Moving Forward, Harvest Weather Will Influence Futures Market Prices

DR. AARON SMITH

KNOXVILLE, TENNESSEE

Corn and wheat futures prices softened in August. December corn closed August 31 at $4.78 1⁄4, down 34 3⁄4 cents compared to the July 31 close of $5.13, on. July 2024 wheat closed August 31 at $6.54 1⁄2, down
72 3⁄4 cents compared to the July 31 close of at $7.27 1⁄4. Soybean and cotton harvest futures had gains for August. The December cotton contract closed up 3.1 cents (84.72 on July 31 compared to 87.82 on August 31) and November soybeans closed up 37 cents ($13.31 on July 31 compared to $13.68 on August 31). Moving forward, harvest weather will influence futures market prices primarily through hurricane activity, untimely rain or storms during harvest, and the potential for an early frost. However, demand will also play a major role in price direction, particularly export demand. 

Lagging export sales entering the new corn and soybean marketing year are a cause for concern. Export sales will be a key factor in farm gate prices for the 2023/2024 marketing year. Currently, outstanding export sales for the 2023/24 marketing year are: corn 8.34 million metric tons (MMT), soybeans 12.94 MMT, cotton 4.5 million running bales, and wheat 3.64 MMT. For the same week in the marketing year, outstanding sales for corn, soybean, cotton, and wheat are down 15.4%, 36.9%, 32.1%, and 30.1% compared to last year. Corn and soybean outstanding export sales, for this week in the marketing year, are at their lowest points since the trade war with China in 2019. Export sales are an extremely important source of demand for agriculture. 13.6% of corn, 43.4% of soybean, 89.3% of cotton, and 40.4% of wheat production in the US is projected to be exported to foreign counties for the 2023/24 marketing year. This does not include processed by-products, such as soybean meal, soybean oil, DDGs, and ethanol. The cotton and wheat marketing years have only just begun, and the corn and soybean marketing year starts September 1, so there is still time for export sales to strengthen, however the start of the 2023/24 marketing year gives some cause for concern. 

Corn

Ethanol production for the week ending August 25 was 1.007 million barrels per day, down 41,000 barrels from the previous week. Ethanol stocks were 21.609 million barrels, down 1.181 million compared to last week. Corn net sales reported by exporters for August 18-24 were net sales of 2.8 million bushels for the 2022/23 marketing year and 39.0 million bushels for the 2023/24 marketing year. Exports for the same period were up 34% compared to last week at 26.1 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 average of 55 under the September futures at elevators and barge points. 

The Crop Progress report estimated corn condition at 56% good-to-excellent and 17% poor-to-very poor; corn dough at 88% compared to 78% last week, 84% last year, and a 5-year average of 86%; corn dented at 51% compared to 35% last week, 44% last year, and a 5-year average of 49%; and corn mature at 9% compared to 4% last week, 7% last year, and a 5-year average of 8%. In Tennessee, corn condition was estimated at 75% good-to-excellent and 7% poor-to-very poor; corn dough at 97% compared to 95% last week, 96% last year, and a 5-year average of 97%; corn dented at 82% compared to 71% last week, 77% last year, and a 5-year average of 78%; and corn mature 32% compared to 15% last week, 25% last year, and a 5-year average of 23%. New crop cash prices ranged from $4.13 to $4.77 at elevators and barge points. December 2023 corn futures closed at $4.81, down 7 cents since last Friday. For the week December 2023 corn futures traded between $4.76 and $4.99. Dec/Mar and Dec/May future spreads were 15 and 24 cents. Downside price protection could be obtained by purchasing a $4.85 December 2023 Put Option costing 20 cents establishing a $4.65 futures floor. March 2024 corn futures closed at $4.96, down 6 cents since last Friday. May 2024 corn futures closed at $5.05, down 6 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 4 under to 1 over the September futures contract, with an average basis at the end of the week of 1 under. Soybean net weekly sales reported by exporters were net sales cancellations of 1.9 million bushels for the 2022/23 marketing year and net sales of 41.3 million bushels for the 2023/24 marketing year. Exports for the same period were down 29% compared to last week at 11.7 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%. 

The Crop Progress report estimated soybean condition at 58% good-to-excellent and 14% poor-to-very poor; soybeans setting pods at 91% compared to 86% last week, 90% last year, and a 5-year average of 90%; and soybeans dropping leaves at 5% compared to 4% last year and a 5-year average of 6%. In Tennessee, the Crop Progress report estimated soybean condition at 77% good-to-excellent and 3% poor-to-very poor; soybeans blooming at 96%, compared to 94% last week, 99% last year, and a 5- year average of 98%; soybeans setting pods at 88% compared to 83% last week, 90% last year, and a 5-year average of 89%; and soybeans dropping leaves at 10% compared to 2% last week, 7% last year, and a 5-year average of 6%. November 2023 soybean futures closed at $13.69, down 18 cents since last Friday. For the week, November 2023 soybean futures traded be- tween $13.66 and $14.09. New crop cash soybean prices at elevators and barge points ranged from $13.14 to $13.91. Down- side price protection could be achieved by purchasing a $13.70 November 2023 Put Option which would cost 38 cents and set a $13.32 futures floor. Nov/Dec 2023 soybean-to-corn price ratio was 2.85 at the end of the week. Nov/Jan and Nov/Mar future spreads were 13 and 18 cents. March soybean-to-corn price ratio was 2.8 at the end of the week. January 2024 soybean futures closed at $13.82, down 17 cents since last Friday. March 2024 soybean futures closed at $13.87, down 15 cents since last Friday. 

Cotton

North Delta upland cotton spot price quotes for August 31 were 85.60 cents/lb (41-4-34) and 87.85 cents/lb (31-3-35). Adjusted world price (AWP) was up 2.5 cents at 71.56 cents. Cotton net weekly sales reported by exporters were 61,400 bales for the 2023/24 marketing year and 11,000 for the 2024/25 marketing year. Exports for the same period were up 5% compared to last week at 214,100 bales. Upland cotton export sales were 44% 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 55%. 

The Crop Progress report estimated cotton condition at 33% good-to-excellent and 44% poor-to-very poor; cotton setting bolls at 90% compared to 81% last week, 93% last year, and a 5-year average of 90%; and cotton bolls opening at 25% compared to 18% last week, 27% last year, and a 5-year average of 25%. In Tennessee, the Crop Progress report estimated cotton condition at 80% good-to-excellent and 5% poor-to-very poor; cotton setting bolls at 98% compared to 96% last week, 97% last year, and a 5-year average of 97%; and cotton bolls opening at 13% compared to 8% last week, 12% last year, and a 5-year average of 12%. December 2023 cotton futures closed at 89.95 cents, up 2.64 cents since last Friday. For the week, December 2023 cotton futures traded between 86.11 and 89.95 cents. Downside price protection could be obtained by purchasing a 90 cent December 2023 Put Option costing 3.79 cents establishing an 86.21 cent futures floor. March 2024 cotton futures closed at 89.77 cents, up 2.58 cents since last Friday. May 2023 cotton futures closed at 89.7 cents, up 2.7 cents since last Friday. Dec/Mar and Dec/May cotton futures spreads were -0.18 cents and -0.25 cents. 

Wheat 

Wheat net weekly sales reported by exporters were net sales of 12.1 million bushels for the 2023/24 marketing year and 0.6 million bushels for the 2024/25 marketing year. Exports for the same period were up 3% compared to last week at 13.0 million bushels. Wheat export sales were 40% 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 47%. Wheat cash prices at elevators and barge points ranged from $4.71 to $5.39. 

The Crop Progress report estimated spring wheat condition at 37% good-to-excellent and 24% poor-to-very poor; and spring wheat harvested at 54% compared to 39% last week, 48% last year, and a 5-year average of 63%. December 2023 wheat futures closed at $5.95, down 26 cents since last Friday. December 2023 wheat futures traded between $5.93 and $6.28 this week. December wheat-to-corn price ratio was 1.24. Dec/Mar and Dec/Jul future spreads were 27 and 52 cents. March 2024 wheat futures closed at $6.22, down 26 cents since last Friday. July 2024 wheat futures closed at $6.47, down 25 cents since last Friday. Downside price protection could be obtained by purchasing a $6.50 July 2024 Put Option costing 65 cents establishing a $5.85 futures floor. New crop wheat cash prices at elevators and barge points ranged from $5.84 to $6.39.  ∆

DR. AARON SMITH: University of Tennessee