.06 cents to 68.69 cents per pound. Net sales reported by exporters were down from last week with net sales of 137,100 bales for the 2016/17 marketing year and 24,700 bales for the 2017/18 marketing year. Exports for the same period were up from last week at 412,800 bales. Upland cotton export sales were 100 percent of the USDA estimated total annual exports for the 2016/17 marketing year (August 1 to July 31), compared to a 5-year average of 98 percent. October 2017 cotton futures closed at 77.08 up 1.42 cents since last Friday. Jul/Oct and Jul/Dec cotton futures spreads were -5.1cents and -8.91 cents, respectively.
   Nationally, the Crop Progress report estimated cotton planted at 21 percent compared to 14 percent last week, 25 percent last year, and a 5-year average of 25 percent. In Tennessee, cotton planted was estimated at 7 percent compared to 4 percent last week, 24 percent last year, and a 5-year average of 17 percent. December 2017 cotton futures closed at 73.27 down 0.85 cents since last Friday. Downside price protection could be obtained by purchasing a 74 cent December 2017 Put Option costing 4.45 cents establishing a 69.55 cent futures floor.
   Wheat
   July 2017 wheat futures closed at $4.32 down 10 cents since last Friday. July 2017 wheat futures traded between $4.26 and $4.41 this week. July wheat-to-corn price ratio was 1.16.Wheat net sales reported by exporters were below expectations with net sales reductions of 0.9 million bushels for the 2016/17 marketing year and net sales of 10.0 million bushels for the 2017/18 marketing year. Exports for the week were down from last week at 21.9 million bushels. Wheat export sales were 100 percent of the USDA estimated total annual exports for the 2016/17 marketing year (June 1 to May 31), compared to a 5-year average of 103 percent. In Memphis, old crop cash wheat ranged from $4.44 to $4.49. Jul/Sep and Jul/Dec future spreads were 14 cents and 34 cents, respectively. In Tennessee, June/July 2017 cash wheat ranged from $4.10 to $4.54. September 2017 wheat futures closed at $4.46 down 10 cents from last Friday.
   Nationally, the Crop Progress report estimated winter wheat condition at 53 percent good-to-excellent and 15 percent poor-to-very-poor; winter wheat headed at 50 percent compared to 42 percent last week, 55 percent last year, and a 5-year average of 46 percent; spring wheat planted at 54 percent compared to 31 percent last week, 74 percent last year, and a 5-year average of 60 percent; and spring wheat emerged at 21 percent compared to 9 percent last week, 37 percent last year, and a 5-year average of 29 percent. In Tennessee, winter wheat condition was reported at 61 percent good-to-excellent and 7 percent poor-to-very poor; and winter wheat headed at 95 percent compared to 86 percent last week, 84 percent last year, and a 5-year average of 71 percent. July 2018 wheat futures closed at $5.01 down 9 cents from last Friday. Downside price protection could be obtained by purchasing a $5.10 July 2018 Put Option costing 45 cents establishing a $4.65 futures floor. ∆ 
   DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee

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