The USD index remains at the highest level since May 2002
DR. AARON SMITH
KNOXVILLE, TENNESSEE
Over the past 5-years, 56% of U.S. soybean exports have occurred from October to January; 45% of cotton exports from February to May; 43% of corn exports from March to June; and 37% of wheat exports from March to June. As such, the normal export window for soybeans and cotton are more compressed, while wheat is more evenly distributed across all months of the year. The challenges for exports this year, particularly for soybeans given the time of year, continue to be low water levels on the Mississippi River and a high US dollar. Low water levels have dramatically reduced the quantity of soybeans moving down the Mississippi River and has substantially increased transportation costs. The USD index remains at the highest level since May 2002. A high USD makes U.S. agricultural products comparatively more expensive to importing countries.
For soybeans, a major challenge ahead is the projected record crop in Brazil (currently estimated at 5.584 billion bushels). If record production is realized in Brazil and U.S. exports continue to lag the normal pace from November through January, soybean importers will have the ability to be more decerning regarding the country of origin and price that soybean purchases will occur. This would result in lower prices to U.S. producers and exporters. Should weather dramatically reduce the size of the Brazilian soybean crop then it is likely that the export window in the U.S. will extend, and USDA soybean export targets achieved, resulting in prices holding or even improving. Thus, producers have a difficult decision. Do they store soybeans and hope for price improvements or take current market offerings foregoing a potential rally?
Cotton prices have been hit hard by global economic concerns, a strong USD, and reduced export demand. The December cotton contract has shed 47.48 cents (40% of its value) falling from 119.59 cents on August 16 to 72.11 cents on October 28. The decline in prices has occurred despite U.S. production estimated at is its lowest level (13.812 million bales) since 2015 and U.S. stocks projected at the lowest level since the end of the 2016/17 marketing year. Prices for the 2022 crop are likely to im- prove, however this will require export demand to return to the U.S. market which may not occur until early 2023.
Corn
Ethanol production for the week ending October 21 was 1.033 million barrels per day, up 17,000 from the previous week. Ethanol stocks were 22.291 million barrels, up 447,000 compared to last week. Corn net sales reported by exporters for October 14- 20 were 10.4 million bushels for the 2022/23 marketing year. Exports for the same period were up 52% compared to last week at 24.4 million bushels. Corn export sales and commitments were 26% 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 39%. Nationally, the Crop Progress report estimated corn mature at 97% compared to 94% last week, 100% last year, and a 5-year average of 97%; and corn harvested at 61% compared to 45% last week, 64% last year, and a 5-year average of 52%. In Tennessee, corn harvested was estimated at 94% compared to 89% last week, 85% last year, and a 5-year average of 92%. Across Tennessee, average corn basis (cash price-nearby futures price) weakened or remained unchanged at Northwest, North-Central, and West-Central elevators and barge points and strengthened at West and Mississippi River elevators and barge points. Overall, basis for the week ranged from 84 under to 10 over, with an average of 43 under the December futures at elevators and barge points. New crop cash prices ranged from $6.27 to $7.11 at elevators and barge points. December 2022 corn futures closed at $6.80, down 4 cents since last Friday. For the week, December 2022 corn futures traded between $6.76 and $6.89. Dec/Mar and Dec/Dec future spreads were 6 and -59 cents.
March 2023 corn futures closed at $6.86, down 4 cents since last Friday. December 2023 corn futures closed at $6.23, down 3 cents since last Friday. Downside price protection could be obtained by purchasing a $6.30 December 2023 Put Option costing 64 cents establishing a $5.66 futures floor.
Soybeans
Across Tennessee, average soybean basis strengthened or remained unchanged at West, Northwest, West-Central, and North- Central elevators and barge points and weakened at Mississippi River elevators and barge points. Basis ranged from 104 under to 22 under, with an average basis of 78 under the November futures contract. Soybean net weekly sales reported by exporters were 37.7 million bushels for the 2022/23 marketing year. Exports for the same period were up 45% compared to last week at 101 million bushels. Soybean export sales and commitments were 57% 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 54%. Nationally, the Crop Progress report estimated soybeans harvested at 80% compared to 63% last week, 71% last year, and a 5-year average of 67%. In Tennessee, soybean condition was estimated at 53% good-to-excellent and 11% poor-to-very poor; soybeans dropping leaves at 96% compared to 93% last week, 88% last year, and a 5-year average of 97%; and soybeans harvested at 61% com- pared to 46% last week, 42% last year, and a 5-year average of 52%. Nov/Dec 2022 soybean-to-corn price ratio was 2.04 at the end of the week. November 2022 soybean futures closed at $13.87, down 8 cents since last Friday. For the week, November 2022 soybean futures traded between $13.66 and $13.87. Nov/Jan and Nov/Nov future spreads were 13 and -28 cents.
January 2023 soybean futures closed at $14.00, down 4 cents since last Friday. New crop cash soybean prices at elevators and barge points ranged from $12.87 to $13.72. November 2023 soybean futures closed at $13.59, down 2 cents since last Friday. Downside price protection could be achieved by purchasing a $13.60 November 2023 Put Option which would cost 99 cents and set a $12.61 futures floor. Nov/Dec 2023 soybean-to-corn price ratio was 2.19 at the end of the week.
Cotton
Delta upland cotton spot price quotes for October 27 were 78.11 cents/lb (41-4-34) and 80.36 cents/lb (31-3-35). Adjusted world price (AWP) was down 4.81 cents at 68.95 cents. Cotton net weekly sales reported by exporters were 68,400 bales for the 2022/23 marketing year and 7,100 bales for the 2023/24 marketing year. Exports for the same period were up 7% com- pared to last week at 177,600 bales. Upland cotton export sales were 72% 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 62%. Nationally, the Crop Progress report estimated cotton condition at 30% good-to-excellent and 45% poor-to-very poor; cotton bolls opening at 92% compared to 89% last week, 90% last year, and a 5-year average of 91%; and cotton harvested at 45% compared to 37% last week, 34% last year, and a 5-year average of 39%. In Tennessee, cotton condition was estimated at 55% good-to-excellent and 11% poor- to-very poor; cotton bolls opening at 96% compared to 93% last week, 88% last year, and a 5-year average of 97%; and cotton harvested at 51% compared to 32% last week, 24% last year, and a 5-year average of 48%. December 2022 cotton futures closed at 72.11 cents, down 7.02 cents since last Friday. For the week, December 2022 cotton futures traded between 72.11 and 80.8 cents. Dec/Mar and Dec/Dec cotton futures spreads were -0.04 cents and -0.95 cents.
March 2023 cotton futures closed at 72.07 cents, down 6.48 cents since last Friday. December 2023 cotton futures closed at 71.16 cents, down 3.41 cents since last Friday. Downside price protection could be obtained by purchasing a 72 cent December 2022 Put Option costing 10.03 cents establishing a 61.97 cent futures floor.
Wheat
Wheat net weekly sales reported by exporters were 19.6 million bushels for the 2022/23 marketing year. Exports for the same period were down 44% compared to last week at 5.0 million bushels. Wheat export sales were 56% 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 61%. Wheat cash prices at elevators and barge points ranged from $7.84 to $8.29. December 2022 wheat futures closed at $8.29, down 21 cents since last Friday. December 2022 wheat futures traded between $8.22 and $8.58 this week. December wheat- to-corn price ratio was 1.22. March 2023 wheat futures closed at $8.49, down 20 cents since last Friday. Dec/Mar and Dec/Jul future spreads were 20 and 32 cents.
Nationally, the Crop Progress report estimated winter wheat planted at 79% compared to 69% last week, 79% last year, and a 5-year average of 78%; and winter wheat emerged at 49% compared to 38% last week, 53% last year, and a 5-year average of 56%. In Tennessee, winter wheat condition was 54% good-to-excellent and 4% poor-to-very poor; winter wheat planted at 46% compared to 29% last week, 47% last year, and a 5-year average of 45%; and winter wheat emerged at 20% compared to 11% last week, 27% last year, and a 5-year average of 23%. New crop wheat cash prices at elevators and barge points ranged from $8.00 to $8.44. July 2023 wheat futures closed at $8.61, down 17 cents since last Friday. Downside price protection could be obtained by purchasing an $8.70 July 2023 Put Option costing 104 cents establishing a $7.66 futures floor. ∆
DR. AARON SMITH: University of Tennessee