March Corn Futures Contract Set A New Low

DR. AARON SMITH

KNOXVILLE, TENNESSEE

The March corn futures contract set a new low at $4.68 1⁄2 on December 20. Corn prices continue to be affected by large US supplies and an anticipated carryover of over 2.1 billion bushels into next marketing year.
South American production remains a wild card, however it is very likely that Argentina has substantially higher year-over-year production as they recover from last year’s severe drought and Brazil has had a mix of weather with some areas too wet and others too dry. More important for Brazil’s corn crop is when soybean harvest will occur in January and February as this will dictate establishment of the second crop corn and the probability of sufficient moisture for the corn crop prior to the dry season. For now, there re- mains a bearish bias in corn futures markets. 

Soybean futures continue to have substantially more volatility than corn or cotton markets. Since July 24th, the January soybean futures contract has traded in a wide range of $12.70 1⁄4 to $14.41. Over that time, daily price changes of greater than 10 cents occurred in 54 of 107 trading days. Over the past month, the January contract has trended lower despite strong US export sales. The fate of soybean prices remains heavily tied to Brazil’s projected production. If beneficial South American forecasts persist prices are likely to continue to move lower. 

March cotton futures are likely to continue to trade between 77 and 83 cents. Export demand has been mediocre at best, with mills purchasing to fulfill only immediate demand. China has been purchasing to replenish reserve but this occurs when futures prices challenge the bottom of the current price range. 

Although down this week, wheat futures have been the lone bright spot with the July contract adding almost 50 cents since the contract low of $5.86 on November 27.  Projected global ending stocks are 428 million bushels lower than last year, which should support prices above $6.00 until more is known about Northern Hemisphere winter wheat production

Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at West, North- west, 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 21 under the March futures at elevators and barge points. Ethanol production for the week ending December 15 was 1.071 million barrels per day, down 3,000 from the previous week. Ethanol stocks were 22.906 million barrels, up 806,000 barrels compared to last week. Corn net sales reported by exporters for December 8-14 were net sales of 39.9 million bushels for the 2023/24 marketing year and 0.04 million bushels for the 2024/25 marketing year. Exports for the same period were up 2% compared to last week at 34.3 million bushels. Corn export sales and commitments were 53% 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 58%. Cash prices ranged from $4.18 to $4.86 at elevators and barge points. March 2024 corn futures closed at $4.72, down 11 cents since last Friday. For the week, March 2024 corn futures traded between $4.68 and $4.82. Mar/May and Mar/Dec future spreads were 13 and 31 cents. May 2024 corn futures closed at $4.85, down 10 cents since last Friday. 

December 2024 corn futures closed at $5.03, down 9 cents since last Friday. Downside price protection could be obtained by purchasing a $5.10 December 2024 Put Option costing 43 cents establishing a $4.67 futures floor. 

Soybeans

Across Tennessee average soybean basis strengthened or remained unchanged at West, Northwest, West-Central, North- Central, and Mississippi River elevators and barge points. Basis ranged from 48 under to 15 over the January futures contract, with an average basis at the end of the week of 8 under. Soybean net weekly sales reported by exporters were net sales of 73.1 million bushels for the 2023/24 marketing year and 5.3 million bushels for the 2024/25 marketing year. Exports for the same period were up 15% compared to last week at 48.8 million bushels. Soybean export sales and commitments were 74% 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 74%. January 2024 soybean futures closed at $12.97, down 18 cents since last Friday. For the week, January 2024 soybean futures traded between $12.95 and $13.28. Cash soybean prices at elevators and barge points ranged from $13.12 to $13.44. March 2024 soybean-to-corn price ratio was 2.76 at the end of the week. Jan/Mar and Jan/Nov future spreads were 4 and -44 cents. March 2024 soybean futures closed at $13.01, down 30 cents since last Friday. 

November 2024 soybean futures closed at $12.53, down 23 cents since last Friday. Downside price protection could be achieved by purchasing a $12.60 November 2024 Put Option which would cost 78 cents and set an $11.82 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 20 were 76.71 cents/lb (41-4-34) and 78.71 cents/lb (31-3-35). Cotton net weekly sales reported by exporters were 146,700 bales for the 2023/24 marketing year and 1,300 bales for the 2024/25 marketing year. Exports for the same period were up 49% compared to last week at 222,300 bales – a marketing year high. Upland cotton export sales were 71% 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 76%. March 2024 cotton futures closed at 79.13 cents, down 0.8 cents since last Friday. For the week, March 2024 cotton futures traded between 78.31 and 80.59 cents. Mar/May and Mar/Dec cotton futures spreads were 0.89 cents and -1.65 cents. May 2024 cotton futures closed at 80.02 cents, down 0.67 cents since last Friday. 

December 2024 cotton futures closed at 77.48 cents, down 0.18 cents since last Friday. Downside price protection could be obtained by purchasing a 78 cent December 2024 Put Option costing 5.65 cents establishing a 72.35 cent futures floor. 

Wheat

Wheat net weekly sales reported by exporters were net sales of 11.9 million bushels for the 2023/24 marketing year and 0.1 million bushels for the 2024/25 marketing year. Exports for the same period were up 17% compared to last week at 12.4 million bushels. Wheat export sales were 76% 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 77%. Wheat cash prices at elevators and barge points ranged from $5.67 to $5.88. March 2024 wheat futures closed at $6.12, down 17 cents since last Friday. March 2024 wheat futures traded between $6.09 and $6.32 this week. March wheat-to-corn price ratio was 1.30. Mar/May and Mar/Jul future spreads were 12 and 19 cents. May 2024 wheat futures closed at $6.24, down 15 cents since last Friday. 

July 2024 wheat futures closed at $6.31, down 13 cents since last Friday. Downside price protection could be obtained by purchasing a $6.40 July 2024 Put Option costing 51 cents establishing a $5.89 futures floor. New crop wheat cash prices at elevators and barge points ranged from $6.03 to $6.31. ∆

DR. AARON SMITH: University of Tennessee