Ethanol Production For The Week Ending April 29 Was 0.969 Million Barrels Per Day
DR. AARON SMITH
KNOXVILLE, TENNESSEE
Drought continues to persist in the western half of the U.S. As of May 3, the USDA estimated that 23 percent of corn, 56 percent of cotton,14 percent of soybean, and 69 percent of winter wheat production were in areas experiencing drought. 22 percent of winter wheat and 36 percent of cotton were estimated to be in extreme-to-exceptional drought, compared to only 4 percent for corn and 1 percent for soybeans. There may be some relief in the 7-day forecast for the southern plains, however it is likely insufficient to provide substantial relief. The seven-day forecast also has 1-3 inches of precipitation in the Northern Plains and Eastern Corn Belt, which could contribute to additional plantings delays. USDA estimated corn planting progress at 14 percent compared to the 5-year average of 33 percent as of May 1.
On May 12, USDA will release the May WASDE report. The report will have initial WASDE supply and demand estimates for the 2022/23 marketing year (2022 crop). Will the USDA modify U.S. planted acres and Ukraine production? Both could have significant impacts on commodity markets, even when accounting for market expectations. The current USDA estimate, from the Prospective Plantings report indicates planted acres of 90.955 million for soybeans, 89.49 million for corn, 13.115 million for spring wheat, and 12.058 million for upland cotton.
From February 1 to March 15, the soybean-to-corn futures price ratio averaged 2.38 and the cotton-to-corn ratio averages 0.169. From April 1 to May 5, the soybean-to-corn ratio averaged 2.04 and the cotton-to- corn ratio averaged 0.165. The change in relative prices favored an increase in cotton and corn planted acres over soybeans. However, with the drought in the southern plains and fertilizer prices increasing 2-16 percent over the same three-month time period the acreage estimates continue to be uncertain.
The Dow Jones Industrial Average (DJIA) had a volatile close to the week opening at 32,978 and closing at 32,899. Wednesday the DJIA was up 932 points, Thursday down 1,063 points, and Friday down 98 points.
This week also saw the federal reserve raise interest rates 0.5 percent to combat inflation, which is currently estimated at 8.5 percent annually (March estimate).
Corn
Ethanol production for the week ending April 29 was 0.969 million barrels per day, up 6,000 from the previous week. Ethanol stocks were 23.887 million barrels, down 78,000 compared to last week. Corn net sales reported by exporters for April 22-28, 2022, were down compared to last week with net sales of 30.8 million bushels for the 2021/22 marketing year and 29.0 million bushels for the 2022/23 marketing year. Exports for the same period were up 22 percent from last week at 75.0 million bushels – a marketing year high. Corn export sales and commitments were 92 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 93 percent. Across Tennessee, average corn basis (cash price-nearby futures price) weakened at West elevators and barge points and strengthened or remained unchanged at Northwest, West- Central, North-Central, and Mississippi River elevators and barge points. Overall, basis for the week ranged from 35 under to 25 over, with an average of 2 over the July futures at elevators and barge points. July 2022 corn futures closed at $7.84, down 29 cents since last Friday. For the week, July 2022 corn futures traded between $7.76 and $8.13. Jul/Sep and Jul/Dec future spreads were -42 and -64 cents.
Nationally, the Crop Progress report estimated corn planted at 14 percent compared to 7 percent last week, 42 percent last year, and a 5- year average of 33 percent; and corn emerged at 3 percent compared to 2 percent last week, 7 percent last year, and a 5-year average of 6 percent. In Tennessee, corn planted was estimated at 42 percent compared to 17 percent last week, 63 percent last year, and a 5-year average of 55 percent; and corn emerged at 10 percent compared to 3 percent last week, 33 percent last year, and a 5-year average of 27 percent. September 2022 corn futures closed at $7.42, down 26 cents since last Friday. New crop cash prices at elevators and barge points ranged from $7.00 to $7.44. December 2022 corn futures closed at $7.20, down 31 cents since last Friday. Downside price protection could be obtained by purchasing a $7.30 December 2022 Put Option costing 65 cents establishing a $6.65 futures floor.
Soybeans
Net sales reported by exporters were up compared to last week with net sales of 27.0 million bushels for the 2021/22 marketing year and 15.0 million bushes for the 2022/23 marketing year. Exports for the same period were down 21 percent compared to last week at 20.7 million bushels. Soybean export sales and commitments were 101 percent of the USDA estimated total annual ex-ports for the 2021/22 marketing year (September 1 to August 31), compared to the previous 5-year average of 96 percent. Across Tennessee, average soybean basis weakened or remained unchanged at West, Northwest, West-Central, and North-Central elevators and barge points and strengthened at Mississippi River elevators and barge points. Basis ranged from even to 47 over, with an average basis of 30 over the July futures contract. July 2022 soybean futures closed at $16.22, down 62 cents since last Friday. For the week, July 2022 soybean futures traded between $16.18 and $16.88. Jul/ Aug and Jul/Nov future spreads were -51 and -152 cents. July 2022 soybean-to-corn price ratio was 2.07 at the end of the week. August 2022 soybean futures closed at $15.71, down 64 cents since last Friday.
Nationally, the Crop Progress report estimated soybean planted at 8 percent compared to 3 percent last week, 22 percent last year, and a 5- year average of 13 percent. In Tennessee, soybeans planted were estimated at 9 percent compared to 3 percent last week, 14 percent last year, and a 5-year average of 8 percent. Nov/Dec 2022 soybean-to- corn price ratio was 2.04 at the end of the week. New crop cash soybean prices at elevators and barge points ranged from $14.51 to $15.21. November 2022 soybean futures closed at $14.70, down 44 cents since last Friday. Downside price protection could be achieved by purchasing a $14.80 November 2022 Put Option which would cost 97 cents and set a $13.83 futures floor.
Cotton
Net sales reported by exporters were up compared to last week with net sales of 232,400 bales for the 2021/22 marketing year and 93,200 bales for the 2022/23 marketing year. Exports for the same period were up 11 percent compared to last week at 426,600 bales. Upland cotton export sales were 106 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 105 percent. Delta upland cotton spot price quotes for May 5 were 147.76 cents/lb (41-4-34) and 150.01 cents/lb (31-3-35). Adjusted world price (AWP) was up 13.72 cents at 147.1 cents. July 2022 cotton futures closed at 143.61 cents, down 2.02 cents since last Friday. For the week, July 2022 cotton futures traded between 143.36 and 155.95 cents. Jul/Dec and Jul/Mar cotton futures spreads were -19.87 cents and -25.27 cents.
Nationally, the Crop Progress report estimated cotton planted at 16 percent compared to 12 percent last week, 15 percent last year, and a 5-year average of 15 percent. In Tennessee, cotton planted was estimated at 3 percent, compared to 0 percent last week, 2 percent last year, and a 5-year average of 4 percent. December 2022 cotton futures closed at 123.74 cents, up 1.67 cents since last Friday. Downside price protection could be obtained by purchasing a 124 cent December 2022 Put Option costing 11.62 cents establishing a 112.38 cent futures floor. March 2023 cotton futures closed at 118.34 cents, up 0.81 cents since last Friday.
Wheat
Wheat net sales reported by exporters were up compared to last week with net sales of 4.4 million bushels for the 2021/22 marketing year and 1.6 million bushels for the 2022/23 marketing year. Exports for the same period were up 53 percent from last week at 13.9 million bushels. Wheat export sales were 92 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 105 percent.
Nationally, the Crop Progress report estimated winter wheat condition at 27 percent good-to-excellent and 43 percent poor-to-very poor; winter wheat headed at 23 percent compared to 11 percent last week, 26 percent last year, and a 5-year average of 29 percent; spring wheat planted at 19 percent compared to 13 percent last week, 46 percent last year, and a 5-year average of 28 percent; and spring wheat emerged at 5 percent compared to 2 percent last week, 13 percent last year, and a 5-year average of 7 percent. In Tennessee, winter wheat condition was estimated at 59 percent good-to-excellent and 7 percent poor-to-very poor; winter wheat jointing at 94 percent compared to 82 percent last week, 93 percent last year, and a 5-year average of 95 percent; and winter wheat heading at 56 percent compared to 18 percent last week, 55 percent last year, and a 5-year average of 63 percent.
Wheat cash prices at elevators and barge points ranged from $10.05 to $10.67. July 2022 wheat futures closed at $11.08, up 53 cents since last Friday. July 2022 wheat futures traded between $10.34 and $11.27 this week. Downside price protection could be obtained by purchasing an $11.10 July 2022 Put Option costing 62 cents establishing a $10.48 futures floor. July wheat-to-corn price ratio was 1.41. Jul/Sep and Jul/Dec future spreads were 1 and 4 cents. New crop wheat cash prices at elevators and barge points ranged from $9.67 to $10.71. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee