Old crop and new crop corn futures continue to spread

DR. AARON SMITH

KNOXVILLE, TENNESSEE

March corn futures closed the week at $6.76 per bushel compared to the December contract at $5.94. Compared to December 6th, 2022, when the March
contract closed at $6.37 and December at $5.93 the spread has added 38 cents (82 cents compared to 44 cents). A short U.S. crop and tight projected ending stocks have fueled price increases for crops held in storage. Additionally, due to the short crop in Tennessee, as a result of the June-July drought, it is likely that basis remains very strong in many locations. The 2023 crop has a tremendous amount of uncertainty and futures prices have been reluctant to move out of the current trading range of $5.80 to $6.10. Moving forward it is likely that old crop prices will remain strong until more is known about the 2023 U.S. crop and Brazil’s second corn crop. 

Like corn, old and new crop soybean prices have expanded the price spread. On December 1st the March-November price spread was 67 cents ($14.36 and $13.69) on Friday the spread closed at 141 cents ($15.27 and $13.86). The majority of the change in the price spread can be attributed to strengthening in old crop prices. Old crop soybeans will likely face some resistance as Brazil’s crop enters the export market, however due to short U.S. stocks it is likely that prices will continue to be strong until more is known about 2023 U.S. planting intentions. 2023 harvest soybean futures have traded between $13.30 and $14.27 since early September. 

This week the National Cotton Council released the results of their 2023 planting survey. The survey indicated total upland cotton acres at 11.235 million acres down 17.3% compared to 2022 planted acreage of 13.58 million acres. Tennessee planted acres were estimated at 312,000 down 7% from last year’s 335,000 acres. Price competitiveness with corn soybeans continue to provide headwinds for cotton acreage in Tennessee. Demand (or lack thereof) continues to be the major impediment to in- creased cotton prices. 

Corn 

Ethanol production for the week ending February 10 was 1.014 million barrels per day, up 14,000 from the previous week. Ethanol stocks were 25.339 million barrels, up 0.922 million compared to last week. Corn net sales reported by exporters for February 3-9 were 40.3 million bushels for the 2022/23 marketing year and 3.9 million bushels for the 23/24 marketing year. Ex- ports for the same period were up 70% compared to last week at 26.4 million bushels. Corn 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 71%. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at West, Northwest, North-Central, West-Central, and Mississippi River elevators and barge points. Over- all, basis for the week ranged from 40 under to 42 over, with an average of 15 over the March futures at elevators and barge points. March 2023 corn futures closed at $6.77, down 3 cents since last Friday. For the week, March 2023 corn futures traded between $6.73 and $6.88. May 2023 corn futures closed at $6.77, down 1 cent since last Friday. Mar/May and Mar/Dec future spreads were 0 and -82 cents. 

New crop cash prices ranged from $5.03 to $5.98 at elevators and barge points. December 2023 corn futures closed at $5.95, down 1 cent since last Friday. Downside price protection could be obtained by purchasing a $6.00 December 2023 Put Option costing 47 cents establishing a $5.53 futures floor. 

Soybeans 

Across Tennessee, average soybean basis strengthened or remained unchanged at West, Northwest, West-Central, North- Central, and Mississippi River elevators and barge points. Basis ranged from even to 39 over, with an average basis of 24 over the March futures contract. Soybean net weekly sales reported by exporters were 18.8 million bushels for the 2022/23 marketing year and 9.5 million bushels for the 2023/24 marketing year. Exports for the same period were up 4% compared to last week at 69.9 million bushels. Soybean export sales and commitments were 89% 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 81%. March 2023 soy- bean futures closed at $15.27, down 15 cents since last Friday. For the week, March 2023 soybean futures traded between $15.16 and $15.55. Mar/May and Mar/Nov future spreads were -5 and -141 cents. May 2023 soybean futures closed at $15.22, down 11 cents since last Friday. 

November 2023 soybean futures closed at $13.86, up 8 cents since last Friday. New crop cash soybean prices at elevators and barge points ranged from $13.43 to $14.12. Downside price protection could be achieved by purchasing a $14.00 November 2023 Put Option which would cost 84 cents and set a $13.16 futures floor. Nov/Dec 2023 soybean-to-corn price ratio was 2.33 at the end of the week. 

Cotton 

Delta upland cotton spot price quotes for February 16 were 81.50 cents/lb (41-4-34) and 83.75 cents/lb (31-3-35). Adjusted world price (AWP) was down 0.36 cents at 74.05 cents. Cotton net weekly sales reported by exporters were net sales of 216,900 bales for the 2022/23 marketing year and 23,900 bales for the 2023/24 marketing year. Exports for the same period were down 11% compared to last week at 186,400 bales. Upland cotton export sales were 88% 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 88%. March 2023 cotton futures closed at 80.25 cents, down 5.02 cents since last Friday. For the week, March 2023 cotton futures traded between 80 and 86.73 cents. May 2023 cotton futures closed at 81.5 cents, down 4.08 cents since last Friday. Mar/May and Mar/Dec cotton futures spreads were 1.25 cents and 2 cents. 

December 2023 cotton futures closed at 82.25 cents, down 2.43 cents since last Friday. Downside price protection could be obtained by purchasing an 83 cent December 2023 Put Option costing 8.11 cents establishing a 74.89 cent futures floor. 

Wheat 

Wheat net weekly sales reported by exporters were 7.7 million bushels for the 2022/23 marketing year and 0.8 million bushels for the 2023/24 marketing year. Exports for the same period were down 7% compared to last week at 18.4 million bushels. Wheat export sales were 79% 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 89%. Wheat cash prices at elevators and barge points ranged from $7.15 to $7.97. March 2023 wheat futures closed at $7.65, down 21 cents since last Friday. March 2023 wheat futures traded between $7.59 and $7.97 this week. March wheat-to-corn price ratio was 1.13. May 2023 wheat futures closed at $7.76, down 19 cents since last Friday. Mar/May and Mar/Jul future spreads were 11 and 16 cents. 

New crop wheat cash prices at elevators and barge points ranged from $7.34 to $7.98. July 2023 wheat futures closed at $7.81, down 18 cents since last Friday. Downside price protection could be obtained by purchasing a $7.90 July 2023 Put Option costing 62 cents establishing a $7.28 futures floor.  ∆

DR. AARON SMITH: University of Tennessee