January USDA WASDE Report Estimated US Corn Days On Hand At 54 days

DR. AARON SMITH

KNOXVILLE, TENNESSEE

Days-on-hand is a measure that is often utilized to estimate the stocks of a commodity relative to consumption. If the number of days-on-hand are high the price should be low and vice versa. The calculation is simple, projected ending stocks divided by daily use (yearly consumption divided by 365 days). 

The January USDA WASDE report estimated US corn days on hand at 54 days, up 18 days compared to the previous year. Soybeans were projected at 24 days-on-hand compared to 22 days the previous marketing year. Foreign days-on-hand indicates a much different supply and demand picture. Foreign corn days-on-hand are projected at 112 days, down 2 days compared to last year and the smallest reserve relative to use number since the 2013/2014 marketing year. Foreign soybean days-on-hand are projected at 123 days, up 9 days compared to last year and the largest reserve relative to use going back to the start of available data for the 1960/61 marketing year. 

The estimates will be contingent on if USDA’s projections for South American production are obtained. Currently, it appears that reductions in Brazil’s soybean crop will be mostly offset by increases in Argentina’s crop. Corn is more uncertain at this time as Brazil’s second crop corn will not be planted until after the 1st quarter soybean harvest. The other major factor is demand. Will Chinese demand for corn and soybeans increase in 2024? At this point in time there is no indication that export demand will increase. 

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 26 over, with an average of 5 under the March futures at elevators and barge points. Ethanol production for the week ending January 19 was 0.818 million barrels per day, down 236,000 from the previous week. Ethanol stocks were 25.815 million barrels, up 0.120 million barrels compared to last week. Corn net sales reported by exporters for January 12-18 were net sales of 37.6 million bushels for the 2023/24 marketing year and 1.5 million bushels for the 2024/25 marketing year. Exports for the same period were down 7% compared to last week at 36.7 million bushels. Corn export sales and commitments were 61% 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 65%. Cash prices for February-March delivery ranged from $3.90 to $4.78 at elevators and barge points. March 2024 corn futures closed at $4.46, up 1 cent since last Friday. For the week, March 2024 corn futures traded between $4.44 and $4.53. Mar/May and Mar/Dec future spreads were 9 and 30 cents. May 2024 corn futures closed at $4.55, down 1 cent since last Friday. 

December 2024 corn futures closed at $4.76, unchanged since last Friday. Downside price protection could be obtained by purchasing a $4.80 December 2024 Put Option costing 39 cents establishing a $4.41 futures floor. 

Soybeans

Across Tennessee average soybean basis strengthened or remained unchanged at Northwest, West, West-Central, North- Central, and Mississippi River elevators and barge points. Basis ranged from 33 under to 40 over the March futures contract, with an average basis at the end of the week of 15 over. Soybean net weekly sales reported by exporters were net sales of 20.6 million bushels for the 2023/24 marketing year. Exports for the same period were down 33% compared to last week at 41.1 million bushels. Soybean export sales and commitments were 79% 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 80%. March 2024 soybean futures closed at $12.09, down 4 cents since last Friday. For the week, March 2024 soybean futures traded between $12.08 and $12.47. Cash soybean prices for February-March at elevators and barge points ranged from $12.23 to $12.69. March 2024 soy- bean-to-corn price ratio was 2.71 at the end of the week. Mar/May and Mar/Nov future spreads were 7 and -24 cents. May 2024 soybean futures closed at $12.16, down 7 cents since last Friday. 

November 2024 soybean futures closed at $11.85, down 6 cents since last Friday. Downside price protection could be achieved by purchasing a $12.00 November 2024 Put Option which would cost 78 cents and set an $11.22 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 January 25 were 83.76 cents/lb (41-4-34) and 85.76 cents/lb (31-3-35). Adjusted World Price (AWP) decreased 0.83 cents to 64.64 cents. Cotton net weekly sales reported by exporters were 207,000 bales for the 2023/24 marketing year. Exports for the same period were down 45% compared to last week at 142,200 bales. Upland cotton export sales were 84% 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 84%. March 2024 cotton futures closed at 84.46 cents, up 0.51 cents since last Friday. For the week, March 2024 cotton futures traded between 83.54 and 85.86 cents. Mar/May and Mar/Dec cotton futures spreads were 1.26 cents and -3.80 cents. May 2024 cotton futures closed at 85.72 cents, up 0.83 cents since last Friday. 

December 2024 cotton futures closed at 80.66 cents, up 0.44 cents since last Friday. Downside price protection could be obtained by purchasing an 81 cent December 2024 Put Option costing 4.74 cents establishing a 76.26 cent futures floor. 

Wheat

Wheat net weekly sales reported by exporters were net sales of 16.6 million bushels for the 2023/24 marketing year and 2.2 million bushels for the 2024/25 marketing year. Exports for the same period were up 32% compared to last week at 11.9 million bushels. Wheat export sales were 84% 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 85%. Wheat cash prices at elevators and barge points ranged from $5.96 to $6.28. March 2024 wheat futures closed at $6.00, up 7 cents since last Friday. March 2024 wheat futures traded between $5.87 and $6.17 this week. March wheat-to-corn price ratio was 1.35. Mar/May and Mar/Jul future spreads were 10 and 16 cents. May 2024 wheat futures closed at $6.10, up 10 cents since last Friday. 

July 2024 wheat futures closed at $6.16, up 7 cents since last Friday. Downside price protection could be obtained by purchasing a $6.20 July 2024 Put Option costing 47 cents establishing a $5.73 futures floor. New crop wheat cash prices at elevators and barge points ranged from $5.82 to $6.18.  ∆

DR. AARON SMITH: University of Tennessee