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Weekly Crop Comments by Dr. Aaron Smith

Overview

​Cotton and wheat were up; soybeans were down; and corn was mixed for the week.

Compared to last year December corn contracts had nearly the same average daily close, half way through the month of October, $3.91 in 2020 versus $3.90 in 2019. Obviously, the paths were very different to current price levels. In 2019 for June and July, December corn spent a substantial amount of time near $4.50; whereas in 2020 December contract prices spent most of the growing season below $3.50 and only started to appreciate in September. $4.00 futures prices and strong regional basis in Tennessee should provide cash pricing opportunities to most producers that three months ago were nearly inconceivable.

Daily closing futures prices for November soybeans, so far in October, are $1.20 higher than 2019 ($10.43 compared to $9.23). Last year, soybeans were being strongly influenced by the China-U.S. trade dispute. This year China is purchasing U.S. soybeans at a fantastic pace that has contributed to the substantial price increase over the past 2-months. China’s purchases can be fickle and leaves the market open to substantial price fluctuations, so some downside price protection at a minimum is strongly encouraged for unpriced 2020 production.

Cotton futures prices continue to improve. This week the December contract crossed the 70 cent level for the first time since February 20, 2020 -- before COVID-19 ravaged cotton markets. To maintain current prices demand will need to strengthen. Most of the current rally can be attributed to weather concerns, strong export sales, and investment money. Long term it is difficult to see a path for cotton to remain above 70 cents without improved cotton consumption in 2021 and beyond.

July 2021 wheat futures closed the week above $6.00. This represents an excellent opportunity to look at pricing the 2021 crop. Looking to price 25-50% of anticipated production above $6.00 deserves consideration for many producers. Prices have rallied substantially since the beginning of August due to weather concerns both domestically (in the southern plains), and internationally (in Europe and Russia). While it is important to note that prices could continue to strengthen if weather concerns persist, it is also important to consider that global wheat stocks are currently projected at 11.811 billion bushels, up 810 million year-over-year and an all-time high. Additionally, wheat is produced on 6 continents and in both hemispheres. Yes, there are substantial differences in classes, but production recovery can begin to occur nearly year round if prices are strong enough. Lastly, in Tennessee producers can take advantage of strong seasonal basis improvements even if a futures price is secured.

Corn

Ethanol production for the week ending October 9 was 0.937 million barrels per day, up 14,000 barrels from the previous week. Ethanol stocks were 20.008 million barrels, up 0.336 million barrels compared to last week. Corn net sales reported by exporters for October 2-8 were down compared to last week with net sales of 25.8 million bushels for the 2020/21 marketing year. Exports for the same time period were down 13% from last week at 32.1 million bushels. Corn export sales and commitments were 45% of the USDA estimated total exports for the 2020/21 marketing year (September 1 to August 31) compared to the previous 5-year average of 31%.

Corn

Dec 20

Change

Mar 21

Change

Price

$4.02

$0.07

$4.07

$0.05

Support

$3.97

$0.16

$4.02

$0.13

Resistance

$4.11

$0.14

$4.14

$0.09

20 Day MA

$3.81

$0.06

$3.89

$0.05

50 Day MA

$3.63

$0.07

$3.73

$0.07

100 Day MA

$3.51

$0.03

$3.61

$0.03

4-Week High

$4.09

$0.11

$4.12

$0.07

4-Week Low

$3.60

$0.01

$3.69

$0.00

Technical Trend

Up

=

Up

=

Nationally the Crop Progress report estimated corn condition at 61% good-to-excellent and 14% poor-to-very poor; corn mature at 94% compared to 87% last week, 69% last year, and a 5-year average of 87%; and corn harvested at 41% compared to 25% last week, 20% last year, and a 5-year average of 32%. In Tennessee, the Crop Progress report estimated corn condition at 72% good-to-excellent and 4% poor-to-very poor; corn mature at 100% compared to 96% last week, 100% last year, and a 5-year average of 99%; and corn harvested at 76% compared to 60% last week, 91% last year, and a 5-year average of 89%. Across Tennessee, average corn basis (cash price-nearby futures price) weakened or remained unchanged at Mississippi River, North-Central, and Northwest, and strengthened at West-Central and West elevators and barge point. Overall, basis for the week ranged from 20 under to 22 over, with an average of 7 over the December futures. December 2020 corn futures closed at $4.02, up 7 cents since last Friday. For the week, December 2020 corn futures traded between $3.87 and $4.09. Dec/Mar and Dec/Dec future spreads were 5 and -7 cents. Downside price protection could be obtained by purchasing a $4.05 December 2020 Put Option costing 14 cents establishing a $3.91 futures floor. In Tennessee, new crop cash corn contracts ranged from $3.76 to $4.39. March 2021 corn futures closed at $4.07, up 5 cents since last Friday. December 2021 corn futures closed at $3.95, down 1 cent since last Friday.

Soybeans

Net sales reported by exporters were up compared to last week with net sales of 96.7 million bushels for the 2020/21 marketing year. Exports for the same period were down 8% compared to last week at 87.6 million bushels. Soybean export sales and commitments were 72% of the USDA estimated total annual exports for the 2020/21 marketing year (September 1 to August 31), compared to the previous 5-year average of 45%.

Soybeans

Nov 20

Change

Jan 21

Change

Price

$10.50

-$0.15

$10.50

-$0.15

Support

$10.34

-$0.01

$10.35

$0.03

Resistance

$10.78

$0.02

$10.78

$0.03

20 Day MA

$10.29

$0.08

$10.32

$0.08

50 Day MA

$9.77

$0.16

$9.82

$0.16

100 Day MA

$9.29

$0.09

$9.34

$0.10

4-Week High

$10.79

$0.00

$10.77

$0.00

4-Week Low

$9.85

$0.11

$9.90

$0.12

Technical Trend

Up

=

Up

=

Nationally the Crop Progress report estimated soybean condition at 63% good-to-excellent and 11% poor-to-very poor; soybeans dropping leaves at 93% compared to 85% last week, 81% last year, and a 5-year average of 90%; and soybeans harvested at 61% compared to 38% last week, 23% last year, and a 5-year average of 42%. In Tennessee, soybean condition was estimated at 75% good-to-excellent and 4% poor-to-very poor; soybeans dropping leaves at 81% compared to 69% last week, 90% last year, and a 5-year average of 89%; and soybeans harvested at 31% compared to 21% last week, 47% last year, and a 5-year average of 40%. Across Tennessee, average soybean basis weakened or remained unchanged at Mississippi River, West, West-Central, North-Central, and Northwest elevators and barge points. Basis ranged from 10 under to 20 over the November futures contract. Average basis at the end of the week was 10 over the November futures contract. November 2020 soybean futures closed at $10.50, down 15 cents since last Friday. For the week, November 2020 soybean futures traded between $10.31 and $10.73. Nov/Jan and Nov/Nov future spreads were 0 and -80 cents. November/December soybean-to-corn price ratio was 2.61 at the end of the week. In Tennessee, new crop soybean cash contracts ranged from $10.34 to $10.98. January 2021 soybean futures closed at $10.50, down 15 cents since last Friday. November 2021 soybean futures closed at $9.70, down 10 cents since last Friday. Downside price protection could be achieved by purchasing a $9.80 November 2020 Put Option which would cost 65 cents and set a $9.15 futures floor.  Nov/Dec 2021 soybean-to-corn price ratio was 2.46 at the end of the week.

Cotton

Net sales reported by exporters were down compared to last week with net sales of 98,900 bales for the 2020/21 marketing year and 13,200 bales for the 2021/22 marketing year. Exports for the same time period were up 35% compared to last week at 192,600 bales. Upland cotton export sales were 61% of the USDA estimated total annual exports for the 2020/21 marketing year (August 1 to July 31), compared to the previous 5-year average of 54%. Delta upland cotton spot price quotes for October 15 were 65.47 cents/lb (41-4-34) and 67.72 cents/lb (31-3-35). Adjusted World Price (AWP) increased 1.95 cents to 53.43 cents.

Cotton

Dec 20

Change

Mar 21

Change

Price

69.92

2.28

70.56

2.14

Support

68.61

2.17

69.35

1.69

Resistance

70.69

1.87

71.31

1.53

20 Day MA

66.84

0.70

67.64

0.69

50 Day MA

65.47

0.51

66.33

0.52

100 Day MA

63.35

0.54

64.11

0.53

4-Week High

70.04

1.36

70.70

1.30

4-Week Low

64.65

0.47

65.48

0.28

Technical Trend

Up

=

Up

=

Nationally, the Crop Progress report estimated cotton condition at 40% good-to-excellent and 30% poor-to-very poor; cotton bolls opening at 90% compared to 83% last week, 86% last year, and a 5-year average of 75%; and cotton harvested at 26% compared to 17% last week, 30% last year, and a 5-year average of 27%. In Tennessee, cotton condition was estimated at 61% good-to-excellent and 19% poor-to-very poor; cotton bolls opening at 91% compared to 85% last week, 92% last year, and a 5-year average of 94%; and cotton harvested at 18% compared to 7% last week, 31% last year, and a 5-year average 30%. December 2020 cotton futures closed at 69.92, up 2.28 cents since last Friday. For the week, December 2020 cotton futures traded between 68.02 and 70.04 cents. Dec/Mar and Dec/Dec cotton futures spreads were 0.64 cents and -0.40 cents. Downside price protection could be obtained by purchasing a 70 cent December 2020 Put Option costing 1.62 cents establishing a 68.38 cent futures floor. March 2021 cotton futures closed at 70.56 cents, up 2.14 cents since last Friday. December 2021 cotton futures closed at 69.52 cents, up 1.99 cents since last Friday.

Wheat

Wheat net sales reported by exporters were up compared to last week with net sales of 19.4 million bushels for the 2020/21 marketing year and 2.6 million bushels for the 2021/22 marketing year. Exports for the same time period were down 28% from last week at 18.6 million bushels. Wheat export sales were 57% of the USDA estimated total annual exports for the 2020/21 marketing year (June 1 to May 31), compared to the previous 5-year average of 57%.

Wheat

Dec 20

Change

Jul 21

Change

Price

$6.25

$0.32

$6.09

$0.15

Support

$6.08

$0.30

$5.97

$0.16

Resistance

$6.39

$0.14

$6.18

$0.03

20 Day MA

$5.79

$0.14

$5.82

$0.09

50 Day MA

$5.53

$0.09

$5.62

$0.06

100 Day MA

$5.36

$0.04

$5.47

$0.04

4-Week High

$6.30

$0.14

$6.12

$0.03

4-Week Low

$5.37

$0.04

$5.50

$0.03

Technical Trend

Up

=

Up

=

Nationally the Crop Progress report estimated winter wheat planted at 68% compared to 52% last week, 61% last year, and a 5-year average of 61%; and winter wheat emerged at 41% compared to 24% last week, 37% last year, and 5-year average of 35%. In Tennessee winter wheat planted was estimated at 24% compared to 11% last week, 21% last year, and a 5-year average of 23%; and winter wheat emerged at 9% compared to 5% last week, 6% last year, and a 5-year average of 6%. December 2020 wheat futures closed at $6.25, up 32 cents since last Friday. December 2020 wheat futures traded between $5.87 and $6.30 this week. December wheat-to-corn price ratio was 1.55. Dec/Mar and Dec/Jul future spreads were -2 and -16 cents. March 2021 wheat futures closed at $6.23, up 26 cents since last Friday. In Tennessee, new crop wheat cash contracts ranged from $5.80 to $6.17. July 2021 wheat futures closed at $6.09, up 15 cents since last Friday. Downside price protection could be obtained by purchasing a $6.10 July 2021 Put Option costing 43 cents establishing a $5.67 futures floor.

Source : tennessee.edu