Low Water Levels On The Mississippi River Causing Increased Transportation Costs And Limiting Movement Of Agricultural Commodities

DR. AARON SMITH

KNOXVILLE, TENNESSEE

December corn futures set a new contract low on September 19th at $4.67 3⁄4. Since August 15th, December corn futures prices have traded in a narrow range of $4.67 3⁄4 to $5.06 1⁄2, a 38 3⁄4 cent trading range. However, over this time, average corn basis in Tennessee fell from 62 over to 66 under. The declining basis is due to low water levels on the Mississippi River (causing increased transportation costs and limiting movement of agricultural commodities) and the onset of harvest. 

November soybeans are at a key level of support, near $13.00. If soybean prices are unable to hold this level of support further price weakness is likely. The next key level of support is near $12.60 and below that $11.80. The contract low was set back on May 31 at $11.30 1⁄2. Tight US supplies continue to be at odds with record Brazilian production and exports and the potential for increased production for Argentina and Brazil for the upcoming production season. Last year Argentina’s production was almost half of expected due to a severe drought. 

Can cotton futures obtain and maintain prices above 90 cents? Yes, but export demand must improve. As of September 14th, cotton export sales and commitments were 47% of the USDA marketing year total of 12.3 million bales. This compares unfavorably to last year and the 5-year average for this week in the cotton marketing year, which was 68% and 59%. US cotton production has been revised down to 13.13 million bales by the USDA. Supply reduction will only take cotton prices so high, increased global demand will be necessary for prices to achieve and maintain the 90-cent price level. For now, it seems likely that cotton will continue to trade between 84 and 90 cents. For unpriced cotton, sales should be considered when futures prices are above 87 cents. 

Currently, the USDA estimates Tennessee average corn yield at 173 bu/acre. The all-time high, for the state average, was 177 bu/acre in 2019. Soybean yield is estimated at 50 bu/acre. The all-time high for soybeans in Tennessee was 50 bu/acre achieved in 2017, 2020, and 2021. Upland cotton yield is estimated at 1,015 lbs/acre, compared to the all-time high in 2019 of 1,138 lbs/acre. 

Corn

Ethanol production for the week ending September 15 was 0.980 million barrels per day, down 59,000 barrels from the previous week. Ethanol stocks were 21.681 million barrels, up 510,000 barrels compared to last week. Corn net sales reported by exporters for September 8-14 were net sales of 22.3 million bushels for the 2023/24 marketing year. Exports for the same period were down 17% compared to last week at 23.7 million bushels. Corn export sales and commitments were 23% of the USDA estimated total annual exports for the 2023/24 marketing year (September 1 to August 31) compared to the previous 5-year average of 33%. Across Tennessee, average corn basis (cash price-nearby futures price) weakened or remained unchanged at West, Northwest, North-Central, West-Central, and Mississippi River elevators and barge points. Overall, basis for the week ranged from 68 to 25 under, with an average of 57 under the December futures at elevators and barge points. 

Crop Progress report estimated corn condition at 51% good-to-excellent and 20% poor-to-very poor; corn dented at 90% compared to 82% last week, 86% last year, and a 5-year average of 87%; corn mature at 54% compared to 34% last week, 38% last year, and a 5-year average of 44%; and corn harvested at 9% compared to 5% last week, 7% last year, and a 5-year average of 7%. In Tennessee, corn condition was estimated at 76% good-to-excellent and 7% poor-to-very poor; corn dented at 97% compared to 96% last week, 97% last year, and a 5-year average of 98%; corn mature at 80% compared to 64% last week, 74% last year, and a 5-year average of 78%; and corn harvested at 26% compared to 12% last week, 25% last year, and a 5-year average of 32%. New crop cash prices ranged from $3.99 to $4.68 at elevators and barge points. December 2023 corn futures closed at $4.77, up 1 cent since last Friday. For the week December 2023 corn futures traded between $4.76 and $4.83. Dec/Mar and Dec/May future spreads were 15 and 24 cents. Downside price protection could be obtained by purchasing a $4.80 December 2023 Put Option costing 15 cents establishing a $4.65 futures floor. March 2024 corn futures closed at $4.92, up 2 cents since last Friday. May 2024 corn futures closed at $5.01, up 2 cents since last Friday. 

Soybeans

Across Tennessee average soybean basis weakened or remained unchanged at Northwest, North-Central, West-Central, West, and Mississippi River elevators and barge points. Basis ranged from 77 to 30 under the November futures contract, with an average basis at the end of the week of 66 under. Soybean net weekly sales reported by exporters were net sales of 16.0 million bushels for the 2023/24 marketing year. Exports for the same period were up 33% compared to last week at 20.0 million bushels. Soybean export sales and commitments were 35% of the USDA estimated total annual exports for the 2023/24 marketing year (September 1 to August 31), compared to the previous 5-year average of 43%. 

The Crop Progress report estimated soybean condition at 52% good-to-excellent and 18% poor-to-very poor; soybeans dropping leaves at 54% compared to 31% last week, 39% last year, and a 5-year average of 43%; and soybeans harvested at 5% compared to 3% last year and a 5-year average of 4%. In Tennessee, the Crop Progress report estimated soybean condition at 76% good-to-excellent and 7% poor-to-very poor; soybeans dropping leaves at 46% compared to 28% last week, 42% last year, and a 5-year average of 39%; and soybeans harvested at 11% compared to 2% last week, 5% last year, and a 5-year average of 7%. November 2023 soybean futures closed at $12.96, down 44 cents since last Friday. For the week, November 2023 soybean futures traded between $12.92 and $13.44. New crop cash soybean prices at elevators and barge points ranged from $12.08 to $12.85. Downside price protection could be achieved by purchasing a $13.00 November 2023 Put Option which would cost 28 cents and set a $12.72 futures floor. Nov/Dec 2023 soybean-to-corn price ratio was 2.72 at the end of the week. Nov/Jan and Nov/Mar future spreads were 17 and 28 cents. March soybean-to-corn price ratio was 2.69 at the end of the week. January 2024 soybean futures closed at $13.13, down 42 cents since last Friday. March 2024 soybean futures closed at $13.24, down 41 cents since last Friday. 

Cotton

North Delta upland cotton spot price quotes for September 21 were 84.22 cents/lb (41-4-34) and 86.47 cents/lb (31-3-35). Adjusted world price (AWP) was up 0.34 cents at 72.29 cents. Cotton net weekly sales reported by exporters were 105,800 bales for the 2023/24 marketing year and 5,100 for the 2024/25 marketing year. Exports for the same period were up 27% compared to last week at 150,700 bales. Upland cotton export sales were 47% 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 59%. 

The Crop Progress report estimated cotton condition at 29% good-to-excellent and 43% poor-to-very poor; cotton bolls opening at 55% compared to 43% last week, 58% last year, and a 5-year average of 52%; and cotton harvested at 9% compared to 8% last week, 11% last year, and a 5-year average of 10%. In Tennessee, the Crop Progress report estimated cotton condition at 72% good-to-excellent and 11% poor-to-very poor; cotton bolls opening at 42% compared to 30% last week, 44% last year, and a 5-year average of 47%; and cotton harvested at 2% compared to 1% last week, 1% last year, and a 5-year average of 1%. December 2023 cotton futures closed at 85.91 cents, down 0.53 cents since last Friday. For the week, December 2023 cotton futures traded between 85.55 and 88.42 cents. Downside price protection could be obtained by purchasing an 86 cent December 2023 Put Option costing 2.5 cents establishing an 83.5 cent futures floor. March 2024 cotton futures closed at 86.75 cents, down 0.61 cents since last Friday. May 2023 cotton futures closed at 87.36 cents, down 0.48 cents since last Friday. Dec/Mar and Dec/May cotton futures spreads were 0.84 cents and 1.45 cents. 

Wheat

Wheat net weekly sales reported by exporters were net sales of 11.3 million bushels for the 2023/24 marketing year and 0.5 million bushels for the 2024/25 marketing year. Exports for the same period were down 28% compared to last week at 10.9 million bushels. Wheat export sales were 45% 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 52%. Wheat cash prices at elevators and barge points ranged from $4.90 to $5.12. 

The Crop Progress report estimated winter wheat planted at 15% compared to 7% last week, 19% last year, and a 5-year average of 16%; and spring wheat harvested at 93% compared to 89% last week, 94% last year, and a 5-year average of 95%. In Tennessee, winter wheat planted was estimated at 1% compared to 4% last year and a 5-year average of 4%. December 2023 wheat futures closed at $5.79, down 25 cents since last Friday. December 2023 wheat futures traded between $5.72 and $6.04 this week. December wheat-to-corn price ratio was 1.21. Dec/Mar and Dec/Jul future spreads were 27 and 54 cents. March 2024 wheat futures closed at $6.06, down 23 cents since last Friday. July 2024 wheat futures closed at $6.33, down 19 cents since last Friday. Downside price protection could be obtained by purchasing a $6.40 July 2024 Put Option costing 60 cents establishing a $5.80 futures floor. New crop wheat cash prices at elevators and barge points ranged from $5.58 to $6.11. ∆   

DR. AARON SMITH: University of Tennessee