Exports Will Continue To Be An Important Factor In Determining Prices This Winter

DR. AARON SMITH

KNOXVILLE, TENNESSEE

Cotton and wheat prices have declined substantially. Since October 9th, December cotton futures have fallen from 88.76 to 79.62 cents, a 10% decline in value in less than a month. The decline in December wheat
futures started earlier, with the December wheat contract peaking on July 25 at $7.96 before declining to $5.72, a 28% decline in value. One of the key factors in price declines has been poor export demand. 

Exports will continue to be an important factor in determining prices this winter. The USDA currently estimates the US will export 2.025 billion bushels of corn, 1.755 billion bushels of soybeans, 12.2 million 480 lb bales of cotton, and 700 million bushels of wheat. Exports and sales are reported on a weekly basis by USDA. To achieve the marketing year totals above average weekly exports would need to be 39 million bushels for corn, 34 million bushels for soybeans, 235,000 480 lb bales for cotton, and 259,000 bushels for wheat. Weekly sales would actually need to track above these averages to account for end-of-year carryover and potential export sales cancellations throughout the marketing year. To date accumulated exports for corn, cotton, soybeans, and wheat are 20% higher, 27% lower, 1% higher, and 23% lower than last year, respectively. 

One factor hindering US export sales has been a strong US dollar. Over the past five years the USD has appreciated in value relative to the Brazilian Real by 32% and the Argentine Peso by 887%. Argentina has been plagued by inflation and has multiple exchange rates, in addition to the official measure, leading some politicians to support adopting the USD or dollarization of the Argentine currency. These two countries are major export competitors for many US agricultural commodities and products. A strong USD dollar makes US agricultural commodities less price competitive in global markets. While numerous other factors will affect export sales, long-term exchange rates will be important in determining US agricultural commodity and product exports and consequently US farm prices. 

Corn

Ethanol production for the week ending October 27 was 1.052 million barrels per day, up 12,000 from the previous week. Ethanol stocks were 21.012 million barrels, down 386,000 barrels compared to last week. Corn net sales reported by exporters for October 20-26 were net sales of 29.5 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 up 5% compared to last week at 19.9 million bushels. Corn export sales and commitments were 36% 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%. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at West, North-Central, West-Central, and Mississippi River elevators and barge points and weakened at Northwest elevators and barge points. Overall, basis for the week ranged from 90 under to 10 over, with an average of 28 under the December futures at elevators and barge points. 

The Crop Progress report estimated corn harvested at 71% compared to 59% last week, 74% last year, and a 5-year average of 66%. In Tennessee, corn harvested was estimated at 92% compared to 88% last week, 97% last year, and a 5-year average of 94%. Cash prices ranged from $4.03 to $5.00 at elevators and barge points. December 2023 corn futures closed at $4.77, down 3 cents since last Friday. For the week, December 2023 corn futures traded between $4.68 and $4.84. 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 9 cents establishing a $4.71 futures floor. March 2024 corn futures closed at $4.92, down 3 cents since last Friday. May 2024 corn futures closed at $5.01, down 2 cents since last Friday. 

Soybeans

Across Tennessee average soybean basis strengthened or remained unchanged at Northwest, North-Central, West-Central, West, and Mississippi River elevators and barge points. Basis ranged from 97 to 2 under the January futures contract, with an average basis at the end of the week of 40 under. Soybean net weekly sales reported by exporters were net sales of 37.1 million bushels for the 2023/24 marketing year. Exports for the same period were down 16% compared to last week at 73.2 million bushels. Soybean export sales and commitments were 49% 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 59%. 

The Crop Progress report estimated soybeans harvested at 85% compared to 76% last week, 87% last year, and a 5-year average of 78%. In Tennessee, the Crop Progress report estimated soybean condition at 78% good-to-excellent and 4% poor-to-very poor; and soybeans harvested at 73% compared to 60% last week, 71% last year, and a 5-year average of 62%. January 2024 soybean futures closed at $13.51, up 32 cents since last Friday. For the week, January 2024 soybean futures traded between $13.00 and $13.55. Cash soybean prices at elevators and barge points ranged from $12.10 to $13.38. March 2024 soybean-to- corn price ratio was 2.78 at the end of the week. Jan/Mar and Jan/Nov future spreads were 15 and -54 cents. March 2024 soybean futures closed at $13.66, up 33 cents since last Friday. November 2024 soybean futures closed at $12.97, up 23 cents since last Friday. Downside price protection could be achieved by purchasing a $13.00 November 2024 Put Option which would cost 89 cents and set a $12.11 futures floor. Nov/Dec soybean-to-corn price ratio was 2.51 at the end of the week. 

Cotton

North Delta upland cotton spot price quotes for November 2 were 76.80 cents/lb (41-4-34) and 79.05 cents/lb (31-3-35). Adjusted world price (AWP) was down 0.61 cents at 68.11 cents. Cotton net weekly sales reported by exporters were 457,100 bales for the 2023/24 marketing year – a marketing year high - and 87,800 bales for the 2024/25 marketing year. Exports for the same period were up 35% compared to last week at 132,200 bales. Upland cotton export sales were 57% 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 66%. 

The Crop Progress report estimated cotton condition at 29% good-to-excellent and 42% poor-to-very poor; cotton bolls opening at 93% compared to 90% last week, 95% last year, and a 5-year average of 95%; and cotton harvested at 49% compared to 41% last week, 54% last year, and a 5-year average of 47%. In Tennessee, the Crop Progress report estimated cotton condition at 83% good-to-excellent and 3% poor-to-very poor; cotton bolls opening at 98% compared to 96% last week, 99% last year, and a 5-year average of 98%; and cotton harvested at 62% compared to 43% last week, 63% last year, and a 5-year average of 56%. December 2023 cotton futures closed at 79.62 cents, down 4.76 cents since last Friday. For the week, December 2023 cotton futures traded between 79.2 and 85.25 cents. Downside price protection could be obtained by purchasing an 83 cent December 2023 Put Option costing 1.2 cents establishing a 78.8 cent futures floor. March 2024 cotton futures closed at 82.12 cents, down 4.01 cents since last Friday. May 2023 cotton futures closed at 83.18 cents, down 3.8 cents since last Friday. Dec/ Mar and Dec/May cotton futures spreads were 2.5 cents and 3.56 cents. 

Wheat

Wheat net weekly sales reported by exporters were net sales of 10.1 million bushels for the 2023/24 marketing year. Exports for the same period were down 24% compared to last week at 3.7 million bushels – a marketing year low. Wheat export sales were 60% 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 63%. Wheat cash prices at elevators and barge points ranged from $4.71 to $5.46. December 2023 wheat futures closed at $5.72, down 3 cents since last Friday. December 2023 wheat futures traded between $5.54 and $5.77 this week. December wheat-to-corn price ratio was 1.20. Dec/Mar and Dec/Jul future spreads were 27 and 60 cents. March 2024 wheat futures closed at $5.99, down 3 cents since last Friday. 

The Crop Progress report estimated winter wheat condition at 47% good-to-excellent and 18% poor-to-very poor; winter wheat planted at 84% compared to 77% last week, 86% last year, and a 5-year average of 85%; and winter wheat emerged at 64% compared to 53% last week, 60% last year, and a 5-year average of 64%. In Tennessee, winter wheat condition was estimated at 62% good-to-excellent and 6% poor-to-very poor; winter wheat planted at 49% compared to 35% last week, 61% last year, and a 5-year average of 56%; and winter wheat emerged at 25% compared to 13% last week, 34% last year, and a 5-year average of 34%. July 2024 wheat futures closed at $6.32, down 1 cent since last Friday. Downside price protection could be obtained by purchasing a $6.40 July 2024 Put Option costing 58 cents establishing a $5.82 futures floor. New crop wheat cash prices at elevators and barge points ranged from $5.89 to $6.03. ∆

DR. AARON SMITH: University of Tennessee