Crop Comments

by Aaron Smith, Crops Marketing Specialist

June 11, 2021

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Overview

Corn and cotton were up; soybeans were mixed; and wheat was down for the week.

Harvest futures prices for corn and soybeans are near contract highs. A valid argument (weather, exports, low US ending stocks, and strong domestic demand) can be made for prices to continue close to these levels as we move through the summer and into the fall. However, everyone in agriculture knows how quickly prices can change. Last year at this time prices were abysmal, due to expected weak global demand, strong forecasted global production, and abundant stocks. Very few expected the tremendous rally that has been experienced in the last nine months.

Dramatic price corrections occur in both directions, so producers may want to consider some cheap protection in the futures market by purchasing out-of-the money put options. For example, a producer can purchase a $12 November soybean put option for 6 cents. This sets an $11.94 futures floor and allows the producer to benefit if the futures market continues to rally. To be clear, it seems very unlikely that prices will retreat to $12 in the next four months, but if setting a futures price floor provides peace of mind then it may be well worth it.

The wheat marketing year came to an end on May 31 and accumulated exports for the season were reported at 911.5 million bushels, less than 1% below the previous marketing year total. Wheat exports have benefitted from increased global demand for feed grains, primarily from China. One factor that has potentially limited wheat exports is reduced US acres designated to wheat. In recent years, US wheat acreage has been near historic lows as farmers have planted corn and soybeans in favor of spring planted wheat. USDA NASS estimated 2021 wheat planted acres at 46.4 million acres compared to 62.5 million acres planted in 2000.

December cotton futures have rallied close to the contract high of 89.28 on February 25 and now appear poised to break the 90 cent barrier for the harvest contract. The June acreage report will provide information on the number of acres of cotton planted nationally and has the potential to move markets up or down. Currently, there is the expectation for a reduction of the March 31 Prospective Plantings report estimate of l1.894 million acres of upland cotton.

Futures prices below are as of Thursday June 10, 2021.

 PreviousCurrentChange
USD Index90.1590.07-0.07
Crude Oil69.4970.10.61
DJIA34,75434,466-288

Corn

Ethanol production for the week ending June 4 was 1.067 million barrels per day, up 33,000 from the previous week. Ethanol stocks were 19.960 million barrels, up 0.372 million barrels compared to last week. Corn net sales reported by exporters for May 28-June 3, 2021 were down compared to last week with net sales of 7.5 million bushels for the 2020/21 marketing year and 1.0 million bushels for the 2021/22 marketing year. Exports for the same time period were down 23% from last week at 64.8 million bushels. Corn export sales and commitments were 111% 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 97%. Across Tennessee, average corn basis (cash price-nearby futures price) weakened or remained unchanged at West, North-Central, West-Central, Mississippi River, and Northwest elevators and barge points. Overall, basis for the week ranged from 15 over to 50 over, with an average of 30 over the July futures at elevators and barge points. July 2021 corn futures closed at $6.99, up 17 cents since last Friday. For the week, July 2021 corn futures traded between $6.69 and $7.17. Jul/Sep and Jul/Dec future spreads were -61 and -83 cents. September 2021 corn futures closed at $6.38, up 32 cents since last Friday.

CornJul 21ChangeDec 21Change
Price$6.99$0.17$6.16$0.25
Support$6.71$0.37$5.95$0.51
Resistance$7.31$0.33$6.38$0.45
20 Day MA$6.65-$0.06$5.64$0.02
50 Day MA$6.42$0.15$5.52$0.15
100 Day MA$5.87$0.08$5.07$0.08
4-Week High$7.31-$0.04$6.28-$0.10
4-Week Low$6.02$0.00$5.00$0.00
Technical TrendUp=Up=
Graph depicting corn futures

Nationally, this week’s Crop Progress report estimated corn condition at 72% good-to-excellent and 5% poor-to-very poor; and corn emerged at 90% compared to 81% last week, 87% last year, and a 5-year average of 82%. In Tennessee, corn condition was 79% good-to-excellent and 4% poor-to-very poor; corn planted was estimated at 99% compared to 98% last week, 95% last year, and a 5-year average of 98%; and corn emerged at 96% compared to 87% last week, 85% last year, and a 5-year average of 93%. In Tennessee, new crop cash corn prices at elevators and barge points ranged from $5.93 to $6.42. December 2021 corn futures closed at $6.16, up 25 cents since last Friday. Downside price protection could be obtained by purchasing a $6.20 December 2021 Put Option costing 69 cents establishing a $5.51 futures floor.

Soybeans

Net sales reported by exporters were down compared to last week with net sales of 0.6 million bushels for the 2020/21 marketing year and 3.9 million bushels for the 2021/22 marketing year. Exports for the same period were up 26% compared to last week at 10.2 million bushels. Soybean export sales and commitments were 109% 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 98%. Across Tennessee, average soybean basis weakened or remained unchanged at West, Northwest, West-Central, and North-Central and strengthened at Mississippi River elevators and barge points. Basis ranged from 3 under to 60 over the July futures contract. Average basis at the end of the week was 27 over the July futures contract. July 2021 soybean futures closed at $15.44, down 39 cents since last Friday. For the week, July 2021 soybean futures traded between $15.27 and $16.23. Jul/Aug and Jul/Nov future spreads were -35 and -85 cents. July 2021 soybean-to-corn price ratio was 2.21 at the end of the week. August 2021 soybean futures closed at $15.09, down 28 cents since last Friday.

SoybeansJul 21ChangeNov 21Change
Price$15.44-$0.39$14.59$0.24
Support$15.13-$0.02$14.27$0.55
Resistance$15.91-$0.15$14.80$0.26
20 Day MA$14.48-$1.12$13.99$0.06
50 Day MA$15.12$0.17$13.56$0.24
100 Day MA$14.45$0.08$12.77$0.13
4-Week High$16.67$0.00$14.80$0.19
4-Week Low$14.89$0.00$13.25$0.00
Technical TrendUp=Up=
Graph depicting soybean futures

Nationally, this week’s Crop Progress report estimated soybean condition at 67% good-to-excellent and 6% poor-to-very poor; soybeans planted at 90% compared to 84% last week, 84% last year, and a 5-year average of 79%; and soybeans emerged at 66% compared to 62% last week, 65% last year, and a 5-year average of 59%. In Tennessee, soybean condition was 80%good-to-excellent and 3% poor-to-very poor; soybeans planted were estimated at 72% compared to 66% last week, 61% last year, and a 5-year average of 68%; and soybeans emerged at 59% compared to 47% last week, 42% last year, and a 5-year average of 49%. In Tennessee, new crop cash soybean prices at elevators and barge points ranged from $14.30 to $14.90. November 2021 soybean futures closed at $14.59, up 24 cents since last Friday. Downside price protection could be achieved by purchasing a $14.60 November 2021 Put Option which would cost 95 cents and set a $13.65 futures floor. Nov/Dec 2021 soybean-to-corn price ratio was 2.37 at the end of the week.

Cotton

Net sales reported by exporters were down compared to last week with net sales of 108,200 bales for the 2020/21 marketing year and 21,400 bales for the 2021/22 marketing year. Exports for the same time period were down 30% compared to last week at 258,400 bales. Upland cotton export sales were 105% 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 109%. Delta upland cotton spot price quotes for June 10 were 85.11 cents/lb (41-4-34) and 87.36 cents/lb (31-3-35). Adjusted world price increased 2.58 cents to 72.36 cents. July 2021 cotton futures closed at 87.2, up 1.4 cents since last Friday. For the week, July 2021 cotton futures traded between 84.26 and 87.74 cents. Jul/Dec and Jul/Mar cotton futures spreads were 1.01 cents and 0.8 cents.

CottonJul 21ChangeDec 21Change
Price87.201.4088.212.33
Support85.212.1585.941.81
Resistance88.530.0689.423.08
20 Day MA83.84-0.4584.250.34
50 Day MA85.050.4883.760.82
100 Day MA85.880.1782.960.48
4-Week High89.74-1.2688.501.50
4-Week Low81.500.0080.990.00
Technical TrendUp+Up=
Graph depicting cotton futures

Nationally, this week’s Crop Progress report estimated cotton condition at 46% good-to-excellent and 15% poor-to-very poor; cotton planted at 71% compared to 64% last week, 76% last year, and a 5-year average of 78%; and cotton squaring at 9% compared to 6% last week, 12% last year, and a 5-year average of 11%. In Tennessee, cotton condition was 73% good-to-excellent and 10% poor-to-very poor; cotton planted was estimated at 96% compared to 92% last week, 83% last year, and a 5-year average of 93%; and cotton squaring at 8% compared to 3% last week, 5% last year, and a 5-year average of 8%. December 2021 cotton futures closed at 88.21 cents, up 2.33 cents since last Friday. Downside price protection could be obtained by purchasing an 89 cent December 2021 Put Option costing 7.02 cents establishing an 81.98 cent futures floor. March 2022 cotton futures closed at 88 cents, up 2.27 cents since last Friday.

Wheat

Wheat net sales reported by exporters were down compared to last week with net sales of 12.0 million bushels for the 2021/22 marketing year. Exports for the same time period were up 145% from last week at 21.9 million bushels. 30.8 million bushels in sales were carried over from the 2020/2021 marketing year, which ended May 31. Accumulated exports for the 2020/21 marketing year ended May 31 were 911.5 million bushels. Wheat export sales were 23% 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 24%. In Tennessee, spot wheat prices ranged from $6.61 to $7.04.

WheatJul 21ChangeSep 21Change
Price$6.82-$0.05$6.81-$0.11
Support$6.65-$0.05$6.72-$0.03
Resistance$6.98$0.00$7.02$0.00
20 Day MA$6.79-$0.13$6.83-$0.11
50 Day MA$6.84$0.07$6.86$0.08
100 Day MA$6.60$0.02$6.60$0.01
4-Week High$7.51-$0.16$7.48-$0.19
4-Week Low$6.39$0.00$6.42$0.00
Technical TrendDownDown
Graph depicting wheat futures

Nationally, the Crop Progress report estimated winter wheat condition at 50% good-to-excellent and 18% poor-to-very poor; winter wheat headed at 85% compared to 79% last week, 84% last year, and a 5-year average of 86%; winter wheat harvested at 2% compared to 6% last year and a 5-year average of 7%; spring wheat condition was estimated at 38% good-to-excellent and 25% poor-to-very poor; and spring wheat emerged at 90% compared to 80% last week, 79% last year, and a 5-year average of 86%. In Tennessee, winter wheat condition was estimated at 79% good-to-excellent and 2% poor-to-very poor; winter wheat coloring at 90% compared to 80% last week, 92% last year, and a 5-year average of 92%; and winter wheat harvested at 4% compared to 6% last year and a 5-year average of 8%. July 2021 wheat futures closed at $6.82, down 5 cents since last Friday. July 2021 wheat futures traded between $6.72 and $7.04 this week. July wheat-to-corn price ratio was 0.98. Jul/Sep and Jul/Jul future spreads were -1 and 13 cents. September wheat-to-corn futures price ratio was 1.07. September 2021 wheat futures closed at $6.81, down 11 cents since last Friday. July 2022 wheat futures closed at $6.95, down 7 cents since last Friday. Downside price protection could be obtained by purchasing a $7.00 July 2022 Put Option costing 78 cents establishing a $6.22 futures floor.


Additional Information

Links for data presented:
U.S. Export Sales – https://apps.fas.usda.gov/export-sales/esrd1.html
USDA FAS: Weekly Export Performance Indicator – https://apps.fas.usda.gov/esrquery/esrpi.aspx
EIA: Weekly ethanol Plant Production – https://www.eia.gov/dnav/pet/pet_pnp_wprode_s1_w.htm
EIA: Weekly Supply Estimates – https://www.eia.gov/dnav/pet/pet_sum_sndw_a_EPOOXE_sae_mbbl_w.htm
Upland Cotton Reports – https://www.fsa.usda.gov/FSA/epasReports?area=home&subject=ecpa&topic=fta-uc
Tennessee Crop Progress – https://www.nass.usda.gov/Statistics_by_State/Tennessee/Publications/Crop_Progress_&_Condition/
U.S. Crop Progress – http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1048
USDA AMS: Market News – https://www.ams.usda.gov/market-news/search-market-news

If you would like further information or clarification on topics discussed in the crop comments section or would like to be added to our free email list please contact me at aaron.smith@utk.edu.