Dry Conditions Have Crept Across A Large Portion Of The Corn Belt

DR. AARON SMITH

KNOXVILLE, TENNESSEE

December corn has increased 50 1⁄2 cents since establishing a recent low of $4.90 3⁄4 on May 18. With planting almost complete - at 92% nationally, the market will focus on weather to determine prices moving forward. As of
June 1, dry conditions have crept across a large portion of the Corn Belt. The U.S. drought monitor reports that 66.2% of the Midwest is abnormally dry and 3.8% is classified as in severe drought. NO- AA’s Climate Prediction Center still projects above normal precipitation for most of the Midwest and southeast in the June-July- August seasonal precipitation outlook. Corn prices will be reactive to changes in short- and long-term temperature and precipitation changes for the next two months. 

November soybeans set a contract low this week at $11.30 1⁄2. The beneficial U.S. planting conditions and the record Brazilian soybean harvest have forced prices lower. Daily trading ranges have been choppy with movements of -36 1⁄4, -6 3⁄4, +22 1⁄2, and +14 3⁄4 cents for the week of May 30 to June 2. 

The USDA Crop Production report estimates Tennessee SRW wheat harvested acreage at 400,000 acres, up 65,000 acres compared to last year. Average state yield is projected at 72 bu/acre, 1 bu/acre lower than last year. In Tennessee, 2023 total SRW wheat production is projected at 28.8 million bushels, 4.345 million bushels greater than last year. Harvested-to-planted acreage in Tennessee is estimated at 85.1%, the highest percentage since 2016. This is substantially different than the national situation, which projects harvested-to-planted winter wheat at 67.4%, the lowest harvest-to-planted percent in over 100 years. 

This year December cotton futures have traded between 77.56 and 86.98 cents. The trading range has tightened since the end of March to 78.5 to 84.5 cents, a 6-cent trading range. Last year, from April 1 to June 1, the December 2022 cotton futures con- tract had a 22.28 cent trading range 110.68 to 132.96 cents. The current trading range is likely to persist until more information is available on global cotton demand for the 2023/24 marketing year and 2023 U.S. production. 

Corn

Ethanol production for the week ending May 26 was 1.004 million barrels per day, up 21,000 from the previous week. Ethanol stocks were 22.332 million barrels, up 0.291 million compared to last week. Corn net sales reported by exporters for May 19-25 were net sales of 7.4 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 5% compared to last week at 56.5 million bushels. Corn export sales and commitments were 85% 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%. Across Tennessee, average corn basis (cash price-nearby futures price) weakened or remained unchanged at West, Northwest, West-Central, and Mississippi River elevators and barge points and strengthened at North-Central elevators and barge points. Overall, basis for the week ranged from 40 under to 43 over, with an average of 4 over the July futures at elevators and barge points. July 2023 corn futures closed at $6.09, up 5 cents since last Friday. For the week, July 2023 corn futures traded between $5.77 and $6.10. Jul/Sep and Jul/Dec future spreads were -74 and -68 cents. 

The Crop Progress report estimated corn condition at 69% good-to-excellent and 5% poor-to-very poor; corn planted at 92% compared to 81% last week, 84% last year, and a 5-year average of 84%; and corn emerged at 72% compared to 52% last week, 58% last year, and a 5-year average of 63%. In Tennessee, corn condition was 78% good-to-excellent and 3% poor-to-very poor; corn planted was estimated at 97% compared to 94% last week, 96% last year, and a 5-year average of 94%; and corn emerged at 87% compared to 79% last week, 79% last year, and a 5-year average of 82%. New crop cash prices ranged from $4.41 to $5.17 at elevators and barge points. September 2023 corn futures closed at $5.35, up 6 cents since last Friday. December 2023 corn futures closed at $5.41, up 7 cents since last Friday. Downside price protection could be obtained by purchasing a $5.50 December 2023 Put Option costing 50 cents establishing a $5.00 futures floor. 

Soybeans

Across Tennessee the average soybean basis weakened or remained unchanged at West, Northwest, West-Central, North- Central, and Mississippi River elevators and barge points. Basis ranged from 12 under to 30 over, with an average basis of 7 over the July futures contract. Soybean net weekly sales reported by exporters were 4.5 million bushels for the 2022/23 marketing year and 11.1 million for the 2023/24 marketing year. Exports for the same period were down 20% compared to last week at 8.5 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 100%. July 2023 soybean futures closed at $13.52, up 15 cents since last Friday. For the week, July 2023 soybean futures traded between $12.70 and $13.55. Jul/Aug and Jul/Nov future spreads were -90 and -169 cents. July soybean-to-corn price ratio was 2.22 at the end of the week. August 2023 soybean futures closed at $12.62, up 1 cent since last Friday. 

 The Crop Progress report estimated soybeans planted at 83% compared to 66% last week, 64% last year, and a 5-year average of 65%; and soybeans emerged at 56% compared to 36% last week, 36% last year, and a 5-year average of 40%. In Tennessee, the Crop Progress report estimated soybeans planted at 68% compared to 60% last week, 59% last year, and a 5-year average of 57%; and soybeans emerged at 50% compared to 36% last week, 41% last year, and a 5-year average of 37%. November 2023 soybean futures closed at $11.83, down 6 cents since last Friday. New crop cash soybean prices at elevators and barge points ranged from $11.03 to $11.74. Downside price protection could be achieved by purchasing a $12.00 November 2023 Put Option which would cost 75 cents and set an $11.25 futures floor. Nov/Dec 2023 soybean-to-corn price ratio was 2.19 at the end of the week. 

Cotton

Delta upland cotton spot price quotes for June 1 were 84.67 cents/lb (41-4-34) and 86.92 cents/lb (31-3-35). Adjusted world price (AWP) was down 2.17 cents at 66.91 cents. Cotton net weekly sales reported by exporters were 267,800 bales for the 2022/23 marketing year and 76,600 bales for the 2023/24 marketing year. Exports for the same period were up 5% compared to last week at 283,000 bales. Upland cotton export sales were 109% 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 112%. July 2023 cotton futures closed at 86.05 cents, up 2.7 cents since last Friday. For the week, July 2023 cotton futures traded between 82.56 and 87.16 cents. Jul/Dec and Jul/Mar cotton futures spreads were -4.2 cents and -4.4 cents. 

The Crop Progress report estimated cotton condition at 48% good-to-excellent and 13% poor-to-very poor; cotton planted at 60% compared to 45% last week, 66% last year, and a 5-year average of 62%; and cotton squaring at 3% compared to 7% last year and a 5-year average of 6%. In Tennessee, the Crop Progress report estimated cotton condition at 71% good-to-excellent and 4% poor-to-very poor; cotton planted at 85% compared to 62% last week, 84% last year, and a 5-year average of 79%; and cotton squaring at 2% compared to 1% last week, 5% last year, and a 5-year average 3%. December 2023 cotton futures closed at 81.85 cents, up 1.31 cents since last Friday. Downside price protection could be obtained by purchasing an 82 cent December 2023 Put Option costing 5.67 cents establishing a 76.33 cent futures floor. March 2024 cotton futures closed at 81.65 cents, up 0.99 cents since last Friday. 

Wheat 

Wheat net weekly sales reported by exporters were net sales cancellations of 7.7 million bushels for the 2022/23 marketing year and net sales of 17.1 million bushels for the 2023/24 marketing year. Exports for the same period were up 21% compared to last week at 17.1 million bushels. Wheat export sales were 89% 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 106%. Wheat cash prices at elevators and barge points ranged from $5.76 to $6.04. 

The Crop Progress report estimated winter wheat condition at 34% good-to-excellent and 35% poor-to-very poor; and winter wheat headed at 72% compared to 61% last week, 71% last year, and a 5-year average of 73%. Spring wheat planted was estimated at 85% compared to 64% last week, 70% last year, and a 5-year average of 86%; and spring wheat emerged at 57% compared to 32% last week, 40% last year, and a 5-year average of 59%. In Tennessee, winter wheat condition was estimated at 73% good-to-excellent and 4% poor-to-very poor; winter wheat headed at 98% compared to 97% last week and 98% last year%; winter wheat coloring at 89% compared to 35% last week, 77% last year, and a 5-year average of 71%; winter wheat mature at 22%; and winter wheat harvested at 1%. New crop wheat cash prices at elevators and barge points ranged from $5.48 to $6.09. July 2023 wheat futures closed at $6.19, up 3 cents since last Friday. July 2023 wheat futures traded between $5.73 and $6.22 this week. July wheat-to-corn price ratio was 1.02. Jul/Sep and Jul/Jul future spreads were 13 and 63 cents. Downside price protection could be obtained by purchasing a $6.20 July 2023 Put Option costing 22 cents establishing a $5.98 futures floor. September 2023 wheat futures closed at $6.32, up 3 cents since last Friday. July 2024 wheat futures closed at $6.82, up 9 cents since last Friday. ∆

DR. AARON SMITH: University of Tennessee