Corn and Soybean Producers have the Benefit of Higher Prices, but in Many cases Lower Yields
DR. AARON SMITH
KNOXVILLE, TENNESSEE
On October 14 of last year, the December corn futures contract traded at $5.17 compared to $6.90 this year; the November soybean contract traded at $12.06 compared to $13.84 this year; and the December cotton contract traded at 107.1 cents compared to 83.15 cents this year. So, soybean and corn futures prices were $1.78/bu and $1.73/bu higher this year, and cotton futures were 23.95 cents lower this year.
There were also substantial year-over-year differences in yields. The USDA October 12 Crop Production report estimated 2022 Tennessee yields at: corn – 126 bu/acre; soybeans – 46 bu/acre; and upland cotton - 975 lbs/acre. In 2021, Tennessee yields were estimated substantially higher: corn 170 bu/acre; soybeans 50 bu/acre; and cotton 1,036 lbs/acre.
So, this year in Tennessee average gross revenue per acre (using the price above and the average state yield) would be estimated at corn - $869/acre; soybeans - $637/acre; and cotton - $811/acre. Last year state average gross revenue for corn would be estimated at: corn - $879/acre; soybeans - $603/acre; and cotton - $1,110/acre. Similar year-over-year gross revenue estimates for corn and soybeans, however much lower gross revenue for cotton.
This simple example does not assume any preharvest sales, crop stored to be sold later, or crop insurance indemnity payments, which would have a dramatic impact on a producers estimated gross revenue. However, it does indicate the potential for much tighter (or negative) profit margins given that average cost of production for corn, soybeans, and cotton across the state were 25-40 percent higher in 2022 than 2021. This margin squeeze will be felt substantially by cotton producers, due to both lower prices and reduced yield. Corn and soybean producers have the benefit of higher prices, but in many cases lower yields. Each producer’s circumstance will be different, but it may be a good time to examine revenue streams and expenses to determine profitability for the 2022 crop.
Corn
Ethanol production for the week ending October 7 was 0.932 million barrels per day, up 43,000 from the previous week. Ethanol stocks were 21.863 million barrels, down 178,000 compared to last week. Corn net sales reported by exporters for September 30 to October 6 were 7.9 million bushels for the 2022/23 marketing year and 2.4 million bushels for the 2023/24 marketing year. Exports for the same period were down 35 percent compared to last week at 16.6 million bushels. Corn export sales and commitments were 25 percent of the USDA estimated total annual exports for the 2022/23 marketing year (September 1 to August 31) compared to the previous 5-year average of 36 percent. Nationally, the Crop Progress report estimated corn condition at 54 percent good-to-excellent and 20 percent poor-to-very-poor; corn mature at 87 percent compared to 75 percent last week, 93 percent last year, and a 5-year average of 85 percent; and corn harvested at 31 percent compared to 20 percent last week, 39 percent last year, and a 5-year average of 30 percent. In Tennessee, corn condition was estimated at 27 percent good-to-excellent and 41 percent poor-to-very poor; corn mature at 99 percent compared to 96 percent last week, 99 percent last year, and a 5-year average of 99 percent; and corn harvested at 82 percent compared to 64 percent last week, 66 percent last year, and a 5-year average of 79 percent. Across Tennessee, average corn basis (cash price-nearby futures price) weakened or remained unchanged at Northwest, West-Central, and North-Central elevators and barge points and strengthened at West and Mississippi River elevators and barge points. Overall, basis for the week ranged from 110 under to 10 over, with an average of 53 under the December futures at elevators and barge points. New crop cash prices ranged from $6.45 to $7.24 at elevators and barge points. December 2022 corn futures closed at $6.89, up 6 cents since last Friday. For the week, December 2022 corn futures traded between $6.80 and $7.06. Downside price protection could be obtained by purchasing a $6.90 December 2022 Put Option costing 21 cents establishing a $6.69 futures floor. Dec/Mar and Dec/Dec future spreads were 7 and -60 cents.
March 2023 corn futures closed at $6.96, up 5 cents since last Friday. December 2023 corn futures closed at $6.29, up 5 cents since last Friday.
Soybeans
Across Tennessee, average soybean basis weakened or remained unchanged at Northwest, West-Central, North-Central, and Mississippi River elevators and barge points and strengthened at West elevators and barge points. Basis ranged from 113 under to 65 under, with an average basis of 92 under the November futures contract. Soybean net weekly sales reported by exporters were 26.6 million bushels for the 2022/23 marketing year. Exports for the same period were up 44 percent compared to last week at 32.6 million bushels. Soybean export sales and commitments were 51 percent of the USDA estimated total annual exports for the 2022/23 marketing year (September 1 to August 31), compared to the previous 5-year average of 49 percent. Nationally, the Crop Progress report estimated soybean condition at 57 percent good-to-excellent and 15 percent poor-to-very poor; soybeans dropping leaves at 91 percent compared to 81 percent last week, 90 percent last year, and a 5-year average of 88 percent; and soybeans harvested at 44 percent compared to 22 percent last week, 47 percent last year, and a 5-year average of 38 percent. In Tennessee, soybean condition was estimated at 47 percent good-to-excellent and 13 percent poor-to-very poor; soybeans dropping leaves at 85 percent compared to 75 percent last week, 75 percent last year, and a 5-year average of 82 percent; and soybeans harvested at 32 percent compared to 21 percent last week, 21 percent last year, and a 5-year average of 32 percent. Nov/Dec 2022 soybean-to-corn price ratio was 2.01 at the end of the week. November 2022 soybean futures closed at $13.83, up 16 cents since last Friday. For the week, November 2022 soybean futures traded between $13.65 and $14.14. Nov/Jan and Nov/Nov future spreads were 9 and -28 cents.
January 2023 soybean futures closed at $13.92, up 13 cents since last Friday. New crop cash soybean prices at elevators and barge points ranged from $12.77 to $13.79. November 2023 soybean futures closed at $13.55, unchanged since last Friday. Downside price protection could be achieved by purchasing a $13.60 November 2023 Put Option which would cost 100 cents and set a $12.60 futures floor. Nov/Dec 2023 soybean-to-corn price ratio was 2.15 at the end of the week.
Cotton
Delta upland cotton spot price quotes for October 13 were 87.79 cents/lb (41-4-34) and 90.04 cents/lb (31-3-35). Adjusted world price (AWP) was up 0.26 cents at 77.45 cents. Cotton net weekly sales reported by exporters were 144,800 bales for the 2022/23 marketing year and 34,800 bales for the 2023/24 marketing year. Exports for the same period were down 20 percent compared to last week at 168,100 bales. Upland cotton export sales were 71 percent of the USDA estimated total annual exports for the 2022/23 marketing year (August 1 to July 31), compared to the previous 5-year average of 59 percent. Nationally, the Crop Progress report estimated cotton condition at 30 percent good-to-excellent and 47 percent poor-to-very poor; cotton bolls opening at 84 percent compared to 77 percent last week, 77 percent last year, and a 5-year average of 81 percent; and cotton harvested at 29 percent compared to 22 percent last week, 19 percent last year, and a 5-year average of 25 percent. In Tennessee, cotton condition was estimated at 46 percent good-to-excellent and 23 percent poor-to-very poor; cotton bolls opening at 80 percent compared to 69 percent last week, 72 percent last year, and a 5-year average of 82 percent; and cotton harvested at 13 percent compared to 6 percent last week, 2 percent last year, and a 5-year average of 22 percent. December 2022 cotton futures closed at 83.15 cents, down 1.08 cents since last Friday. For the week, December 2022 cotton futures traded between 82 and 89.78 cents. Dec/Mar and Dec/Dec cotton futures spreads were -1.16 cents and -7.5 cents. Downside price protection could be obtained by purchasing an 84 cent December 2022 Put Option costing 4.13 cents establishing an 79.87 cent futures floor.
March 2023 cotton futures closed at 81.99 cents, down 0.67 cents since last Friday. December 2023 cotton futures closed at 75.65 cents, down 0.01 cents since last Friday.
Wheat
Wheat net weekly sales reported by exporters were 7.8 million bushels for the 2022/23 marketing year. Exports for the same period were down 11 percent compared to last week at 20.6 million bushels. Wheat export sales were 53 percent of the USDA estimated total annual exports for the 2022/23 marketing year (June 1 to May 31), compared to the previous 5-year average of 58 percent. Wheat cash prices at elevators and barge points ranged from $8.32 to $8.72. December 2022 wheat futures closed at $8.59, down 21 cents since last Friday. December 2022 wheat futures traded between $8.57 and $9.49 this week. December wheat-to-corn price ratio was 1.25. March 2023 wheat futures closed at $8.77, down 18 cents since last Friday. Dec/Mar and Dec/Jul future spreads were 18 and 21 cents.
Nationally, the Crop Progress report estimated winter wheat planted at 55 percent compared to 40 percent last week, 58 percent last year, and a 5-year average of 58 percent; and winter wheat emerged at 26 percent compared to 15 percent last week, 29 percent last year, and a 5-year average of 32 percent. In Tennessee, winter wheat planted was estimated at 20% compared to 11 percent last week, 21 percent last year, and a 5-year aver-age of 20 percent; and winter wheat emerged at 7 percent compared to 5 percent last week, 12% last year, and a 5-year average of 8 percent. New crop wheat cash prices at elevators and barge points ranged from $8.42 to $8.87. July 2023 wheat futures closed at $8.80, down 16 cents since last Friday. Downside price protection could be obtained by purchasing an $8.90 July 2023 Put Option costing 109 cents establishing a $7.81 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
by Dr. Aaron Smith