Corn net sales reported by exporters for January 20-27 were 62.7 million bushels for the 2022/23 marketing year
DR. AARON SMITH
KNOXVILLE, TENNESSEE
For corn and soybean producers, activity in futures markets in February is very important. For Tennessee producers, projected crop insurance prices and volatility factors are determined from February 1-28. The projected price will set revenue guarantees and potentially affect planting decisions. At the start of February 2023, December 2023 corn futures were slightly above ($5.94) last years projected crop insurance price of $5.90 per bushel and November 2023 soybean futures ($13.65) were well below last year’s futures price of $14.40. The direction of prices from now until the end of February will be key for producers when examining risk management and marketing strategies for the 2023 crop.
Every year, during winter producer meetings, when discussions turn to risk management and marketing strategies, someone inevitably states that December corn and November soybean futures tend to fall during the projected crop insurance price determination period. This statement usually coincides with the assertion that external forces (government and/or global grain companies) are moving markets to reduce premium expense or foster utilization of other price risk management tools to boost profits.
Does a simple analysis support this? No. From 2010 to 2022, the data does not back this claim. Instead, the data shows prices tend to follow the month-over-month price trend. For example, December corn, average monthly prices from December to April declined in 2010, 2013, 2015, 2019, and 2020. For 2011, 2014, 2018, 2021, and 2022 December corn futures prices in- creased. The remaining years 2012, 2016, and 2017 showed no trend and moved mostly sideways over the five-month interval. For the November soybean contract, average monthly prices from December to April declined in 2013, 2015, 2017, 2019, and 2020. For 2011, 2012, 2014, 2016, 2018, 2021, and 2022 November futures contract price increased. The remaining year, 2010, had no trend and moved mostly sideways over the five-month interval.
What does this mean for the 2023 crop insurance price determination period? Not much. This is a backward looking metric – the trend is not revealed until the trend has occurred. However, a small month-over-month average decline occurred between December and January for both corn and soybean harvest futures. The final projected crop insurance prices for corn and soybeans will be important to producer marketing and risk management decisions moving forward.
Corn
Ethanol production for the week ending January 27 was 1.028 million barrels per day, up 16,000 from the previous week. Ethanol stocks were 24.442 million barrels, down 0.635 million compared to last week. Corn net sales reported by exporters for January 20-27 were 62.7 million bushels for the 2022/23 marketing year and 6.4 million bushels for the 23/24 marketing year. Exports for the same period were down 34% compared to last week at 23.6 million bushels. Corn export sales and commitments were 52% of the USDA estimated total annual exports for the 2022/23 marketing year (September 1 to August 31) com- pared to the previous 5-year average of 68%. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at West, North-Central, West-Central, and Mississippi River elevators and barge points and weakened at Northwest elevators and barge points. Overall, basis for the week ranged from 45 under to 42 over, with an average of 16 over the March futures at elevators and barge points. March 2023 corn futures closed at $6.77, down 6 cents since last Friday. For the week, March 2023 corn futures traded between $6.71 and $6.88. May 2023 corn futures closed at $6.75, down 5 cents since last Friday. Mar/May and Mar/Dec future spreads were -2 and -81 cents.
New crop cash prices ranged from $5.06 to $5.96 at elevators and barge points. December 2023 corn futures closed at $5.96, up 9 cents since last Friday. Downside price protection could be obtained by purchasing a $6.00 December 2023 Put Option costing 49 cents establishing a $5.51 futures floor.
Soybeans
Across Tennessee, average soybean basis weakened or remained unchanged at West and Mississippi River elevators and barge points and strengthened at Northwest, West-Central, and North-Central elevators and barge points. Basis ranged from 10 un- der to 45 over, with an average basis of 25 over the March futures contract. Soybean net weekly sales reported by exporters were 27 million bushels for the 2022/23 marketing year and 7.1 million bushels for the 2023/24 marketing year. Exports for the same period were up 3% compared to last week at 72 million bushels. Soybean export sales and commitments were 87% 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 79%. March 2023 soybean futures closed at $15.32, up 23 cents since last Friday. For the week, March 2023 soybean futures traded between $15.10 and $15.43. Mar/May and Mar/Nov future spreads were -7 and -163 cents. May 2023 soybean futures closed at $15.25, up 21 cents since last Friday.
November 2023 soybean futures closed at $13.69, up 18 cents since last Friday. New crop cash soybean prices at elevators and barge points ranged from $13.28 to $13.699. Downside price protection could be achieved by purchasing a $13.80 November 2023 Put Option which would cost 86 cents and set a $12.94 futures floor. Nov/Dec 2023 soybean-to-corn price ratio was 2.25 at the end of the week.
Cotton
Delta upland cotton spot price quotes for February 3 were 84.93 cents/lb (41-4-34) and 87.18 cents/lb (31-3-35). Adjusted world price (AWP) was up 0.19 cents at 75.24 cents. Cotton net weekly sales reported by exporters were net sales of 171,200 bales for the 2022/23 marketing year and 20,200 bales for the 2023/24 marketing year. Exports for the same period were up 21% compared to last week at 212,200 bales. Upland cotton export sales were 84% 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 85%. March 2023 cotton futures closed at 85.43 cents, down 1.46 cents since last Friday. For the week, March 2023 cotton futures traded between 84.5 and 87.4 cents. May 2023 cotton futures closed at 86.11 cents, down 1.349 cents since last Friday. Mar/May and Mar/Dec cotton futures spreads were 0.68 cents and -0.28 cents.
December 2023 cotton futures closed at 85.15 cents, down 0.43 cents since last Friday. Downside price protection could be obtained by purchasing an 86 cent December 2023 Put Option costing 9.24 cents establishing a 76.76 cent futures floor.
Wheat
Wheat net weekly sales reported by exporters were 5.0 million bushels for the 2022/23 marketing year and 1.2 million bushels for the 2023/24 marketing year. Exports for the same period were up 88% compared to last week at 18.2 million bushels. Wheat export sales were 77% 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 86%. Wheat cash prices at elevators and barge points ranged from $7.06 to $7.76. March 2023 wheat futures closed at $7.56, up 6 cents since last Friday. March 2023 wheat futures traded between $7.42 and $7.76 this week. March wheat-to-corn price ratio was 1.12. May 2023 wheat futures closed at $7.68, up 10 cents since last Friday. Mar/May and Mar/Jul future spreads were 12 and 15 cents.
New crop wheat cash prices at elevators and barge points ranged from $7.17 to $7.81. July 2023 wheat futures closed at $7.71, up 11 cents since last Friday. Downside price protection could be obtained by purchasing a $7.80 July 2023 Put Option costing 61 cents establishing a $7.19 futures floor. ∆
DR. AARON SMITH: University of Tennessee