Corn Futures Post A New Contract Low

DR. AARON SMITH

KNOXVILLE, TENNESSEE

Corn futures posted a new contract low on Friday. The March closed the week at $4.29, the lowest close for the nearby futures contract since December 2020. Prices seem likely to move sideways to down in the short term. The next key level of price support is near $4.20. Large global and US projected ending stocks will limit price appreciation. Any rally in the futures market will likely be a result of weather concerns in the US or Brazil. 

Nearby cotton prices continued their remarkable run this week gaining 4.67 cents. Since the start of the year prices have gained over 10 cents, closing the week near 92 cents. Strong export sales in the past few weeks have contributed to the price increases and caused USDA to raise their marketing year export estimate from 12.1 to 12.3 million bales. There continues to be about a 10-cent discount between the nearby contract and the 2024 harvest contract. 

Soybean futures continue to get pushed lower by an anticipated record South American crop. 16 of the 30 trading days this year have seen nearby soybean futures close down for the day. Since January 2, the March contract is down $1.05. 

July wheat continues to trade below the 50-day moving average of $6.25. Since August, July futures prices have traded between $5.86 and $6.66 in a mostly sideways to lower pattern. As of February 6, the USDA estimated that 14% of winter wheat was in drought, down dramatically compared to last year when 58% of winter wheat was in some form of drought.
Analysis of this month’s USDA WASDE report can be obtained at: https://arec.tennessee.edu/extension/tennessee-market- highlights/monthly-crop-comments/ 

Corn

Across Tennessee, average corn basis (cash price-nearby futures price) weakened or remained unchanged at West, Northwest, North-Central, West-Central, and Mississippi River elevators and barge points. Overall, basis for the week ranged from 55 under to 20 over, with an average of 14 under the March futures at elevators and barge points. Ethanol production for the week ending February 2 was 1.033 million barrels per day, up 42,000 from the previous week. Ethanol stocks were 24.779 million barrels, up 0.509 million barrels compared to last week. Corn net sales reported by exporters for January 26 to February 1 were net sales of 48 million bushels for the 2023/24 marketing year. Exports for the same period were down 14% compared to last week at 30.8 million bushels. Corn export sales and commitments were 65% 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 72%. Cash prices for February -March delivery ranged from $3.83 to $4.63 at elevators and barge points. March 2024 corn futures closed at $4.29, down 13 cents since last Friday. For the week March 2024 corn futures traded between $4.28 and $4.45. Mar/May and Mar/Dec future spreads were 12 and 39 cents. May 2024 corn futures closed at $4.41, down 12 cents since last Friday. 

December 2024 corn futures closed at $4.68, down 8 cents since last Friday. Downside price protection could be obtained by purchasing a $4.70 December 2024 Put Option costing 38 cents establishing a $4.32 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 22 over the March futures contract, with an average basis at the end of the week of 1 under. Soybean net weekly sales reported by exporters were net sales of 12.5 million bushels for the 2023/24 marketing year and 0.3 million bushels for the 2024/25 marketing year. Exports for the same period were up 74% compared to last week at 60.8 million bushels. Soybean export sales and commitments were 81% 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 83%. March 2024 soybean futures closed at $11.83, down 5 cents since last Friday. For the week March 2024 soybean futures traded between $11.79 and $12.05. Cash soybean prices for February-March at elevators and barge points ranged from $11.88 to $12.18. March 2024 soybean-to-corn price ratio was 2.76 at the end of the week. Mar/May and Mar/Nov future spreads were 7 and -20 cents. May 2024 soybean futures closed at $11.90, down 8 cents since last Friday. 

November 2024 soybean futures closed at $11.63, down 8 cents since last Friday. Downside price protection could be achieved by purchasing an $11.80 November 2024 Put Option which would cost 76 cents and set an $11.04 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 February 8 were 87.10 cents/lb (41-4-34) and 89.10 cents/lb (31-3-35). Adjusted World Price (AWP) increased 2 cents to 70.04 cents. Cotton net weekly sales reported by exporters were 284,100 bales for the 2023/24 marketing year and 34,600 for the 2024/25 marketing year. Exports for the same period were down 37% compared to last week at 248,500 bales. Upland cotton export sales were 89% 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 91.78 cents, up 4.67 cents since last Friday. For the week, March 2024 cotton futures traded between 86.51 and 92 cents. Mar/May and Mar/Dec cotton futures spreads were 0.44 cents and -8.56 cents. May 2024 cotton futures closed at 92.22 cents, up 4.07 cents since last Friday. 

December 2024 cotton futures closed at 83.22 cents, up 1.3 cents since last Friday. Downside price protection could be obtained by purchasing an 84 cent December 2024 Put Option costing 5.52 cents establishing a 78.48 cent futures floor. 

Wheat

Wheat net weekly sales reported by exporters were net sales of 13.9 million bushels for the 2023/24 marketing year and 0.3 million bushels for the 2024/25 marketing year. Exports for the same period were up 18% compared to last week at 11.6 million bushels. Wheat export sales were 88% 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 87%. Wheat cash prices at elevators and barge points ranged from $5.87 to $6.22. March 2024 wheat futures closed at $5.96, down 3 cents since last Friday. March 2024 wheat futures traded between $5.83 and $6.06 this week. March wheat-to-corn price ratio was 1.39. Mar/May and Mar/Jul future spreads were 3 and 5 cents. May 2024 wheat futures closed at $5.99, down 9 cents since last Friday. 

July 2024 wheat futures closed at $6.01, down 12 cents since last Friday. Downside price protection could be obtained by purchasing a $6.10 July 2024 Put Option costing 42 cents establishing a $5.68 futures floor. New crop wheat cash prices at elevators and barge points ranged from $5.67 to $6.02.  ∆

DR. AARON SMITH: University of Tennessee