July wheat futures are closing in on the contract low of $6.65

DR. AARON SMITH

KNOXVILLE, TENNESSEE

The price spread between the May and July corn contracts has widened substantially. Since the start of the year the May contract has traded higher than the July contract. The closest the two contracts have traded is -4 3⁄4
cents (July-May), on Friday the contracts closed -47 1⁄4 cents apart. In January, the July-May spread averaged -9 cents, in February -11 cents, in March -15 cents, and so far in April -30 cents. Volume has shifted to the July contract. Prices were pulled down this week based on projected beneficial rains continuing in key Brazil pro- duction regions, solid planting progress in the US, and weak export sales numbers. 

November soybean futures fell below $13.00/bu on Friday. The last three days of the trading week had declines of 11 cents, 8 cents, and 15 1⁄4 cents. The contract closed at $12.85 1⁄4. The contract high so far this year was $14.05 on January 12 and the con- tract low was $12.47 1⁄2 on March 24. 

On Thursday, July cotton futures crossed the 20-day moving average closing down 3.56 cents for the day. On Friday, the con- tract gained 0.06 cents. Maintaining nearby futures prices above 80 cents next week will be key or further weakness could be seen in cotton markets. 78 cents is the next key level of support, below that is the six month contract low of 70.5 cents. 

July wheat futures are closing in on the contract low of $6.65/bu established on March 22. Current futures prices are substantially lower than the projected crop insurance price of $8.40/bu established on September 14, 2022, however the likelihood of a revenue protection crop insurance indemnity payment, due solely to price declines, remains unlikely if production is near APH yield. For example, if a producer purchased 75% buyup coverage, and realizes an actual yield that is the same as their APH, the price trigger would be $6.30/bu ($8.40/bu x 75% = $6.30). 

Corn

Ethanol production for the week ending April 14 was 1.024 million barrels per day, up 65,000 from the previous week. Ethanol stocks were 25.293 million barrels, down 0.165 million compared to last week. Corn net sales reported by exporters for April 7- 13 were 12.3 million bushels for the 2022/23 marketing year and 16.6 million bushels for the 2023/24 marketing year. Exports for the same period were up 42% compared to last week at 51.1 million bushels. Corn export sales and commitments were 81% 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 91%. 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 65 under to 30 over, with an average of 2 over the May futures at elevators and barge points. May 2023 corn futures closed at $6.63, down 3 cents since last Friday. For the week, May 2023 corn futures traded between $6.56 and $6.82. July 2023 corn futures closed at $6.15, down 20 cents since last Friday. May/Jul and May/Dec future spreads were -48 and -115 cents. 

The Crop Progress report estimated corn planted at 8% compared to 3% last week, 4% last year, and a 5-year average of 5%. In Tennessee, corn planted was estimated at 23% compared to 5% last week, 7% last year, and a 5-year average of 16% and corn emerged at 1% compared to 0% last year and a 5-year average of 2%. New crop cash prices ranged from $4.78 to $5.70 at elevators and barge points. December 2023 corn futures closed at $5.48, down 12 cents since last Friday. Downside price protection could be obtained by purchasing a $5.50 December 2023 Put Option costing 38 cents establishing a $5.12 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 10 under to 30 over, with an average basis of 7 over the May futures contract. Soybean net weekly sales reported by exporters were 3.7 million bushels for the 2022/23 marketing year and 0.01 million bushels for the 2023/24 marketing year. Exports for the same period were down 15% compared to last week at 21.4 million bushels. Soybean export sales and commitments were 92% 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 96%. May 2023 soybean futures closed at $14.83, down 17 cents since last Friday. For the week, May 2023 soybean futures traded between $14.80 and $15.31. May/Jul and May/Nov future spreads were -34 and -198 cents. July 2023 soybean futures closed at $14.49, down 18 cents since last Friday. 

 The Crop Progress report estimated soybeans planted at 4% compared to 1% last year and a 5-year average of 1%. In Tennessee, the Crop Progress report estimated soybeans planted at 7% compared to 1% last week, 1% last year, and a 5-year average of 1%. November 2023 soybean futures closed at $12.85, down 16 cents since last Friday. New crop cash soybean prices at elevators and barge points ranged from $12.65 to $13.36. Downside price protection could be achieved by purchasing a $13.00 November 2023 Put Option which would cost 76 cents and set a $12.24 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 April 20 were 78.84 cents/lb (41-4-34) and 81.09 cents/lb (31-3-35). Adjusted world price (AWP) was up 0.77 cents at 70.82 cents. Cotton net weekly sales reported by exporters were net sales of 62,100 bales for the 2022/23 marketing year and 38,000 bales for the 2023/24 marketing year. Exports for the same period were down 13% compared to last week at 289,800 bales. Upland cotton export sales were 103% 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 104%. May 2023 cotton futures closed at 78.41 cents, down 4.45 cents since last Friday. For the week, May 2023 cotton futures traded between 78.42 and 84.93 cents. July 2023 cotton futures closed at 80.15 cents, down 2.78 cents since last Friday. May/Jul and May/Dec cotton futures spreads were 1.74 cents and 1.97 cents. 

The Crop Progress report estimated cotton planted at 8% compared to 6% last week, 10% last year, and a 5-year average of 9%. In Tennessee, the Crop Progress report estimated cotton planted at 1% compared to 0% last week, 0% last year, and a 5-year average of 0%. December 2023 cotton futures closed at 80.38 cents, down 2.42 cents since last Friday. Downside price protection could be obtained by purchasing an 81 cent December 2023 Put Option costing 7.02 cents establishing a 73.98 cent futures floor. 

 Wheat 

Wheat net weekly sales reported by exporters were 9.5 million bushels for the 2022/23 marketing year and 1.7 million bushels for the 2023/24 marketing year. Exports for the same period were down 28% compared to last week at 7.5 million bushels. Wheat export sales were 88% 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 103%. Wheat cash prices at elevators and barge points ranged from $6.45 to $6.98. May 2023 wheat futures closed at $6.61, down 21 cents since last Friday. May 2023 wheat futures traded between $6.58 and $7.07 this week. May wheat-to-corn price ratio was 1.01. May/Jul and May/Sep future spreads were 12 and 22 cents. 

The Crop Progress report estimated winter wheat condition at 27% good-to-excellent and 39% poor-to-very poor; and winter wheat headed at 10% compared to 7% last week, 7% last year, and a 5-year average of 8%. Spring wheat planted was estimated at 3% compared to 1% last week, 8% last year, and a 5-year average of 7%. In Tennessee, winter wheat condition was estimated at 60% good-to-excellent and 11% poor-to-very poor; winter wheat jointing at 75% compared to 67% last week, 76% last year, and a 5-year average of 79%; and winter wheat headed at 3% compared to 1% last week, 8% last year, and a 5-year average of 10%. New crop wheat cash prices at elevators and barge points ranged from $6.40 to $7.05. July 2023 wheat futures closed at $6.73, down 19 cents since last Friday. Downside price protection could be obtained by purchasing a $6.75 July 2023 Put Option costing 33 cents establishing a $6.42 futures floor. September 2023 wheat futures closed at $6.83, down 19 cents since last Friday.  ∆

DR. AARON SMITH: University of Tennessee