AgWatch


As Exports Lag, Higher Domestic Stocks Weigh On Markets

DR. AARON SMITH

KNOXVILLE, TENN.
   Prices for grains and oilseeds were down across the board as low exports remain a major concern in grain markets. As of February 22, accumulated exports of corn, soybeans and wheat were 5 percent above, 25 percent below, and 15 percent below the five year average for this week in the marketing year. Similarly, total export commitments (accumulated exports plus outstanding sales) as a percent of total projected USDA marketing exports were: corn - 64 percent (5-year average of 71 percent), soybeans - 76 percent (5-year average of 89 percent), and wheat - 81 percent (5-year average of 94 percent). The longer exports lag projections the more worries about higher domestic stocks will weigh on markets.
   February was a rough month for corn, soybean, cotton, and wheat futures prices. December corn opened the month at $4.00 ¼, closed at $3.92, with a trading range of $3.91 ¼ to $4.04 ¼. November soybeans opened the month at $9.59 ¼, closed at $9.43 ¾, with a trading range of $9.38 ¾ to $9.69 ¼. December cotton opened the month at 74.34, closed at 73.28, with a trading range of 72.25 to 74.68. July wheat opened the month at $5.26 ½, closed at $4.66 ½, with a trading range of $4.64 ¾ to $5.35. Wheat had the largest declines in spite of the lowest number of winter wheat acres planted in the US since the early 1900s. Global stocks and export competition form the Black Sea region continue to depress wheat prices.
   This week the project prices (spring prices) for crop insurance in Tennessee were set for corn, cotton, and soybeans. Corn price was set at $4.00, up 4 cents compared to last year; cotton price was set at $0.73, down $0.03 cents compared to last year; and soybean price was set at $9.54, down $0.62 compared to last week. With projected prices set it is important to finalize crop insurance decisions prior to March 15. Working with a qualified crop insurance professional to analyze the products and options that best manage your operations risk is strongly advised.
   Corn
   Ethanol production for the week ending February 22 was 1.028 million barrels per day, down 32,000 from the previous week. Ethanol stocks were 23.709 million barrels, down 204,000 barrels. Corn net sales reported by exporters from February 15-21 were 48.8 million bushels for the 2018/19 marketing year and 4.7 million bushels for the 2019/20 marketing year. Exports for the same time period were 30.3 million bushels. Corn export sales and commitments were 64 percent of the USDA estimated total annual exports for the 2018/19 marketing year (September 1 to August 31) compared to a 5-year average of 71 percent. Across Tennessee, average corn basis (cash price-nearby futures price) weakened at Northwest Barge Points and Northwest Tennessee and strengthened at Memphis and Upper-middle Tennessee. Overall, basis for the week ranged from 1 under to 25 over the March futures contract with an average of 9 over the March futures at the end of the week. March 2019 corn futures closed at $3.64, down 11 cents since last Fri-day. For the week, March 2019 corn futures traded between $3.57 and $3.78. May 2019 corn futures closed at $3.73, down 11 cents since last Friday. Mar/May and Mar/Dec future spreads were 9 and 30 cents.
   In Tennessee, September 2019 corn cash forward contracts averaged $3.80 with a range of $3.53 to $3.95. December 2019 corn futures closed at $3.94, down 7 cents since last Friday. Downside price protection could be obtained by purchasing a $4.00 December 2019 Put Option costing 29 cents establishing a $3.71 futures floor.
   Soybeans
   Net sales reported by exporters were 80.7 million bushels for the 2018/19 marketing year and 0.007 million bushels for the 2019/20 marketing year. Exports for the same period were 83.4 million bushels. Soybean export sales and commitments were 76 percent of the USDA estimated total annual exports for the 2018/19 marketing year (September 1 to August 31), compared to a 5-year average of 89 percent. Average soybean basis strengthened or remained unchanged at Northwest Barge Points, Northwest, and Upper-middle Tennessee and weakened at Memphis. Basis ranged from 46 under to 6 over the March futures contract at elevators and barge points. Average basis at the end of the week was 23 under the March futures contract. March 2019 soybean futures closed at $8.99, down 11 cents since last Friday. For the week, March 2019 soybean futures traded between $8.88 and $9.21. March soybean-to-corn price ratio was 2.47 at the end of the week.   May 2019 soybean futures closed at $9.11, down 12 cents since last Fri-day. Mar/May and Mar/Nov future spreads were 12 and 46 cents.
   In Tennessee, October/November 2019 soybean cash contracts average $9.11 with a range of $8.79 to $9.36. November 2019 soybean futures closed at $9.45, down 9 cents since last Friday. Downside price protection could be achieved by purchasing a $9.60 November 2019 Put Option which would cost 56 cents and set a $9.04 futures floor. Nov/Dec 2019 soybean-to-corn price ratio was 2.40 at the end of the week.
   Cotton
   Net sales reported by exporters were 85,500 bales for the 2018/19 marketing year and 12,100 bales for the 2019/20 marketing year. Exports for the same time period were 345,700 bales. Upland cotton export sales were 86 percent of the USDA estimated total annual exports for the 2018/19 marketing year (August 1 to July 31), compared to a 5-year average of 85 percent. Delta upland cotton spot price quotes for February 28 were 68.32 cents/lb (41-4-34) and 70.07 cents/lb (31-3-35). Adjusted World Price (AWP) increased 0.87 cents to 62.67 cents. March 2019 cotton futures closed at 72.73, up 0.89 cents since last Friday. For the week, March 2019 cotton futures traded between 70.85 and 72.73 cents. Mar/May and Mar/Dec cotton futures spreads were 1.12 cents and 1.05 cents. May 2019 cotton futures closed at 73.85, up 0.84 cents since last Friday.
   December 2019 cotton futures closed at 73.78, up 0.27 cents since last Friday. Downside price protection could be obtained by purchasing a 74 cent December 2019 Put Option costing 4.41 cents establishing a 69.59 cent futures floor.
   Wheat
   Wheat net sales reported by exporters were 17.5 million bushels for the 2018/19 marketing year and 2.2 million bushels for the 2019/20 marketing year. Exports for the same time period were 24.5 million bushels. Wheat export sales were 81 percent of the USDA estimated total annual exports for the 2018/19 marketing year (June 1 to May 31), compared to a 5-year average of 94 percent. March 2019 wheat futures closed at $4.54, down 32 cents since last Friday. March 2019 wheat futures traded between $4.40 and $4.90 this week. March wheat-to-corn price ratio was 1.25. Mar/May and Mar/Jul future spreads were 3 cents and 9 cents. May 2019 wheat futures closed at $4.57, down 34 cents since last Friday.
   In Tennessee, June/July 2019 wheat cash contracts ranged from $4.58 to $5.08 for the week. July 2019 wheat futures closed at $4.63, down 32 cents since last Friday. Downside price protection could be obtained by purchasing a $4.70 July 2019 Put Option costing 32 cents establishing a $4.42 futures floor. ∆
   DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee

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