All Prices Finished Down

DR. AARON SMITH

KNOXVILLE, TENNESSEE

The week, ending March 10, was not a good week for corn, soybean, cotton, and wheat prices. All prices finished down and the week closed out with news of the collapse of the 16th largest bank in the U.S. – Silicon Valley Bank. Uncertainty in financial institutions and the banking system only adds to concerns with the general economy, considering the numerous other challenges - inflation, government spending, high interest rates etc. Increased concerns with financial markets and the general economy have the potential for numerous impacts on agricultural markets. Two short term concerns are the increased likelihood of short-term price declines and increased volatility. 

Of the four primary row crops in Tennessee, cotton prices were hit the hardest this past week. Cotton is dependent on consumer demand and discretionary spending. As such, weakness in the general economy always has a large impact on cotton futures prices. It will be interesting to see if sub-80 cent cotton can stimulate additional export sales next week. If buyers stay away further weakness is likely. 

In Tennessee corn basis will continue to remain strong, due to strong terminal markets and a smaller 2022 crop due to the June -July drought. For those producers with unpriced crop in storage setting the futures (or establishing a price floor) and letting basis do the work is a strategy worth considering. For new crop, there is still plenty of time to establish price but we have likely seen the high in markets until a weather concern occurs. 

Soybean prices are likely to soften due to Brazil’s crop hitting global markets. Interest in U.S. soybeans, from global importers is likely to wain substantially. Domestic soybean markets should remain strong due to short supplies and strong crush demand. 

Corn

Ethanol production for the week ending March 3 was 1.010 million barrels per day, up 7,000 from the previous week. Ethanol stocks were 25.32 million barrels, up 0.545 million compared to last week. Corn net sales reported by exporters for February 24 -March 2 were 55.6 million bushels for the 2022/23 marketing year. Exports for the same period were up 58% compared to last week at 41.4 million bushels. Corn export sales and commitments were 65% 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%. Across Tennessee, aver- age corn basis (cash price-nearby futures price) weakened or remained unchanged at North-Central and Mississippi River elevators and barge points and strengthened at West, Northwest, and West-Central elevators and barge points. Overall, basis for the week ranged from 50 under to 37 over, with an average of 15 over the May futures at elevators and barge points. May 2023 corn futures closed at $6.17, down 22 cents since last Friday. For the week, May 2023 corn futures traded between $6.06 and $6.40. July 2023 corn futures closed at $6.06, down 22 cents since last Friday. May/Jul and May/Dec future spreads were -11 and -60 cents. 

New crop cash prices ranged from $4.73 to $5.68 at elevators and barge points. December 2023 corn futures closed at $5.57, down 14 cents since last Friday. Downside price protection could be obtained by purchasing a $5.60 December 2023 Put Option costing 42 cents establishing a $5.18 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 20 under to 53 over, with an average basis of 25 over the May futures contract. Soybean net weekly sales reported by exporters were net cancelations of 0.9 million bushels for the 2022/23 marketing year and net sales of 6.3 million bushels for the 2023/24 marketing year. Exports for the same period were down 34% compared to last week at 21.3 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 aver- age of 88%. May 2023 soybean futures closed at $15.07, down 11 cents since last Friday. For the week, May 2023 soybean futures traded between $14.98 and $15.38. May/Jul and May/Nov future spreads were -13 and -150 cents. July 2023 soybean futures closed at $14.94, down 12 cents since last Friday. 

November 2023 soybean futures closed at $13.57, down 16 cents since last Friday. New crop cash soybean prices at elevators and barge points ranged from $13.25 to $14.00. Downside price protection could be achieved by purchasing a $13.60 November 2023 Put Option which would cost 73 cents and set a $12.87futures floor. Nov/Dec 2023 soybean-to-corn price ratio was 2.44 at the end of the week. 

Cotton

Delta upland cotton spot price quotes for March 10 were 77.18 cents/lb (41-4-34) and 79.43 cents/lb (31-3-35). Adjusted world price (AWP) was down 0.78 cents at 71.95 cents. Cotton net weekly sales reported by exporters were net sales of 114,500 bales for the 2022/23 marketing year and net sales cancellations of 68,300 bales for the 2023/24 marketing year. Exports for the same period were up 38% compared to last week at 287,500 bales. Upland cotton export sales were 94% 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 95%. May 2023 cotton futures closed at 78.18 cents, down 5.99 cents since last Friday. For the week, May 2023 cotton futures traded between 78.18 and 85.38 cents. July 2023 cotton futures closed at 78.94 cents, down 5.85 cents since last Friday. May/Jul and May/Dec cotton futures spreads were 0.76 cents and 2.07 cents. 

December 2023 cotton futures closed at 80.25 cents, down 4.01 cents since last Friday. Downside price protection could be obtained by purchasing an 81 cent December 2023 Put Option costing 7.35 cents establishing a 73.65 cent futures floor. 

Wheat

Wheat net weekly sales reported by exporters were 9.8 million bushels for the 2022/23 marketing year and 2.6 million bushels for the 2023/24 marketing year. Exports for the same period were down 38% compared to last week at 13.9 million bushels. Wheat export sales were 83% 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 97%. Wheat cash prices at elevators and barge points ranged from $6.37 to $6.96. May 2023 wheat futures closed at $6.79, down 29 cents since last Friday. May 2023 wheat futures traded between $6.61 and $7.11 this week. May wheat-to-corn price ratio was 1.11. May/Jul and May/Sep future spreads were 11 and 22 cents. 

New crop wheat cash prices at elevators and barge points ranged from $6.37 to $7.02. July 2023 wheat futures closed at $6.90, down 26 cents since last Friday. Downside price protection could be obtained by purchasing a $7.00 July 2023 Put Option costing 51 cents establishing a $6.49 futures floor. September 2023 wheat futures closed at $7.01, down 26 cents since last Friday.  ∆

DR. AARON SMITH: University of Tennessee