November Soybean Prices Have Been Volatile Since June
DR. AARON SMITH
KNOXVILLE, TENNESSEE
December corn increased from $5.61 ¾, on July 22, to $6.85 this Friday, a 123 ½ cent increase in seven months. The upward trend has been sup-ported by production concerns in the U.S. The August USDA WASDE report estimated national yield at 175.4 bu/acre, however many analysts are expecting a revision in yield next Monday to around 173 bu/acre. A 2.4 bu/acre reduction in national average yield equates to a 204.5-million-bushel reduction in U.S. production. This crop year has seen tremendous weather variability making yield estimates highly variable across large sections of the U.S. Corn Belt.
November soybean prices have been volatile since June. There has been 70 trading days since June 1. 36 days have experienced daily price changes of 20 cents or greater (18 days with greater than 20 cent declines and 18 days with greater than 20 cent increases). Overall, the November contract has decline 99 ¼ cents since June 1. Volatility is likely to remain a feature in soybean futures markets this fall as Brazil is projected to plant a record number of soybean acres and growing conditions/La Nina continue to insert uncertainty in production estimates.
Cotton prices continue to be influenced by a tug of war between supply concerns and demand concerns. Production and supply concerns are well documented in the U.S. with record abandonment projected and endings stocks for the 2022/23 marketing year at 1.8 million bales – which is supportive for high prices. On the demand side a high U.S. dollar and concerns over global economic growth continue to create demand concerns – which is negative for prices. The result has been wild swings in cotton futures prices with dramatic declines followed by rapid increases over short periods of time.
July wheat prices closed the week at $8.84, providing a strong incentive for many Mid-south producers to consider planting a crop this fall. In Tennessee, the projected crop insurance price is $8.31 with only a few days remaining in the price discovery period. The high projected crop insurance price should mitigate some producer concerns over high input prices. An increase in wheat acreage in Tennessee, if weather cooperates during planting, should be expected given high prices and a strong safety net provided by crop insurance.
Corn
Ethanol production for the week ending September 2 was 0.989 million barrels per day, up 19,000 from the previous week. Ethanol stocks were 23.138 million barrels, down 395,000 compared to last week. Nationally, the Crop Progress report estimated corn condition at 54 percent good-to-excellent and 19 percent poor-to-very-poor; corn dough at 92 percent compared to 86 percent last week, 94 percent last year, and a 5-year average of 93 percent; corn dented at 63 percent compared to 46 percent last week, 72 percent last year, and a 5-year average of 67 percent; and corn mature at 15 percent compared to 8 percent last week, 19 percent last year, and a 5-year average of 18 percent. In Tennessee, corn condition was estimated at 34 percent good-to- excellent and 34 percent poor-to-very poor; corn dough at 100 percent compared to 97 percent last week, 100 percent last year, and a 5-year average of 99 percent; corn dented at 87 percent compared to 80 percent last week, 89 percent last year; and a 5-year average of 90 percent; corn mature at 42 percent compared to 28 percent last week, 36 percent last year, and a 5-year average of 49 percent; and corn harvested at 9 percent compared to 2 percent last week, 6 percent last year, and a 5-year average of 9 percent. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at Northwest, West-Central, North-Central, and Mississippi River elevators and barge points and weakened at West elevators and barge points. Overall, basis for the week ranged from even to 32 over, with an average of 24 over the December futures at elevators and barge points. New crop cash prices ranged from $6.48 to $6.91 at elevators and barge points. December 2022 corn futures closed at $6.85, up 20 cents since last Friday. For the week, December 2022 corn futures traded between $6.59 and $6.88. Downside price protection could be obtained by purchasing a $6.85 December 2022 Put Option costing 36 cents establishing a $6.49 futures floor. Dec/Mar and Dec/Dec future spreads were 4 and -59 cents.
March 2023 corn futures closed at $6.89, up 18 cents since last Friday. December 2023 corn futures closed at $6.26, up 11 cents since last Friday.
Soybeans
Across Tennessee, average soybean basis strengthened or remained unchanged at Northwest, West-Central, North-Central, and Mississippi River elevators and barge points and weakened at West elevators and barge points. Basis ranged from 53 to 75 over, with an average basis of 62 over the November futures contract. Nationally, the Crop Progress report estimated soybean condition at 57 percent good-to- excellent and 14 percent poor-to-very poor; soybeans setting pods at 94 percent compared to 91 percent last week, 96 percent last year, and a 5-year average of 96 percent; and soybeans dropping leaves at 10 percent compared to 4 percent last week, 17 percent last year, and a 5- year average of 14 percent. In Tennessee, soybean condition was estimated at 60 percent good-to-excellent and 10 percent poor-to-very poor; soybean setting pods at 95 percent compared to 92 percent last week, 94 percent last year, and a 5-year average of 94 percent; and soybeans dropping leaves at 15 percent compared to 8 percent last week, 15 percent last year, and a 5-year average of 15 percent. Nov/ Dec 2022 soybean-to-corn price ratio was 2.06 at the end of the week.
New crop cash soybean prices at elevators and barge points ranged from $13.55 to $14.38. November 2022 soybean futures closed at $14.12, down 8 cents since last Friday. For the week, November 2022 soybean futures traded between $13.73 and $14.32. Downside price protection could be achieved by purchasing a $14.20 November 2022 Put Option which would cost 49 cents and set a $13.71 futures floor. Nov/Jan and Nov/Nov future spreads were 5 and -62 cents.
January 2023 soybean futures closed at $14.17, down 8 cents since last Friday. November 2023 soybean futures closed at $13.50, unchanged since last Friday. November/December 2023 soybean-to-corn price ratio was 2.16 at the end of the week.
Cotton
Delta upland cotton spot price quotes for September 8 were 111.32 cents/lb (41-4-34) and 113.57 cents/lb (31-3-35). Adjusted world price (AWP) was down 9.94 cents at 94.92 cents. Nationally, the Crop Progress report estimated cotton condition at 35 percent good-to- excellent and 31 percent poor-to-very poor; cotton setting bolls at 97 percent compared to 94 percent last week, 93 percent last year, and a 5-year average of 96 percent; and cotton bolls opening at 39 percent compared to 28 percent last week, 28 percent last year, and a 5-year average of 32 percent. In Tennessee, cotton condition was estimated at 55 percent good-to-excellent and 16 percent poor-to-very poor; cotton setting bolls at 100 percent compared to 97 percent last week, 99 percent last year, and a 5-year average of 100 percent; and cotton bolls opening at 26 percent compared to 13 percent last week, 7 percent last year, and a 5-year average of 22 percent. December 2022 cotton futures closed at 104.84 cents, up 1.63 cents since last Friday. For the week, December 2022 cotton futures traded between 101.19 and 106 cents. Dec/Mar and Dec/Dec cotton futures spreads were -3.39 cents and -21.87 cents. Downside price protection could be obtained by purchasing a 105 cent December 2022 Put Option costing 7.73 cents establishing a 97.27 cent futures floor.
March 2023 cotton futures closed at 101.45 cents, up 1.31 cents since last Friday. December 2023 cotton futures closed at 82.97 cents, up 1.05 cents since last Friday.
Wheat
Nationally, the Crop Progress report estimated spring wheat harvested at 71 percent compared to 50 percent last week, 94 percent last year, and a 5-year average of 83 percent; and winter wheat planted at 3 percent compared to 5 percent last year and a 5-year average of 3 percent. In Tennessee, winter wheat planted was estimated at 1 percent. Wheat cash prices at elevators and barge points ranged from $7.47 to $8.30. December 2022 wheat futures closed at $8.69, up 58 cents since last Friday. December 2022 wheat futures traded between $8.01 and $8.73 this week. December wheat-to-corn price ratio was 1.27. Dec/Mar and Dec/Jul future spreads were 15 and 15 cents.
March 2023 wheat futures closed at $8.84, up 57 cents since last Friday. New crop wheat cash prices at elevators and barge points ranged from $7.78 to $8.35. July 2023 wheat futures closed at $8.84, up 46 cents since last Friday. Downside price protection could be obtained by purchasing an $8.90 July 2023 Put Option costing 114 cents establishing a $7.76 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee