March Cotton Futures Had A Great Week

DR. AARON SMITH

KNOXVILLE, TENNESSEE

March corn futures have found some support near $4.40, trading side-ways for the past 14 days in a channel between $4.36 and $4.53. Large carryover stocks in the US and world will likely limit potential price increases. Weather in South America and planted acreage estimates in the US also have the potential to move prices up or down. For now, the most likely path forward is to continue sideways to down. 

Nearby soybean futures have continued its freefall posting a new contract low of $11.86 3⁄4 on Friday. Price direction continues to be dominated by news out of South America. The anticipated record crop in South America will continue to weigh on US domestic prices and reduce the US share of global exports. Marketing year low export sales this week are not a good indication for US exports. Soybean prices will continue to search for a bottom and new trading range. How low prices go will be determined by production estimates down South.

March cotton futures had a great week with prices increasing 2.65 cents. Prices were supported by marketing year high weekly sales with large purchases reported by China, Vietnam, and Pakistan. May and July futures broke above the upper bound of the long-term upper end of the range of 88 cents, however March has not breached that threshold yet. For nearby futures to push to 90 cents, export sales will need to continue to be robust. 

Since Mid-August, July wheat has traded mostly between $6.00 to $6.55 with limited movement outside the trading channel. The trading range is likely to persist until more information on the Northern hemisphere winter crop is revealed. For now, expect price to trade within the established range. 

Corn

Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at Northwest, North-Central, and West-Central and weakened at West and Mississippi River elevators and barge points. Overall, basis for the week ranged from 50 under to 25 over, with an average of 7 under the March futures at elevators and barge points. Ethanol production for the week ending January 26 was 0.991 million barrels per day, up 173,000 from the previous week. Ethanol stocks were 24.27 million barrels, down 1.545 million barrels compared to last week. Corn net sales reported by exporters for January 19-25 were net sales of 47.5 million bushels for the 2023/24 marketing year and 1.4 million bushels for the 2024/25 marketing year. Exports for the same period were down 2% compared to last week at 35.9 million bushels. Corn export sales and commitments were 63% 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 70%. Cash prices for February-March delivery ranged from $3.96 to $4.72 at elevators and barge points. March 2024 corn futures closed at $4.42, down 4 cents since last Friday. For the week March 2024 corn futures traded between $4.36 and $4.48. Mar/May and Mar/Dec future spreads were 11 and 34 cents. May 2024 corn futures closed at $4.55, down 2 cents 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 weakened or remained unchanged at Northwest, West, West-Central, North-Central, and Mississippi River elevators and barge points. Basis ranged from 28 under to 40 over the March futures contract, with an average basis at the end of the week of 5 over. Soybean net weekly sales reported by exporters were net sales of 6.0 million bushels for the 2023/24 marketing year – a marketing year low and 0.05 million bushels for the 2024/25 marketing year. Ex- ports for the same period were down 15% compared to last week at 34.9 million bushels. Soybean export sales and commitments were 80% 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 81%. March 2024 soybean futures closed at $11.88, down 21 cents since last Friday. For the week March 2024 soybean futures traded between $11.86 and $12.23. Cash soybean prices for February-March at elevators and barge points ranged from $12.08 to $12.47. March 2024 soybean-to-corn price ratio was 2.69 at the end of the week. Mar/May and Mar/Nov future spreads were 10 and -17 cents. May 2024 soybean futures closed at $11.98, down 18 cents since last Friday. 

November 2024 soybean futures closed at $11.71, down 14 cents since last Friday. Downside price protection could be achieved by purchasing an $11.80 November 2024 Put Option which would cost 73 cents and set an $11.07 futures floor. Nov/ Dec soybean-to-corn price ratio was 2.46 at the end of the week. 

Cotton

North Delta upland cotton spot price quotes for February 1 were 84.49 cents/lb (41-4-34) and 86.49 cents/lb (31-3-35). Adjusted World Price (AWP) increased 3.4 cents to 68.04 cents. Cotton net weekly sales reported by exporters were 349,400 bales for the 2023/24 marketing year and 25,200 for the 2024/25 marketing year. Exports for the same period were up 179% compared to last week at 396,700 bales – a marketing year high. Upland cotton export sales were 86% 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 87%. March 2024 cotton futures closed at 87.11 cents, up 2.65 cents since last Friday. For the week, March 2024 cotton futures traded between 83.65 and 87.32 cents. Mar/May and Mar/Dec cotton futures spreads were 1.04 cents and -5.19 cents. May 2024 cotton futures closed at 88.15 cents, up 2.43 cents since last Friday. 

December 2024 cotton futures closed at 81.92 cents, up 1.26 cents since last Friday. Downside price protection could be obtained by purchasing an 82 cent December 2024 Put Option costing 5.06 cents establishing a 76.94 cent futures floor. 

Wheat

Wheat net weekly sales reported by exporters were net sales of 11.8 million bushels for the 2023/24 marketing year and 0.6 million bushels for the 2024/25 marketing year. Exports for the same period were down 17% compared to last week at 9.8 million bushels. Wheat export sales were 86% 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 86%. Wheat cash prices at elevators and barge points ranged from $5.75 to $6.21. March 2024 wheat futures closed at $5.99, down 1 cent since last Friday. March 2024 wheat futures traded between $5.84 and $6.11 this week. March wheat-to-corn price ratio was 1.36. Mar/May and Mar/Jul future spreads were 9 and 14 cents. May 2024 wheat futures closed at $6.08, down 2 cents since last Friday. 

July 2024 wheat futures closed at $6.13, down 3 cents since last Friday. Downside price protection could be obtained by purchasing a $6.20 July 2024 Put Option costing 45 cents establishing a $5.75 futures floor. New crop wheat cash prices at elevators and barge points ranged from $5.79 to $6.12. 

DR. AARON SMITH: University of Tennessee