There is still a lot of time and uncertainty embedded in this year’s crop
DR. AARON SMITH
KNOXVILLE, TENNESSEE
The May 12 USDA WASDE report provided bearish projections for 2023 corn and soybean supply and demand estimates. There remains a great deal of uncertainty with the 2023 crop, however if USDA projections are
realized corn and soybean prices will be near $4.00 and $12.00 per bushel. Improved weather forecasts have national average trendline yield projected at 52 bu/acre and 181.5 bu/acre, both would be records if realized. U.S. ending stocks for the 2023/24 marketing year are projected at 2.222 billion bushels for corn (up 805 million bushels compared to the current marketing year) and 335 million bushels for soybeans (up 120 million compared to this year). The bearishness in soybeans is more prevalent internationally than domestically. Foreign soybean stocks are projected to increase 669 million bushels. Largely due to Brazil’s record pro- duction and a projected drought recovery in Argentina. As mentioned, there is still a lot of time and uncertainty embedded in this year’s crop but the USDA WASDE’s initial estimates for the 2023/24 marketing set a decidedly bearish tone.
Wheat prices will be influenced by other grain production; however, the underlying supply and demand situation paints a picture of tighter domestic and global stocks. Global stocks-to-use are projected at their lowest level since 2014/15 and U.S. stocks are projected to decline for the 4th consecutive year, from 1.028 billion bushels at the end of the 2019/20 marketing year to 556 million for the upcoming marketing year. Wheat prices will continue to be influenced by the Ukraine-Russia conflict and global trade in 2023 but the current projected supply and demand situation is supportive for prices.
WASDE projections for cotton were mildly supportive but are unlikely to move futures market prices out of the well-entrenched range of 76-85 cents. U.S. ending stocks for the 2022/23 marketing year were revised down based on lower production and increased exports. Carryover into the next marketing year is now projected at 3.5 million bales. Projected 2023 production is estimated at 15.5 million bales based on a projected national average yield of 854 lbs/ acre and harvested acres of 8.71 million. Drought concerns in Texas are contributing to the projected abandonment of 23% and trendline yield almost 100 lbs/acre lower than last year.
The May 12 USDA WASDE report provided bearish projections for 2023 corn and soybean supply and demand estimates. There remains a great deal of uncertainty with the 2023 crop, however if USDA projections are
realized corn and soybean prices will be near $4.00 and $12.00 per bushel. Improved weather forecasts have national average trendline yield projected at 52 bu/acre and 181.5 bu/acre, both would be records if realized. U.S. ending stocks for the 2023/24 marketing year are projected at 2.222 billion bushels for corn (up 805 million bushels compared to the current marketing year) and 335 million bushels for soybeans (up 120 million compared to this year). The bearishness in soybeans is more prevalent internationally than domestically. Foreign soybean stocks are projected to increase 669 million bushels. Largely due to Brazil’s record production and a projected drought recovery in Argentina. As mentioned, there is still a lot of time and uncertainty embedded in this year’s crop but the USDA WASDE’s initial estimates for the 2023/24 marketing set a decidedly bearish tone.
Wheat prices will be influenced by other grain production; however, the underlying supply and demand situation paints a picture of tighter domestic and global stocks. Global stocks-to-use are projected at their lowest level since 2014/15 and U.S. stocks are projected to decline for the 4th consecutive year, from 1.028 billion bushels at the end of the 2019/20 marketing year to 556 million for the upcoming marketing year. Wheat prices will continue to be influenced by the Ukraine-Russia conflict and global trade in 2023 but the current projected supply and demand situation is supportive for prices.
WASDE projections for cotton were mildly supportive but are unlikely to move futures market prices out of the well-entrenched range of 76-85 cents. U.S. ending stocks for the 2022/23 marketing year were revised down based on lower production and increased exports. Carryover into the next marketing year is now projected at 3.5 million bales. Projected 2023 production is estimated at 15.5 million bales based on a projected national average yield of 854 lbs/ acre and harvested acres of 8.71 million. Drought concerns in Texas are contributing to the projected abandonment of 23% and trendline yield almost 100 lbs/acre low- er than last year. A summary of USDA WASDE projections for corn, cotton, soybeans, and wheat is available at:
https://arec.tennessee.edu/extension/tennessee-market-highlights/monthly-crop-comments/.
Corn
Ethanol production for the week ending May 5 was 0.965 million barrels per day, down 11,000 from the previous week. Ethanol stocks were 23.291 million barrels, down 0.072 million compared to last week. Corn net sales reported by exporters for April 28 – May 4 were net sales of 10.1 million bushels for the 2022/23 marketing year and 3.3 million bushels for the 2023/24 marketing year. Exports for the same period were down 33% compared to last week at 45.1 million bushels. Corn export sales and commitments were 82% 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 95%. Across Tennessee, average corn basis (cash price-nearby futures price) weakened or remained unchanged at West, Northwest, West-Central, North-Central, and Mississippi River elevators. Overall, basis for the week ranged from 40 under to 43 over, with an average of 7 over the July futures at elevators and barge points. July 2023 corn futures closed at $5.86, down 10 cents since last Friday. For the week, July 2023 corn futures traded between $5.72 and $6.00. Jul/Sep and Jul/Dec future spreads were -76 and -78 cents.
The Crop Progress report estimated corn planted at 49% compared to 26% last week, 21% last year, and a 5-year average of 42%; and corn emerged at 12% compared to 6% last week, 5% last year, and a 5-year average of 11%. In Tennessee, corn planted was estimated at 79% compared to 60% last week, 61% last year, and a 5-year average of 66%; and corn emerged at 43% compared to 23% last week, 23% last year, and a 5-year average of 35%. New crop cash prices ranged from $4.34 to $5.24 at elevators and barge points. September 2023 corn futures closed at $5.10, down 27 cents since last Friday. December 2023 corn futures closed at $5.08, down 26 cents since last Friday. Downside price protection could be obtained by purchasing a $5.10 December 2023 Put Option costing 36 cents establishing a $4.74 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 15 to 30 over, with an average basis of 24 over the July futures contract. Soybean net weekly sales reported by exporters were 2.3 million bushels for the 2022/23 marketing year and 1.8 million for the 2023/24 marketing year. Exports for the same period were down 27% compared to last week at 15.1 million bushels. Soybean export sales and commitments were 93% 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 98%. July 2023 soybean futures closed at $13.90, down 46 cents since last Friday. For the week, Jul 2023 soybean futures traded between $13.85 and $14.46. Jul/Aug and Jul/Nov future spreads were -72 and -167 cents. July soybean-to-corn price ratio was 2.37 at the end of the week. August 2023 soybean futures closed at $13.18, down 55 cents since last Friday.
The Crop Progress report estimated soybeans planted at 35% compared to 19% last week, 11% last year, and a 5-year average of 21%; and soybeans emerged at 9% compared to 3% last year and a 5-year average of 4%. In Tennessee, the Crop Progress report estimated soybeans planted at 38% compared to 23% last week, 18% last year, and a 5-year average of 16%; and soybeans emerged at 9% compared to 3% last month and a 5-year average of 4%. November 2023 soybean futures closed at $12.23, down 57 cents since last Friday. New crop cash soybean prices at elevators and barge points ranged from $12.08 to $12.78. Downside price protection could be achieved by purchasing a $12.40 November 2023 Put Option which would cost 67 cents and set a $11.73 futures floor. Nov/Dec 2023 soybean-to-corn price ratio was 2.41 at the end of the week.
Cotton
Delta upland cotton spot price quotes for May 11 were 78.37 cents/lb (41-4-34) and 80.62 cents/lb (31-3-35). Adjusted world price (AWP) was up 1.28 cents at 67.97 cents. Cotton net weekly sales reported by exporters were 246,800 bales for the 2022/23 marketing year and 12,800 bales for the 2023/24 marketing year. Exports for the same period were down 20% compared to last week at 331,000 bales. Upland cotton export sales were 108% 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 109%. July 2023 cotton futures closed at 80.53 cents, down 3.37 cents since last Friday. For the week, July 2023 cotton futures traded between 79.6 and 84.87 cents. Jul/Dec and Jul/Mar cotton futures spreads were -0.31 cents and -0.38 cents.
The Crop Progress report estimated cotton planted at 22% compared to 15% last week, 23% last year, and a 5-year average of 23%. In Tennessee, the Crop Progress report estimated cotton planted at 15% compared to 5% last week, 12% last year, and a 5 -year average of 11%. December 2023 cotton futures closed at 80.15 cents, down 3.09 cents since last Friday. Downside price protection could be obtained by purchasing an 81 cent December 2023 Put Option costing 6.21 cents establishing a 74.79 cent futures floor. March 2024 cotton futures closed at 80.22 cents, down 2.79 cents since last Friday.
Wheat
Wheat net weekly sales reported by exporters were 1.0 million bushels for the 2022/23 marketing year and 12.3 million bushels for the 2023/24 marketing year. Exports for the same period were down 29% compared to last week at 7.5 million bushels. Wheat export sales were 90% 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 105%. Wheat cash prices at elevators and barge points ranged from $5.97 to $6.49.
The Crop Progress report estimated winter wheat condition at 29% good-to-excellent and 44% poor-to-very poor; and winter wheat headed at 38% compared to 25% last week, 32% last year, and a 5-year average of 35%. Spring wheat planted was estimated at 24% compared to 12% last week, 26% last year, and a 5-year average of 38%; and spring wheat emerged at 5% compared to 2% last week, 8% last year, and a 5-year average of 11%. In Tennessee, winter wheat condition was estimated at 69% good-to-excellent and 8% poor-to-very poor; winter wheat jointing at 97% compared to 94% last week, and 97% last year; and winter wheat headed at 85% compared to 61% last week, 78% last year, and a 5-year average of 78%. New crop wheat cash prices at elevators and barge points ranged from $5.46 to $6.47. July 2023 wheat futures closed at $6.35, down 25 cents since last Friday. July 2023 wheat futures traded between $6.25 and $6.69 this week. July wheat-to-corn price ratio was 1.08. Jul/ Sep and Jul/Jul future spreads were 12 and 47 cents. Downside price protection could be obtained by purchasing a $6.35 July 2023 Put Option costing 28 cents establishing a $6.07 futures floor. September 2023 wheat futures closed at $6.47, down 24 cents since last Friday. July 2024 wheat futures closed at $6.82, down 17 cents since last Friday. ∆
DR. AARON SMITH, University of Tennessee