AgWatch


Nationally, The Crop Progress Report Estimated Soybeans Harvested At 85 Percent

DR. AARON SMITH

KNOXVILLE, TENN.
   The November USDA Crop Production report estimated national average corn yield at 167 bu/ acre down 1.4 bu/acre compared to the previous month. In Tennessee, average corn yield was reduced 1 bu/acre to 174 bu/acre. Compared to 30 year linear trend line yields, 2019 Tennessee average corn yield is 16.8 bu/acre higher. Comparatively, the US trend line yield is 4.3 bu/acre lower than trend line. If realized the Tennessee average yield would be an all-time record, exceeding the previous high of 171 bu/acre in 2017. Due to yield variation and acres prevented from planting, there is a great deal of variation in basis across the Corn Belt and Mid-south. Areas with low production in 2019 will need to bring in corn to maintain feedstocks and ethanol faculties. Producers with storage are well positioned to take advantage of higher than typical basis offers.
   Soybean yields exhibit a similar pattern. U.S. and Tennessee yields are projected at 46.9 and 47 bu/acre, 1.0 bu/acre below and 2.8 bu/acre above the 30 year trend lines. Soybeans in Tennessee are largely produced for the export market, due to proximity to the Mississippi River and lack of in-state crushing facilities. As such, fluctuations in cash price offerings, especially in west Tennessee are directly affected by export sales. Currently, export sales have strengthened and have resulted in a strengthening basis at elevators and barge points.
Projected upland cotton yields show a divergence in U.S. and Tennessee yields. U.S. and Tennessee yields are projected at 784 and 1,116 lb/acre, 76 lb/acre below and 75 lb/acre above the 30 year trend line yields. If realized, the Tennessee average yield would slightly exceed the all-time record of 1,104 lb/acre in 2016. The wet cold conditions may affect yield estimates as the USDA’s data was collected before the recent cold wet weather.
   A quote in a DTN article by Chris Clayton recently caught my eye – “While President Donald Trump trying to line up a meeting with Xi (President of China), Bolsonaro (President of Brazil) has met with Xi twice in the last month.” This should give all agricultural producers, particularly cotton and soybean producers, cause for concern. While a trade deal between the U.S. and China may still occur, the continuation of strong export competition from Brazil for China’s agricultural imports remains a serious concern if U.S. agriculture is to recoup long-term market share lost due to the trade dispute.
   Corn
   Ethanol production for the week ending November 8 was 1.030 million barrels per day, up 16,000 from the previous week. Ethanol stocks were 20.985 million barrels, down 889 million barrels compare to last week. Corn net sales reported by exporters for November 1-7 were up from last week with net sales of 22.9 million bushels for the 2019/20 marketing year. Exports for the same time period were up 90 percent from last week at 23.7 million bushels. Corn export sales and commitments were 27 percent of the USDA estimated total annual exports for the 2019/20 marketing year (September 1 to August 31) compared to the previous 5-year average of 41 percent. Nationally, the Crop Progress report estimated corn harvested at 66 percent compared to 52 percent last week, 83 percent last year, and a 5-year average of 85 percent. In Tennessee, the Crop Progress report corn harvested at 100 percent compared to 99 percent last week, 98 percent last year, and a 5-year average of 99 percent. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened at Memphis, Northwest Barge Points, Upper-middle, and Northwest Tennessee. Overall, basis for the week ranged from 38 under to 25 over with an average of 8 over the December futures at elevators and barge points. December 2019 corn futures closed at $3.71, down 6 cents since last Friday. For the week, December 2019 corn futures traded between $3.70 and $3.78.
   Dec/Mar and Dec/Dec future spreads were 9 and 24 cents. In Tennessee, January corn cash contracts averaged $3.98 with a range of $3.83 to $4.06. March 2020 corn futures closed at $3.80, down 6 cents since last Friday. December 2020 corn futures closed at $3.95, down 6 cents since last Friday. Downside price protection could be obtained by purchasing a $4.00 December 2020 Put Option costing 27 cents establishing a $3.73 futures floor.
   Soybeans
   Net sales reported by exporters were down compared to last week with net sales of 46 million bushels for the 2019/20 marketing year and 0.1 million bushels for the 2020/21 marketing year. Exports for the same period were down 18 percent compared to last week at 46.8 million bushels. Soybean export sales and commitments were 46 percent of the USDA estimated total annual exports for the 2019/20 marketing year (September 1 to August 31), compared to the previous 5-year average of 61 percent. Nationally, the Crop Progress report estimated soybeans harvested at 85 percent compared to 75 percent last week, 87 percent last year, and a 5-year average of 92 percent. In Tennessee, the Crop Progress report estimated soybeans harvested at 80 percent compared to 75 percent last week, 71 percent last year, and a 5-year average of 79 percent.     Average soybean basis strengthened at Memphis, Northwest Barge Points, Northwest, and Upper-middle Tennessee. Basis ranged from 36 under to 26 over the January futures contract at elevators and barge points. Average basis at the end of the week was 4 over the January futures contract. January 2020 soybean futures closed at $9.18, down 13 cents since last Friday. For the week, January 2020 soybean futures traded between $9.11 and $9.29. January/December 2019 soybean-to-corn price ratio was 2.47 at the end of the week.
   Jan/Mar and Jan/Nov future spreads were 12 and 35 cents. March 2020 soybean futures closed at $9.30, down 14 cents since last Friday. In Tennessee, January 2020 cash contracts ranged from $9.10 to $9.40. Nov/Dec 2020 soybean-to-corn price ratio was 2.41 at the end of the week. November 2020 soybean futures closed at $9.53, down 14 cents since last Friday. Downside price protection could be achieved by purchasing a $9.60 November 2020 Put Option which would cost 52 cents and set a $9.08 futures floor.
   Cotton
   Net sales reported by exporters were up compared to last week with net sales of 345,100 bales for the 2019/20 marketing year and 1,100 bales for the 2020/21 marketing year. Exports for the same time period were down 3 percent compared to last week at 126,200 bales. Upland cotton export sales were 64 percent of the USDA estimated total annual exports for the 2019/20 marketing year (August 1 to July 31), compared to the previous 5-year average of 57 percent. Nationally, the Crop Progress report estimated cotton harvested at 62 percent compared to 53 percent last week, 53 percent last year, and a 5-year average of 59 percent. In Tennessee, the Crop Progress report estimated cotton harvested at 73 percent compared to 67 last week, 80 percent last year, and a 5-year average of 75 percent. Delta upland cotton spot price quotes for November 14 were 63.27 cents/lb (41-4-34) and 65.52 cents/lb (31-3-35). Adjusted World Price (AWP) increased 0.43 cents to 57.06 cents. December 2019 cotton futures closed at 64.86, up 0.14 cents since last Friday. For the week, December 2019 cotton futures traded between 63.73 and 65 cents.
   Dec/Mar and Dec/Dec cotton futures spreads were 1.83 cents and 3.95 cents. March 2020 cotton futures closed at 66.69, up 0.12 cents since last Friday. December 2020 cotton futures closed at 68.81, up 0.22 cents since last Friday. Downside price protection could be obtained by purchasing a 69 cent December 2020 Put Option costing 4.12 cents establishing a 64.88 cent futures floor.
   Wheat
   Nationally, the Crop Progress report estimated winter wheat condition at 54 percent good-to-excellent and 13 percent poor-to-very poor; winter wheat planted at 92 percent compared to 89 percent last week, 88 percent last year, and a 5-year average of 92 percent; and winter wheat emerged at 78 percent compared to 71 percent last week, 76 percent last year, and a 5-year average of 81 percent. In Tennessee, winter wheat condition was estimated at 64 percent good-to-excellent and 8 percent poor-to-very poor; winter wheat planted was estimated at 68 percent compared to 58 percent last week, 66 percent last year, and a 5-year average of 75 percent; and winter wheat emerged at 48 percent compared to 36 percent last week, 47 percent last year, and a 5-year average of 51 percent. Wheat net sales reported by exporters were down compared to last week with net sales of 8.8 million bushels for the 2019/20 marketing year. Exports for the same time period were up 11 percent from last week at 16.7 million bushels. Wheat export sales were 59 percent of the USDA estimated total annual exports for the 2019/20 marketing year (June 1 to May 31), compared to the previous 5-year average of 67 percent. In Tennessee, November 2019 wheat cash contracts ranged from $5.14 to $5.58 for the week. December 2019 wheat futures closed at $5.02, down 8 cents since last Friday. December 2019 wheat futures traded between $5.01 and $5.17 this week. December wheat-to-corn price ratio was 1.35.
   Dec/Mar and Dec/Jul future spreads were 4 and 12 cents. March 2020 wheat futures closed at $5.06, down 8 cents since last Fri-day. March wheat-to-corn price ratio was 1.33. In Memphis, June/July 2020 cash contracts ranged from $5.24 to $5.35. July 2020 wheat futures closed at $5.14, down 10 cents since last Friday. Downside price protection could be obtained by purchasing a $5.20 July 2020 Put Option costing 23 cents establishing a $4.97 futures floor. ∆
   DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee

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