Brazil soybean exports have replaced the US as the cheapest on the world market

DR. AARON SMITH

KNOXVILLE, TENNESSEE

May corn has gained 36 1⁄4 cents since the recent six month low of $6.06 3⁄4 on March 10. The rally in old crop futures has pushed the old crop-new crop price spread to 83 cents. Strong export sales have facilitated the recent price rally. This week corn exports were a marketing year high of 121.9 million bushels. Export sales and shipments will need to remain strong to achieve USDA’s marketing year projection of 1.85 billion bushels. 

Since February 22, May soybeans have declined 121 1⁄2 cents. Brazil soybean exports have replaced the US as the cheapest on the world market. Brazil is projected to export 3.4 billion bushels of its record 5.6-billion-bushel crop. Export pace out of South America will be watched closely over the next three months as Brazil can have labor and logistical issues when moving the crop to world markets. US old crop soybean prices are likely to find price support from domestic crushing rather than exports. 

Cotton prices are unlikely to substantially improve unless the weather is uncooperative. The challenge for cotton prices remains very weak demand. There are limited buyers of US cotton even at current prices. As such, purchasers can take a wait and see approach to secure cotton later this year at potentially lower prices. A return to mid-80 cent prices seems very unlikely based on current information. 

July wheat prices set a new low of $6.65 on Wednesday before gaining 26 cents on Friday. Volatility remains a feature in wheat markets as news out of Russia-Ukraine and US weather continue to influence prices. Prices are likely to move mostly sideways until more is known about the Northern Hemisphere winter wheat crop. 

 Corn

Ethanol production for the week ending March 17 was 0.997 million barrels per day, down 17,000 from the previous week. Ethanol stocks were 26.188 million barrels, down 0.206 million compared to last week. Corn net sales reported by exporters for March 10-16 were 121.9 million bushels for the 2022/23 marketing year – a marketing year high – and 3.7 million bushels for the 2023/24 marketing year. Exports for the same period were up 19% compared to last week at 54.4 million bushels – a marketing year high. Corn export sales and commitments were 74% 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 85%. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at West, Northwest, West-Central, North-Central, and Mississippi River elevators and barge points. Overall, basis for the week ranged from 55 under to 41 over, with an average of 15 over the May futures at elevators and barge points. May 2023 corn futures closed at $6.43, up 9 cents since last Friday. For the week, May 2023 corn futures traded between $6.23 and $6.45. July 2023 corn futures closed at $6.23, up 6 cents since last Friday. May/Jul and May/Dec future spreads were -20 and -83 cents. 

New crop cash prices ranged from $4.72 to $5.59 at elevators and barge points. December 2023 corn futures closed at $5.60, down 1 cent since last Friday. Downside price protection could be obtained by purchasing $5.70 December 2023 Put Option costing 47 cents establishing a $5.23 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 and strengthened at North-Central elevators and barge points. Basis ranged from 10 under to 45 over, with an average basis of 32 over the May futures contract. Soybean net weekly sales reported by exporters were 5.6 million bushels for the 2022/23 marketing year and 7.3 million bushels for the 2023/24 marketing year. Ex- ports for the same period were down 9% compared to last week at 25.9 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), com- pared to the previous 5-year average of 91%. May 2023 soybean futures closed at $14.28, down 48 cents since last Friday. For the week, May 2023 soybean futures traded between $14.05 and $14.97. May/Jul and May/Nov future spreads were -22 and - 155 cents. July 2023 soybean futures closed at $14.06, down 55 cents since last Friday. 

 November 2023 soybean futures closed at $12.73, down 40 cents since last Friday. New crop cash soybean prices at elevators and barge points ranged from $12.26 to $13.28. Downside price protection could be achieved by purchasing a $12.80 November 2023 Put Option which would cost 82 cents and set a $11.98 futures floor. Nov/Dec 2023 soybean-to-corn price ratio was 2.27 at the end of the week. 

Cotton

Delta upland cotton spot price quotes for March 23 were 76.58 cents/lb (41-4-34) and 78.83 cents/lb (31-3-35). Adjusted world price (AWP) was down 2.25 cents at 66.33 cents. Cotton net weekly sales reported by exporters were net sales of 310,200 bales for the 2022/23 marketing year and 21,300 bales for the 2023/24 marketing year. Exports for the same period were down 1% compared to last week at 272,500 bales. Upland cotton export sales were 99% 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 100%. May 2023 cotton futures closed at 76.54 cents, down 1.29 cents since last Friday. For the week, May 2023 cotton futures traded between 76.54 and 79.8 cents. July 2023 cotton futures closed at 77.17 cents, down 1.27 cents since last Friday. May/Jul and May/Dec cotton futures spreads were 0.63 cents and 1.86 cents. 

December 2023 cotton futures closed at 78.4 cents, down 1.11 cents since last Friday. Downside price protection could be obtained by purchasing a 79 cent December 2023 Put Option costing 7 cents establishing a 72 cent futures floor. 

Wheat

 Wheat net weekly sales reported by exporters were 4.6 million bushels for the 2022/23 marketing year and 0.5 million bushels for the 2023/24 marketing year. Exports for the same period were up 44% compared to last week at 13.3 million bushels. Wheat export sales were 85% 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 99%. Wheat cash prices at elevators and barge points ranged from $6.34 to $6.96. May 2023 wheat futures closed at $6.88, down 22 cents since last Friday. May 2023 wheat futures traded between $6.54 and $7.08 this week. May wheat-to-corn price ratio was 1.07. May/Jul and May/Sep future spreads were 12 and 23 cents. 

 New crop wheat cash prices at elevators and barge points ranged from $6.34 to $7.04 July 2023 wheat futures closed at $7.00, down 19 cents since last Friday. Downside price protection could be obtained by purchasing a $7.20 July 2023 Put Option costing 42 cents establishing a $6.78 futures floor. September 2023 wheat futures closed at $7.11, down 17 cents since last Friday.  ∆

DR. AARON SMITH: University of Tennessee