Soybean Futures Decreased Substantially

DR. AARON SMITH

KNOXVILLE, TENNESSEE

November 2024 soybean futures have decreased substantially since November 21, 2023, falling from $13.17 to $12.08 on January 5, 2024 – down $1.09 in six weeks. The primary driver of the price declines has been improved South American production projections. Argentina has had good growing conditions year-to-date and is expected to have a dramatic increase in production (1.76 billion bushels) compared to last year’s drought-stricken crop (0.92 billion bushels). Brazil’s production is projected at 5.92 billion bushels compared to last year’s record of 5.88 billion bushels. There were concerns over drought in key production areas in Brazil such as Mato Grosso, but recent and projected rains have alleviated some concerns. Bottom line Brazil could still reach a new record in soybean production in 2024. 

Increased global production is likely to continue to support the downward trend in soybean prices. A comparison year, for potential price direction in 2024, may be 2014. In early 2014, soybean prices were coming off three years (2011, 2012, and 2013) in which the November soybean contract traded between $11.58 and $17.68, averaging $13.44 over the three-year interval. Prices started the year near $12 before falling to a low of $9.10 in September 2014. 

How does that compare to the start of 2024? From 2021 to 2023, November soybean futures have traded between $11.12 and $15.82, averaging $13.44 over the three-year interval. Currently, November 2024 soybean futures are just over $12. Does this mean prices are heading to $9? Not necessarily. Every year is different, and weather will continue to play a pivotal role, but two key points should be taken. First, high prices cure high prices – periods when prices remain high for multiple years will eventually lead to increased production and a lower price environment. Second, downside price risk is still prevalent despite recent price declines and protection against further price declines should be strongly considered. Managing price risk will be essential to financial success in 2024. 

Corn

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 under to 8 over, with an average of 17 under the March futures at elevators and barge points. Ethanol production for the week ending December 29 was 1.049 million barrels per day, down 58,000 from the previous week. Ethanol stocks were 23.579 million barrels, up 62,000 barrels compared to last week. Corn net sales reported by exporters for December 22-28 were net sales of 14.5 million bushels for the 2023/24 marketing year – a marketing year low - and net sales cancelations of 7,874 bushels for the 2024/25 marketing year. Exports for the same period were down 47% compared to last week at 26.8 million bushels. Corn export sales and commitments were 56% 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 61%. Cash prices ranged from $4.08 to $4.77 at elevators and barge points. March 2024 corn futures closed at $4.60, down 11 cents since last Friday. For the week, March 2024 corn futures traded between $4.60 and $4.70. Mar/May and Mar/Dec future spreads were 13 and 34 cents. May 2024 corn futures closed at $4.73, down 11 cents since last Friday.

December 2024 corn futures closed at $4.94, down 9 cents since last Friday. Downside price protection could be obtained by purchasing a $5.00 December 2024 Put Option costing 42 cents establishing a $4.58 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 25 under to 25 over the January futures contract, with an average basis at the end of the week of 11 over. Soybean net weekly sales reported by exporters were net sales of 7.4 million bushels for the 2023/24 marketing year - a marketing year low - and 0.02 million bushels for the 2024/25 marketing year. Exports for the same period were down 18% compared to last week at 36.8 million bushels. Soybean export sales and commitments were 77% 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 77%. January 2024 soybean futures closed at $12.49, down 44 cents since last Friday. For the week, January 2024 soybean futures traded between $12.49 and $12.89. Cash soybean prices at elevators and barge points ranged from $12.58 to $12.97. March 2024 soybean-to-corn price ratio was 2.73 at the end of the week. Jan/Mar and Jan/Nov future spreads were 7 and -41 cents. March 2024 soybean futures closed at $12.56, down 42 cents since last Friday. 

November 2024 soybean futures closed at $12.08, down 37 cents since last Friday. Downside price protection could be achieved by purchasing a $12.20 November 2024 Put Option which would cost 78 cents and set an $11.42 futures floor. Nov/ Dec soybean-to-corn price ratio was 2.45 at the end of the week. 

Cotton

North Delta upland cotton spot price quotes for January 3 were 78.68 cents/lb (41-4-34) and 80.68 cents/lb (31-3-35). Adjusted World Price (AWP) increased 0.8 cents to 64.96 cents. Cotton net weekly sales reported by exporters were 131,100 bales for the 2023/24 marketing year. Exports for the same period were down 8% compared to last week at 213,200 bales. Upland cotton export sales were 75% 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 79%. March 2024 cotton futures closed at 80.19 cents, down 0.81 cents since last Friday. For the week, March 2024 cotton futures traded between 79.59 and 81.75 cents. Mar/May and Mar/Dec cotton futures spreads were 1.16 cents and -0.9 cents. May 2024 cotton futures closed at 81.35 cents, down 0.80 cents since last Friday. 

December 2024 cotton futures closed at 79.29 cents, down 0.07 cents since last Friday. Downside price protection could be obtained by purchasing an 80 cent December 2024 Put Option costing 5.65 cents establishing a 74.35 cent futures floor. 

Wheat

Wheat net weekly sales reported by exporters were net sales of 4.8 million bushels for the 2023/24 marketing year and 0.2 million bushels for the 2024/25 marketing year. Exports for the same period were down 16% compared to last week at 10.5 million bushels. Wheat export sales were 78% 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 80%. Wheat cash prices at elevators and barge points ranged from $5.85 to $6.08. March 2024 wheat futures closed at $6.16, down 12 cents since last Friday. March 2024 wheat futures traded between $5.91 and $6.28 this week. March wheat-to-corn price ratio was 1.34. Mar/May and Mar/Jul future spreads were 11 and 19 cents. May 2024 wheat futures closed at $6.27, down 12 cents since last Friday. 

July 2024 wheat futures closed at $6.35, down 10 cents since last Friday. Downside price protection could be obtained by purchasing a $6.40 July 2024 Put Option costing 49 cents establishing a $5.91 futures floor. New crop wheat cash prices at elevators and barge points ranged from $5.92 to $6.09.  ∆

DR. AARON SMITH: University of Tennessee