December 2021 Corn Futures Closed At $5.77

DR. AARON SMITH

KNOXVILLE, TENNESSEE

   The USDA World Agricultural Supply and Demand Estimates (WASDE) report provided support for soybean prices this week. National average yield was lowered 0.3 bu/acre to 51.2, resulting in a 23-million-bushel reduction in production. Exports were reduced 40 million bushels to 2.05 billion or 46 percent of 2021 projected production. Exports will be key moving forward as the size and duration of U.S. soybean purchases by China, before switching to Brazil, will be an important determinant for prices this winter. Futures prices jumped over 20 cents following the WASDE report release and followed through with another 20-cent increase at the end of the week due to strong export sales data.

   Corn also closed up (about 3 cents) on November 9 when the WASDE report was released, however this can likely be attributed to prices being pulled higher by soybeans. National average yield was increased 0.5 bu/acre to 177, which would break the 2017 record yield of 176.6 bu/acre. The 43 million bushel increase in production was offset by a 50 million bushel increase in ethanol use. US ending stocks declined 7 million bushels to 1.493 billion. Stocks-to-use is now projected at 10 percent.

   U.S. cotton production was increased 200,000 bales to 18.2 million bales, due to an increase in national average yield of 9 lb./acre to 880 lb./acre. Ending stocks increased 200,000 bales as exports and domestic use were left unchanged. Foreign cotton stocks were decreased 400,000 bales, driven by an increase in global use of 700,000 bales compared to last month. March cotton futures have traded sideways near 120 cents for 10 trading days. Will prices have another leg up or will they decline?

   Corn

   Ethanol production for the week ending November 5 was 1.107 million barrels per day, down 68,000 from the previous week. Ethanol stocks were 20.286 million barrels, up 0.157 million compared to last week.  Corn net sales reported by exporters for October 29-November 4, 2021, were down compared to last week with net sales of 42.0 million bushels for the 2021/22 marketing year and net sales cancellations of 0.1 million bushels. Exports for the same period were down 4 percent from last week at 28.3 million bushels. Corn export sales and commitments were 51 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 42 percent. Nationally, this week’s Crop Progress report estimated corn harvested at 84 percent compared to 74 percent last week, 90 percent last year, and a 5-year average of 78 percent.  In Tennessee, corn harvested was estimated at 94 percent compared to 91 percent last week, 97 percent last year, and a 5-year average of 98 percent. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at Northwest, West, North-Central, and Mississippi River; and weakened at West-Central elevators and barge points. Overall, basis for the week ranged from even to 36 under, with an average of 16 under the December futures at elevators and barge points. December 2021 corn futures closed at $5.77, up 24 cents since last Friday. For the week, December 2021 corn futures traded between $5.47 and $5.82. In Tennessee, new crop cash corn prices at elevators and barge points ranged from $5.15 to $5.94.

   Dec/Mar and Dec/May future spreads were 8 and 11 cents. March 2022 corn futures closed at $5.85, up 21 cents since last Friday. May 2022 corn futures closed at $5.88, up 21 cents since last Friday. December 2022 corn futures closed at $5.48, up 8 cents since last Friday.  Downside price protection could be obtained by purchasing a $5.50 December 2022 Put Option costing 53 cents establishing a $4.97 futures floor.

   Soybeans

   Net sales reported by exporters were down compared to last week with net sales of 47.4 million bushels for the 2021/22 marketing year and 1.1 million bushels for the 2022/23 marketing year. Exports for the same period were up 40 percent compared to last week at 136.0 million bushels. Soybean export sales and commitments were 60 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 61 percent. Nationally, this week’s Crop Progress report estimated soybeans harvested at 87 percent compared to 79 percent last week, 91 percent last year, and a 5-year average of 88 percent. In Tennessee, soybeans harvested were estimated at 66 percent compared to 55 percent last week, 69 percent last year, and a 5-year average of 76 percent. 

   Across Tennessee, average soybean basis strengthened at Northwest, West, West-Central, and Mississippi River; and weakened at North- Central elevators and barge points. Basis ranged from 2 over to 50 under, with an average basis, at the end of the week, of 17 under the January futures contract. January 2022 soybean futures closed at $12.44, up 39 cents since last Friday. For the week, January 2022 soybean futures traded between $11.81 and $12.49. Jan/Dec 2021 soybean- to-corn price ratio was 2.16 at the end of the week.

   Jan/Mar and Jan/Nov future spreads were 12 and -4 cents. March 2022 soybean-to-corn price ratio was 2.15 at the end of the week. March 2022 soybean futures closed at $12.56, up 39 cents since last Friday.  November 2022 soybean futures closed at $12.40, up 30 cents since last Friday. Downside price protection could be achieved by purchasing a $12.60 November 2022 Put Option which would cost 94 cents and set an $11.66 futures floor.

   Cotton

   Net sales reported by exporters were down compared to last week with net sales of 128,000 bales for the 2021/22 marketing year and 11,600 for the 2022/23 marketing year. Exports for the same period were down 38 percent compared to last week at 87,900 bales. Upland cotton export sales were 59 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 61 percent. Delta upland cotton spot price quotes for November 10 were 116.68 cents/lb. (41-4-34) and 118.93 cents/lb. (31-3-35). Adjusted world price increased 0.57 cents to 101.56 cents.

   Nationally, this week’s Crop Progress report estimated cotton bolls opening at 98 percent compared to 94 percent last week, 100 percent last year, and a 5-year average of 98 percent; and cotton harvested at 55 percent compared to 45 percent last week, 60 percent last year, and a 5-year average of 57 percent. In Tennessee, cotton condition was estimated at 73 percent good-to-excellent and 8 percent poor-to-very poor; cotton bolls opening at 99 percent compared to 94 percent last week, 100 percent last year, and a 5-year average of 100 percent; and cotton harvested at 54 percent compared to 42 percent last week, 62 percent last year, and a 5-year average of 74 percent. December 2021 cotton futures closed at 117.69 cents, up 0.82 cents since last Friday. For the week, December 2021 cotton futures traded between 116.2 and 120.75 cents. Dec/Mar and Dec/May cotton futures spreads were -2.67 cents and -4.34 cents. March 2022 cotton futures closed at 115.08 cents, up 1.84 cents since last Friday. May 2022 cotton futures closed at 113.35 cents, up 1.66 cents since last Friday. December 2022 cotton futures closed at 91.65 cents, up 0.4 cents since last Friday.  Downside price protection could be obtained by purchasing a 92 cent December 2022 Put Option costing 9.39 cents establishing an 82.61 cent futures floor.

   Wheat

   Wheat net sales reported by exporters were down compared to last week with net sales of 10.5 million bushels for the 2021/22 marketing year and 0.8 million bushels for the 2022/23 marketing year. Exports for the same period were up 98 percent from last week at 9.9 million bushels. Wheat export sales were 57 percent of the USDA estimated total annual exports for the 2021/22 marketing year (June 1 to May 31), compared to the previous 5-year average of 65 percent. December 2021 wheat futures closed at $8.17, up 51 cents since last Friday.  December 2021 wheat futures traded between $7.62 and $8.26 this week.  December wheat-tocorn price ratio was 1.42. Dec/Mar and Dec/Jul future spreads were 11 and 1 cents. March 2022 wheat futures closed at $8.28, up 49 cents since last Friday. March wheat-to-corn futures price ratio was 1.42.

   Nationally, the Crop Progress report estimated winter wheat condition at 45 percent good-to-excellent and 22 percent poor-to-very poor; winter wheat planted at 91 percent compared to 87 percent last week, 92 percent last year, and a 5-year average of 91 percent; and winter wheat emerged at 74 percent compared to 67 percent last week, 78 percent last year, and a 5-year average of 77 percent. In Tennessee, winter wheat condition was estimated at 85 percent good-to-excellent and 3 percent poor-to-very poor; winter wheat planted at 71 percent compared to 59 percent last week, 76 percent last year, and a 5-year average of 71 percent; and winter wheat emerged at 50 percent compared to 37 percent last week, 58 percent last year, and a 5-year average of 48 percent. New crop wheat cash prices at elevators and barge points ranged from $7.41 to $8.11. July 2022 wheat futures closed at $8.18, up 45 cents since last Friday. Downside price protection could be obtained by purchasing a $8.20 July 2022 Put Option costing 68 cents establishing a $7.52 futures floor. ∆

   DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee

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