The WASDE Report Increased National Average Corn Yield

DR. AARON SMITH 

KNOXVILLE, TENNESSEE

This week nearby corn futures fell to $4.47/bu, the lowest nearby price since December 2020. The USDA WASDE report was the main contributor to the new price lows; however, corn futures have been in a steady decline since the end of July. The WASDE report increased national average corn yield to 177.3 bu/acre, up 2.4 bu/acre compared to last month. The yield revision propelled projected US ending stocks to 2.162 billion bushels. Foreign corn stocks also increased 363 million bushels compared to last month. Baring intensification of dry conditions in Brazil, it is hard to paint a bullish picture for corn prices in the near future. 

Soybean futures plummeted immediately following the release of the USDA reports. Prior to the report March soybean futures were trading between $12.35/bu and $12.45/bu. Ten minutes after the report, the March contract was below $12.10/bu. US ending stocks were increased by 35 million bushels to 280 million bushels, due primarily to a 0.7 bu/acre increase in national average yield. The larger concern for soybean prices remains in South America. Brazil has received timely rains which have im- proved production prospects. Additionally, Argentina is on track to almost double production compared to last year’s drought- stricken crop. Bottom line South American soybean production is very likely to exceed last years. 

Cotton futures prices have moved to the upper end of the 2.5-month trading range of 77 to 83 cents, closing Friday at 81.31 cents. Demand remains the number one issue and Friday’s WASDE report decreased projected global use by 1.3 million bales. US harvested acres decreased by 960,000 acres but the change in production was mostly offset by an 80 lb/acre increase in national yield. Moving forward prices are likely to continue to trade in the established range. 

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 12 over, with an average of 14 under the March futures at elevators and barge points. Ethanol production for the week ending January 5 was 1.062 million barrels per day, up 13,000 from the previous week. Ethanol stocks were 24.371 million barrels, up 792,000 barrels compared to last week. Corn net sales reported by exporters for December 29 to January 4 were net sales of 19.2 million bushels for the 2023/24 marketing year. Exports for the same period were up 52% compared to last week at 40.8 million bushels. Corn export sales and commitments were 57% 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 62%. Cash prices ranged from $4.00 to $4.75 at elevators and barge points. March 2024 corn futures closed at $4.47, down 13 cents since last Friday. For the week, March 2024 corn futures traded between $4.41 and $4.62. Mar/May and Mar/Dec future spreads were 12 and 34 cents. May 2024 corn futures closed at $4.59, down 14 cents since last Friday. 

December 2024 corn futures closed at $4.81, down 13 cents since last Friday. Downside price protection could be obtained by purchasing a $4.90 December 2024 Put Option costing 43 cents establishing a $4.47 futures floor. 

Soybeans

Across Tennessee average soybean basis strengthened or remained unchanged at West, West-Central, North-Central, and Mississippi River elevators and barge points and weakened at Northwest elevators and barge points. Basis ranged from 27 under to 30 over the March futures contract, with an average basis at the end of the week of 13 over. Soybean net weekly sales reported by exporters were net sales of 10.3 million bushels for the 2023/24 marketing year. Exports for the same period were down 14% compared to last week at 31.7 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%. March 2024 soybean futures closed at $12.24, down 32 cents since last Friday. For the week, March 2024 soybean futures traded between $12.03 and $12.61. Cash soybean prices at elevators and barge points ranged from $12.21 to $12.69. March 2024 soybean-to-corn price ratio was 2.74 at the end of the week. Mar/May and Mar/Nov future spreads were 11 and -23 cents. May 2024 soybean futures closed at $12.35, down 29 cents since last Friday. 

November 2024 soybean futures closed at $12.01, down 7 cents since last Friday. Downside price protection could be achieved by purchasing a $12.20 November 2024 Put Option which would cost 79 cents and set an $11.41 futures floor. Nov/Dec soy- bean-to-corn price ratio was 2.5 at the end of the week. 

Cotton

North Delta upland cotton spot price quotes for January 11 were 79.11 cents/lb (41-4-34) and 81.11 cents/lb (31-3-35). Adjust- ed World Price (AWP) decreased 0.68 cents to 64.28 cents. Cotton net weekly sales reported by exporters were 262,500 bales for the 2023/24 marketing year and 22,000 for the 2024/25 marketing year. Exports for the same period were up 7% compared to last week at 228,100 bales. Upland cotton export sales were 77% 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 81%. March 2024 cotton futures closed at 81.31 cents, up 1.12 cents since last Friday. For the week, March 2024 cotton futures traded between 79.6 and 82.22 cents. Mar/May and Mar/Dec cotton futures spreads were 0.98 cents and -1.68 cents. May 2024 cotton futures closed at 82.29 cents, up 0.94 cents since last Friday. 

December 2024 cotton futures closed at 79.63 cents, up 0.34 cents since last Friday. Downside price protection could be obtained by purchasing an 80 cent December 2024 Put Option costing 5.44 cents establishing a 74.56 cent futures floor. 

Wheat

Wheat net weekly sales reported by exporters were net sales of 4.7 million bushels for the 2023/24 marketing year. Exports for the same period were up 105% compared to last week at 21.5 million bushels – a marketing year high. 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 81%. Wheat cash prices at elevators and barge points ranged from $5.81 to $6.12. March 2024 wheat futures closed at $5.96, down 20 cents since last Friday. March 2024 wheat futures traded between $5.87 and $6.17 this week. March wheat-to-corn price ratio was 1.33. Mar/May and Mar/Jul future spreads were 14 and 22 cents. May 2024 wheat futures closed at $6.10, down 17 cents since last Friday. 

July 2024 wheat futures closed at $6.18, down 17 cents since last Friday. Downside price protection could be obtained by purchasing a $6.20 July 2024 Put Option costing 46 cents establishing a $5.74 futures floor. New crop wheat cash prices at elevators and barge points ranged from $5.88 to $6.22. ∆

DR. AARON SMITH: University of Kentucky