USDA Estimates 2023 Corn Crop For Tennessee Will Set State Record Yields

DR. AARON SMITH

KNOXVILLE, TENNESSEE

Currently, the USDA estimates that for the 2023 crop Tennessee will set state record yields for corn – 177 bu/acre, soybean – 54 bu/acre, cotton – 1,237 lb/acre, and wheat – 80 bu/acre. All four are up substantially from last year’s drought reduced yields for corn - 130 bu/acre, soybean - 48 bu/acre, cotton - 1,053 lb/acre, and wheat - 73 bu/acre. But will profitability be better in 2023 than 2022? Like most economic questions the answer is it depends. 

Prices are down substantially from last year. In Tennessee, prices for the 2022 crop marketing year averaged $6.72/bu, $13.80/ bu, 85 cents/lb, and $8.40/bu for corn, soybeans, cotton, and wheat, respectively. Marketing year average prices have not been finalized for 2023, but harvest prices and deferred futures contracts are substantially lower than last year’s prices. However, for 2023 there were opportunities to price crops at higher prices throughout the growing season and price direction between now and the end of the marketing year remains uncertain. As such, how a producer managed price risk in 2023 will be a key determinant in profitability. 

Additionally, cost structures changed between 2022 and 2023. A key factor for the cost of production in the past two years was when inputs were purchased. For example, fertilizer prices were cheaper in the fourth quarter 2021 than first quarter 2022 and the opposite was true for fourth quarter 2022 and first quarter 2023. Other input prices, such as diesel and chemical, declined during the 2023 growing season reducing costs. Two costs that increased substantially year-over-year were interest and land/ lease rates. There has been greater variability in the cost of production the past two years than others in the recent past. 

Looking at the 2024 crop, it seems likely that prices will remain below 2022 levels and may push lower than current levels depending on how the South American growing season progresses and direction of global demand for US commodities. Yields remain uncertain at this time of year, but if trendline yields are obtained in 2024 they would be below 2023, in Tennessee (it’s unlikely to set back-to-back records). Costs are projected lower and interest rates could be reduced by 0.75 to 1% from current levels depending on inflation and labor markets. Bottomline, this is the time of year when producers need to start putting pen to paper to estimate profitability for 2024. 

Corn

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 60 to even, with an average of 26 under the March futures at elevators and barge points. Ethanol production for the week ending December 8 was 1.074 million barrels per day, down 2,000 from the previous week. Ethanol stocks were 22.1 million barrels, up 661,000 barrels compared to last week. Corn net sales reported by exporters for December 1-7 were net sales of 55.8 million bushels for the 2023/24 marketing year. Exports for the same period were down 22% compared to last week at 33.5 million bushels. Corn export sales and commitments were 51% 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 55%. Cash prices ranged from $4.24 to $4.96 at elevators and barge points. March 2024 corn futures closed at $4.83, down 2 cents since last Friday. For the week, March 2024 corn futures traded between $4.77 and $4.88. Mar/May and Mar/Dec future spreads were 12 and 29 cents. May 2024 corn futures closed at $4.95, down 2 cents since last Friday. 

December 2024 corn futures closed at $5.12, unchanged since last Friday. Downside price protection could be obtained by purchasing a $5.20 December 2024 Put Option costing 44 cents establishing a $4.76 futures floor. 

Soybeans

Across Tennessee average soybean basis weakened or remained unchanged at Northwest, West-Central, and Mississippi River elevators and barge points and strengthened at North-Central and West elevators and barge points. Basis ranged from 53 under to 10 over the January futures contract, with an average basis at the end of the week of 14 under. Soybean net weekly sales reported by exporters were net sales of 39.8 million bushels for the 2023/24 marketing year. Exports for the same period were down 13% compared to last week at 42.6 million bushels. Soybean export sales and commitments were 70% of the USDA estimated total annual exports for the 2023/24 marketing year (September 1 to August 31), compared to the previous 5-year aver- age of 71%. January 2024 soybean futures closed at $13.15, up 11 cents since last Friday. For the week, January 2024 soybean futures traded between $13.02 and $13.44. Cash soybean prices at elevators and barge points ranged from $13.07 to $13.54. March 2024 soybean-to-corn price ratio was 2.76 at the end of the week. Jan/Mar and Jan/Nov future spreads were 16 and -39 cents. March 2024 soybean futures closed at $13.31, up 8 cents since last Friday. 

November 2024 soybean futures closed at $12.76, up 6 cents since last Friday. Downside price protection could be achieved by purchasing a $12.80 November 2024 Put Option which would cost 81 cents and set an $11.99 futures floor. Nov/Dec soybean- to-corn price ratio was 2.49 at the end of the week. 

Cotton

North Delta upland cotton spot price quotes for December 14 were 78.31 cents/lb (41-4-34) and 80.31 cents/lb (31-3-35). Adjusted world price (AWP) was up 2.04 cents at 65.67 cents. Cotton net weekly sales reported by exporters were 57,800 bales for the 2023/24 marketing year and 13,600 bales for the 2024/25 marketing year. Exports for the same period were up 7% compared to last week at 148,700 bales. Upland cotton export sales were 70% 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 75%. March 2024 cotton futures closed at 79.93 cents, down 1.51 cents since last Friday. For the week, March 2024 cotton futures traded between 79.83 and 82.5 cents. Mar/May and Mar/Dec cotton futures spreads were 0.76 cents and 2.27 cents. May 2024 cotton futures closed at 80.69 cents, down 1.35 cents since last Friday. 

December 2024 cotton futures closed at 77.66 cents, down 0.89 cents since last Friday. Downside price protection could be obtained by purchasing a 78 cent December 2024 Put Option costing 5.24 cents establishing a 72.76 cent futures floor. 

Wheat

Wheat net weekly sales reported by exporters were net sales of 54.8 million bushels for the 2023/24 marketing year – a marketing year high - and 0.7 million bushels for the 2024/25 marketing year. Exports for the same period were up 46% compared to last week at 10.6 million bushels. Wheat export sales were 74% 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 75%. Wheat cash prices at elevators and barge points ranged from $5.55 to $6.18. March 2024 wheat futures closed at $6.29, down 2 cents since last Friday. March 2024 wheat futures traded between $6.02 and $6.33 this week. March wheat-to-corn price ratio was 1.30. Mar/May and Mar/Jul future spreads were 10 and 15 cents. May 2024 wheat futures closed at $6.39, down 1 cent since last Friday. 

 July 2024 wheat futures closed at $6.44, down 1 cent since last Friday. Downside price protection could be obtained by purchasing a $6.50 July 2024 Put Option costing 59 cents establishing a $5.91 futures floor. New crop wheat cash prices at elevators and barge points ranged from $5.93 to $6.25.  ∆

DR. AARON SMITH: University of Tennessee