Updated supply and demand projections for the 2023 crop were released

Dr. Aaron Smith

 KNOXVILLE, TENNESSEE

On Thursday February 23 at the annual USDA Agricultural Outlook Forum updated supply and demand projections for the 2023 crop were released. For corn, production was projected at 15.085 billion bushels, based on a
181.5 bu/acre national average yield and harvested acreage of 83.1 million acres (91 million acres planted). If realized this would be a 1.355-billion-bushel increase over the 2022 crop. On the demand side, exports were projected to increase to 2.2 billion bushels, up 275 million bushels compared to the current marketing year. Total corn use was projected at 14.49 billion bushels. Ending stocks were projected up 620 million bushels at 1.887 billion. Season average farm price was projected at $5.60, down $0.90 cents compared to the current marketing year. 

Soybean production was projected at 4.51 billion bushels based on a national average yield of 52 bu/acre and harvested acreage of 86.7 million (87.5 million acres planted). Exports and crush were both increased year-over-year resulting in total use increasing from 4.34 billion to 4.461 billion bushels. Projected ending stocks and season average farm price were projected at 290 million bushels, up 65 million bushels year-over-year, and $12.90, down $1.40. 

Cotton acreage planted was lower then the NCC survey estimate at 10.9 million acres. Yield per harvested acre was projected at 852 lbs./acre resulting in projected production of 15.8 million bales, up 1.12 million bales year-over-year. Exports were projected to increase 1.8 million bales to 13.8 million bales for the 2023/24 marketing year. U.S. ending stocks are projected to fall 300,000 bales to 4 million bales and season average price was projected at 80 cents, 3 cents lower than the current marketing year. 

All wheat production was projected at 1.887 billion bushels, up 237 million compared to 2022. National average yield and harvested acreage was projected at 49.2 bu/acre and 38.4 million acres. Total wheat use was increased 67 million bushels, largely due to increased exports. U.S. wheat stocks were projected to grow year-over-year by 40 million bushels. Season average price was projected 50 cents lower at $8.50. 

USDA projections will continue to be revised throughout the 2023 production year. However, the February projections paint a more bearish picture than the one realized for the 2022 crop. A great deal of uncertainty remains for the 2023 crop, but producers should consider risk management strategies that can limit downside price risk. 

Corn

Ethanol production for the week ending February 17 was 1.029 million barrels per day, up 15,000 from the previous week. Ethanol stocks were 25.588 million barrels, up 0.249 million compared to last week. Corn net sales reported by exporters for February 10-16 were 32.4 million bushels for the 2022/23 marketing year and 1.0 million bushels for the 23/24 marketing year. Exports for the same period were up 3% compared to last week at 27.1 million bushels. Corn export sales and commitments were 59% 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 75%. Across Tennessee, average corn basis (cash price-nearby futures price) weakened or remained unchanged at West, Northwest, North-Central, West-Central, and Mississippi River elevators and barge points. Overall, basis for the week ranged from 40 under to 42 over, with an average of 14 over the March futures at elevators and barge points. March 2023 corn futures closed at $6.50, down 27 cents since last Friday. For the week, March 2023 corn futures traded between $6.49 and $6.83. May 2023 corn futures closed at $6.49, down 28 cents since last Friday. Mar/May and Mar/Dec future spreads were -1 and -74 cents. 

New crop cash prices ranged from $4.96 to $6.01 at elevators and barge points. December 2023 corn futures closed at $5.76, down 19 cents since last Friday. Downside price protection could be obtained by purchasing a $5.80 December 2023 Put Option costing 46 cents establishing a $5.34 futures floor. 

Soybeans

Across Tennessee, average soybean basis weakened 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 22 over the March futures contract. Soybean net weekly sales reported by exporters were 20.0 million bushels for the 2022/23 marketing year and 0.4 million bushels for the 2023/24 marketing year. Exports for the same period were down 9% compared to last week at 63.9 million bushels. Soybean export sales and commitments were 90% 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 84%. March 2023 soybean futures closed at $15.29, up 2 cents since last Friday. For the week, March 2023 soybean futures traded between $15.26 and $15.54. Mar/May and Mar/Nov future spreads were -10 and -155 cents. May 2023 soybean futures closed at $15.19, down 3 cents since last Friday. 

November 2023 soybean futures closed at $13.74, down 12 cents since last Friday. New crop cash soybean prices at elevators and barge points ranged from $13.56 to $14.27. Downside price protection could be achieved by purchasing a $13.80 November 2023 Put Option which would cost 76 cents and set a $13.04 futures floor. Nov/Dec 2023 soybean-to-corn price ratio was 2.34 at the end of the week. 

Cotton

Delta upland cotton spot price quotes for February 23 were 81.66 cents/lb (41-4-34) and 83.91 cents/lb (31-3-35). Adjusted world price (AWP) was down 3.27 cents at 70.78 cents. Cotton net weekly sales reported by exporters were net sales of 425,300 bales for the 2022/23 marketing year – a marketing year high – and 11,900 bales for the 2023/24 marketing year. Exports for the same period were up 4% compared to last week at 193,600 bales. Upland cotton export sales were 92% 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 91%. March 2023 cotton futures closed at 85.13 cents, up 4.88 cents since last Friday. For the week, March 2023 cotton futures traded between 79.8 and 85.13 cents. May 2023 cotton futures closed at 84.9 cents, up 3.4 cents since last Fri- day. Mar/May and Mar/Dec cotton futures spreads were -0.81 cents and -0.23 cents. 

December 2023 cotton futures closed at 84.32 cents, up 2.07 cents since last Friday. Downside price protection could be obtained by purchasing an 85 cent December 2023 Put Option costing 8.02 cents establishing a 76.98 cent futures floor. 

Wheat

Wheat net weekly sales reported by exporters were 12.4 million bushels for the 2022/23 marketing year and 2.9 million bushels for the 2023/24 marketing year. Exports for the same period were down 32% compared to last week at 12.4 million bushels. Wheat export sales were 80% 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 93%. Wheat cash prices at elevators and barge points ranged from $6.86 to $7.58. March 2023 wheat futures closed at $7.08, down 57 cents since last Friday. March 2023 wheat futures traded between $7.03 and $7.73 this week. March wheat-to-corn price ratio was 1.09. May 2023 wheat futures closed at $7.21, down 55 cents since last Friday. Mar/May and Mar/Jul future spreads were 13 and 21 cents. 

New crop wheat cash prices at elevators and barge points ranged from $7.16 to $7.64. July 2023 wheat futures closed at $7.29, down 52 cents since last Friday. Downside price protection could be obtained by purchasing a $7.30 July 2023 Put Option costing 44 cents establishing a $6.86 futures floor.  ∆

DR. AARON SMITH: University of Tennessee