Harvest Is Upon Us

DR. AARON SMITH

KNOXVILLE, TENNESSEE

Harvest is upon us, and corn and soybean producers will need to decide how to market the remainder of the 2023 crop. For uncommitted corn and soybean production, producers have three choices, 1) sell corn and
soybeans off the combine, 2) store corn and soybeans unpriced, and 3) price (basis, futures, or both) the corn and soybeans for future delivery and put the crops in storage. Historically, access to storage has been a powerful marketing tool for many Tennessee corn and soybean producers. Over the last ten years, storing corn and selling in March, rather than September, has pro- vided an average increase in cash price received of $0.87 per bushel. Similarly, storing soybeans, from October to March has averaged an increase in cash price of $1.35 per bushel. Storing the crop does not pay every year, but historically Tennessee producers have benefited from storing corn and soybeans into the next calendar year. However, this year producers will need to consider how increased interest rates affect corn and soybeans held in storage. 

During the previous 10 years, the bank prime interest rate was between 3.25% and 5.5%. Today the bank prime interest rate is 8.5%. At an interest rate of 8.5%, the monthly interest cost for $5 corn is 3.5 cents. For $14 soybeans, the monthly interest expense is 9.9 cents. This means that to store corn or soybeans for six months (September to March) will cost 21 cents and 59 cents in interest alone. Additional storage cost considerations include shrink, quality deterioration risk, variable costs, such as electricity, and capital recovery. Producers will need to evaluate if storing corn and soybeans unpriced is worth the risk versus selling at harvest or securing a futures or basis price for delivery next year. 

Corn

Ethanol production for the week ending September 1 was 1.012 million barrels per day, up 5,000 barrels from the previous week. Ethanol stocks were 21.621 million barrels, up 12,000 barrels compared to last week. Corn net sales reported by exporters for August 25-31 were net sales of 37.4 million bushels for the 2023/24 marketing year. Exports for the same period were down 22% compared to last week at 20.3 million bushels. Accumulated exports for the 2022/23 marketing year were 1.55 billion bushels, down 34 percent from the prior year’s total of 2.53 billion 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) strengthened or remained unchanged at West, Northwest, North-Central, West-Central, and Mississippi River elevators and barge points. Overall, basis for the week ranged from 40 to 31 under, with an average of 33 under the December futures at elevators and barge points. 

The Crop Progress report estimated corn condition at 53% good-to-excellent and 18% poor-to-very poor; corn dough at 93% compared to 88% last week, 91% last year, and a 5-year average of 92%; corn dented at 67% compared to 51% last week, 61% last year, and a 5-year average of 65%; and corn mature at 18% compared to 9% last week, 14% last year, and a 5-year average of 16%. In Tennessee, corn condition was estimated at 73% good-to-excellent and 8% poor-to-very poor; corn dough at 98% compared to 97% last week, 100% last year, and a 5-year average of 99%; corn dented at 91% compared to 82% last week, 86% last year, and a 5-year average of 88%; corn mature at 45% compared to 32% last week, 40% last year, and a 5-year average of 42%; and corn harvested at 5% compared to 1% last week, 8% last year, and a 5-year average of 7%. New crop cash prices ranged from $4.20 to $4.67 at elevators and barge points. December 2023 corn futures closed at $4.82, up 2 cents since last Friday. For the week December 2023 corn futures traded between $4.78 and $4.90. Dec/Mar and Dec/May future spreads were 15 and 23 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 $4.98, up 2 cents since last Friday. May 2024 corn futures closed at $5.06, up 1 cent since last Friday. 

Soybeans

Across Tennessee average soybean basis strengthened or remained unchanged at Northwest, North-Central, West-Central, and Mississippi River elevators and barge points and weakened at West elevators and barge points. Basis ranged from 28 to 15 under the November futures contract, with an average basis at the end of the week of 22 under. Soybean net weekly sales reported by exporters were net sales of 65.5 million bushels for the 2023/24 marketing year. Exports for the same period were up 61% compared to last week at 18.9 million bushels. Accumulated exports for the 2022/23 marketing year were 1.92 billion bushels, down 9 percent from the prior year’s total of 2.10 billion 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 53% good-to-excellent and 17% poor-to-very poor; soybeans setting pods at 95% compared to 91% last week, 94% last year, and a 5-year average of 94%; and soybeans dropping leaves at 16% compared to 5% last week, 9% last year, and a 5-year average of 13%. In Tennessee, the Crop Progress report estimated soybean condition at 77% good-to-excellent and 7% poor-to-very poor; soybeans setting pods at 92% compared to 88% last week, 95% last year, and a 5-year average of 94%; and soybeans dropping leaves at 18% compared to 10% last week, 14% last year, and a 5-year average of 14%. November 2023 soybean futures closed at $13.63, down 6 cents since last Friday. For the week, November 2023 soybean futures traded between $13.52 and $13.84. New crop cash soybean prices at elevators and barge points ranged from $12.99 to $13.68. Downside price protection could be achieved by purchasing a $13.70 November 2023 Put Option which would cost 40 cents and set a $13.30 futures floor. Nov/Dec 2023 soybean-to-corn price ratio was 2.82 at the end of the week. Nov/Jan and Nov/Mar future spreads were 15 and 21 cents. March soybean-to-corn price ratio was 2.78 at the end of the week. January 2024 soybean futures closed at $13.78, down 4 cents since last Friday. March 2024 soybean futures closed at $13.84, down 3 cents since last Friday. 

Cotton

North Delta upland cotton spot price quotes for September 7 were 81.12 cents/lb (41-4-34) and 83.37 cents/lb (31-3-35). Adjusted world price (AWP) was up 1.99 cents at 73.55 cents. Cotton net weekly sales reported by exporters were 85,100 bales for the 2023/24 marketing year and 6,600 for the 2024/25 marketing year. Exports for the same period were down 18% compared to last week at 175,400 bales. Upland cotton export sales were 45% 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 57%. 

The Crop Progress report estimated cotton condition at 31% good-to-excellent and 41% poor-to-very poor; cotton setting bolls at 94% compared to 90% last week, 97% last year, and a 5-year average of 95%; and cotton bolls opening at 32% compared to 25% last week, 37% last year, and a 5-year average of 33%. In Tennessee, the Crop Progress report estimated cotton condition at 75% good-to-excellent and 11% poor-to-very poor; cotton setting bolls at 99% compared to 98% last week, 100% last year, and a 5-year average of 99%; cotton bolls opening at 18% compared to 13% last week, 24% last year, and a 5-year average of 23%; and cotton harvested at 0%. December 2023 cotton futures closed at 85.91 cents, down 4.04 cents since last Friday. For the week, December 2023 cotton futures traded between 85.16 and 89.24 cents. Downside price protection could be obtained 

by purchasing an 86 cent December 2023 Put Option costing 3.1 cents establishing an 82.9 cent futures floor. March 2024 cotton futures closed at 86.09 cents, down 3.68 cents since last Friday. May 2023 cotton futures closed at 86.28 cents, down 3.42 cents since last Friday. Dec/Mar and Dec/May cotton futures spreads were 0.18 cents and 0.37 cents. 

Wheat 

Wheat net weekly sales reported by exporters were net sales of 13.6 million bushels for the 2023/24 marketing year and 0.4 million bushels for the 2024/25 marketing year. Exports for the same period were down 11% compared to last week at 11.6 million bushels. Wheat export sales were 42% 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 48%. Wheat cash prices at elevators and barge points ranged from $4.71 to $5.21. 

The Crop Progress report estimated spring wheat harvested at 74% compared to 54% last week, 68% last year, and a 5-year average of 77%. December 2023 wheat futures closed at $5.95, unchanged since last Friday. December 2023 wheat futures traded between $5.90 and $6.15 this week. December wheat-to-corn price ratio was 1.23. Dec/Mar and Dec/Jul future spreads were 26 and 52 cents. March 2024 wheat futures closed at $6.21, down 1 cent since last Friday. July 2024 wheat futures closed at $6.47, unchanged since last Friday. Downside price protection could be obtained by purchasing a $6.50 July 2024 Put Option costing 62 cents establishing a $5.88 futures floor. New crop wheat cash prices at elevators and barge points ranged from $5.77 to $6.34.  ∆

DR. AARON SMITH: University of Tennessee