November Soybean Futures Have Built Strong Support At $13.00

DR. AARON SMITH

KNOXVILLE, TENNESSEE
This week the December corn contract established a new low at $4.73 1⁄2, before closing up the last three trading days of the week. US yield estimates remain a hot topic of debate between market analysts, as rains at the end of July through August have improved crop conditions across a large portion of the growing area. As of August 15th, corn production in drought is estimated at 42%, with 5% in extreme drought, 15% in severe drought, and 22% in moderate drought. Currently, the USDA estimates the national average corn yield at 175.1 bu acre. Most analysts have a national yield closer to 177 bu/acre. Based on USDA’s current harvested acre projection of 86.322 million acres, a 1.9 bu/acre increase in national average yield would increase US production by 164 million bushels. 

November soybean futures have built strong support at $13.00. This is not to say prices won’t break below $13.00, but it will likely require additional bearish news. The most likely source of new bearish data, for soybeans, remains South American planted acres and projected production. The bulk of the South American soybean acres are planted September through December. Soybean futures prices greater than $13.00 will continue to support increased planted acres in South America. It is likely that Argentina’s production will increase dramatically compared to last year’s drought-stricken crop. 

December cotton prices have pulled back nearly six cents from the recent high of 88.83 cents on August 11. There is good support for December cotton futures prices at 83 cents (previously a level of resistance). Prices will be sensitive to intensification of the drought in the Southern Plains and the potential for an active hurricane season this fall. For cotton futures to trade, and maintain, prices greater than 90 cents export sales and global demand need to show signs of improvement.

The post-harvest collapse in wheat futures has been dramatic. On July 25th, September wheat futures achieved a four-month high of $7.77 1⁄4. This week the September contract set a low of $5.86 1⁄4, a decline of $1.91/bu in 19 trading days. Numerous factors (weather/drought, Russia-Ukraine, export sales, and the potential for increased global production) have contributed to the collapse in wheat prices. 

Corn

Ethanol production for the week ending August 11 was 1.069 million barrels per day, up 76,000 barrels from the previous week. Ethanol stocks were 23.435 million barrels, up 0.555 million compared to last week. Corn net sales reported by exporters for August 4-10 were net sales of 9.2 million bushels for the 2022/23 marketing year and 27.7 million bushels for the 2023/24 marketing year. Exports for the same period were down 7% compared to last week at 17.5 million bushels. Corn export sales and commitments were 98% 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 103%. Across Tennessee, average corn basis (cash price-nearby futures price) remained unchanged at West, Northwest, North-Central, West-Central, and Mississippi River elevators and barge points. Overall, basis for the week ranged from 55 under to 10 over, with an average of 23 under the September futures at elevators and barge points at the end of the week. 

The Crop Progress report estimated corn condition at 59% good-to-excellent and 13% poor-to-very poor; corn silking at 96% compared to 93% last week, 93% last year, and a 5-year average of 96%; corn dough at 65% compared to 47% last week, 60% last year, and a 5-year average of 63%; and corn dented at 18% compared to 8% last week, 15% last year, and a 5-year average of 18%. In Tennessee, corn condition was 74% good-to-excellent and 7% poor-to-very poor; corn silking was 99% compared to 97% last week, 98% last year, and a 5-year average of 99%; corn dough at 90% compared to 81% last week, 87% last year, and a 5-year average of 87%; corn dented at 55% compared to 37% last week, 42% last year, and a 5-year average of 47%; and corn mature 4% compared to 0% last year. New crop cash prices ranged from $4.20 to $4.71 at elevators and barge points. September 2023 corn futures closed at $4.79, up 5 cents since last Friday. For the week, September 2023 corn futures traded between $4.72 and $4.82. Sep/Dec and Sep/Mar future spreads were 14 and 27 cents. December 2023 corn futures closed at $4.93, up 6 cents since last Friday. Downside price protection could be obtained by purchasing a $5.00 December 2023 Put Option costing 29 cents establishing a $4.71 futures floor. March 2024 corn futures closed at $5.06, up 5 cents since last Friday. 

Soybeans

Across Tennessee average soybean basis strengthened or remained unchanged at West, Northwest, North-Central, West- Central, and Mississippi River elevators and barge points. Basis ranged from 53 to 74 over, with an average basis at the end of the week of 74 over the September futures contract. Soybean net weekly sales reported by exporters were 3.4 million bushels for the 2022/23 marketing year and 51.7 million bushels for the 2023/24 marketing year. Exports for the same period were down 7% compared to last week at 16.0 million bushels. Soybean export sales and commitments were 99% 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 104%. September 2023 soybean futures closed at $13.62, up 25 cents since last Friday. For the week, September 2023 soybean futures traded between $13.19 and $13.65. Sep/Nov and Sep/Jan future spreads were -9 and 1 cents. September soy- bean-to-corn price ratio was 2.84 at the end of the week. 

The Crop Progress report estimated soybean condition at 59% good-to-excellent and 12% poor-to-very poor; soybeans blooming at 94% compared to 90% last week, 92% last year, and a 5-year average of 92%; and soybeans setting pods at 78% compared to 66% last week, 72% last year, and a 5-year average of 75%. In Tennessee, the Crop Progress report estimated soybean condition at 79% good-to-excellent and 5% poor-to-very poor; soybeans blooming at 91%, compared to 86% last week, 91% last year, and a 5-year average of 90%; and soybeans setting pods at 76% compared to 63% last week, 68% last year, and a 5- year average of 71%. November 2023 soybean futures closed at $13.53, up 46 cents since last Friday. New crop cash soybean prices at elevators and barge points ranged from $12.58 to $13.36. Downside price protection could be achieved by purchasing a $13.60 November 2023 Put Option which would cost 47 cents and set a $13.13 futures floor. Nov/Dec 2023 soybean-to-corn price ratio was 2.74 at the end of the week. January 2024 soybean futures closed at $13.63, up 46 cents since last Friday. 

Cotton

North Delta upland cotton spot price quotes for August 17 were 81.46 cents/lb (41-4-34) and 83.61 cents/lb (31-3-35). Adjusted world price (AWP) was up 0.89 cents at 71.14 cents. Cotton net weekly sales reported by exporters were 186,300 bales for the 2023/24 marketing year. Exports for the same period were down 38% compared to last week at 202,300 bales. Upland cotton export sales were 43% of the USDA estimated total annual exports for the 2023/24 marketing year (August 1 to July 31), compared to the previous 5-year average of 53%. 

The Crop Progress report estimated cotton condition at 36% good-to-excellent and 43% poor-to-very poor; cotton squaring at 96% compared to 92% last week, 98% last year, and a 5-year average of 97%; cotton setting bolls at 72% compared to 63% last week, 78% last year, and a 5-year average of 77%; and cotton bolls opening at 13% compare to 8% last week, 14% last year, and a 5-year average of 14%. In Tennessee, the Crop Progress report estimated cotton condition at 72% good-to-excellent and 11% poor-to-very poor; cotton squaring at 96% compared to 94% last week, 98% last year, and a 5-year average of 99%; cotton setting bolls at 83% compared to 73% last week, 90% last year, and a 5-year average of 85%; and cotton bolls opening at 4% compared to 3% last week, 4% last year, and a 5-year average of 4%. December 2023 cotton futures closed at 83.62 cents, up down 4.27 cents since last Friday. For the week, December 2023 cotton futures traded between 83.4 and 87.8 cents. Downside price protection could be obtained by purchasing an 84 cent December 2023 Put Option costing 5.35 cents establishing an 78.65 cent futures floor. March 2024 cotton futures closed at 83.55 cents, down 4.12 cents since last Friday. May 2023 cotton futures closed at 83.68 cents, down 3.86 cents since last Friday. Dec/Mar and Dec/May cotton futures spreads were -0.07 cents and 0.06 cents. 

Wheat

Wheat net weekly sales reported by exporters were net sales of 13.2 million bushels for the 2023/24 marketing year. Exports for the same period were down 35% compared to last week at 8.4 million bushels. Wheat export sales were 36% of the USDA estimated total annual exports for the 2023/24 marketing year (June 1 to May 31), compared to the previous 5-year average of 43%. Wheat cash prices at elevators and barge points ranged from $5.14 to $5.51. 

The Crop Progress report estimated winter wheat harvested at 92% compared to 87% last week, 89% last year, and a 5-year average of 92%; spring wheat condition at 42% good-to-excellent and 20% poor-to-very poor; and spring wheat harvested at 24% compared to 11% last week, 15% last year, and a 5-year average of 28%. September 2023 wheat futures closed at $6.13, down 13 cents since last Friday. September 2023 wheat futures traded between $5.86 and $6.35 this week. September wheat- to-corn price ratio was 1.28. Sep/Dec and Sep/Jul future spreads were 26 and 70 cents. December 2023 wheat futures closed at $6.39, down 14 cents since last Friday. July 2024 wheat futures closed at $6.83, down 20 cents since last Friday. Downside price protection could be obtained by purchasing a $6.90 July 2024 Put Option costing 84 cents establishing a $6.06 futures floor. New crop wheat cash prices at elevators and barge points ranged from $5.95 to $6.60. ∆

DR. AARON SMITH: University of Tennessee