Where Is The Bottom Of The Corn And Soybean Market?

DR. AARON SMITH

KNOXVILLE, TENNESSEE

Where is the bottom of the corn and soybean market? Nearby corn and soybean futures have been on a downward spiral since the start of the year. The March corn contract has declined from $4.63 3⁄4 to $3.99 3⁄4, a
$0.64 decrease. March soybeans have declined from $12.73 1⁄2 to $11.33, a $1.40 1⁄2 decrease. Prices have been adversely impacted by large projected global supplies, South American production estimates, and tepid demand. Prices are likely approaching a bottom. Sub $4.00 prices will be tough for producers with crops in storage to initiate additional sales. That being said, it is unlikely that we will see dramatic price increases in the futures market. Abundant projected supplies relative to use will keep a lid on prices in the near term. For corn nearby futures prices are likely to trade between $3.90 and $4.30 and nearby soybean futures $11.00 and $12.00. The best chance for Tennessee producers to increase cash prices is to look for improved basis opportunities and on demand sales. However, with near record state average yields in 2023 even basis increases are likely to be muted compared to previous years. 

After adding 12 cents in the past month, nearby cotton futures price increases have slowed and moved sideways in the last seven trading sessions between 91 and 96 cents. The stall in price increases has corresponded with increased volatility. The last seven daily movements in the March contract were +1.96, +1.15, -0.76, -2.68, +1.41, +1.60, and +0.73. It remains uncertain whether another leg up is possible or if prices will pull back. Export sales, crop production revisions, and speculative money flows will dictate price direction.

July wheat futures are trading below $6.00, setting a new contract low of $5.56 1⁄2 on Monday. Wheat prices have been pushed lower based on competition for exports and improved moisture conditions across a large portion of the US winter wheat production area. As of February 20th, only 12% of US winter wheat production is estimated to be in drought. This is a dramatic improvement compared to a year ago when 57% of production was in drought. 

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 50 under to 20 over, with an average of 9 under the March futures at elevators and barge points. Ethanol production for the week ending February 16 was 1.084 million barrels per day, up 1,000 from the previous week. Ethanol stocks were 25.502 million barrels, down 0.308 million barrels compared to last week. Corn net sales reported by exporters for February 9-15 were net sales of 32.3 million bushels for the 2023/24 marketing year and 7 million bushels for the 2024/25 marketing year. Exports for the same period were up 13% compared to last week at 40.3 million bushels. Corn export sales and commitments were 69% 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%. Cash prices for March delivery ranged from $3.61 to $4.50 at elevators and barge points. March 2024 corn futures closed at $3.99, down 17 cents since last Friday. For the week March 2024 corn futures traded between $3.98 and $4.21. Mar/May and Mar/Dec future spreads were 14 and 50 cents. May 2024 corn futures closed at $4.13, down 16 cents since last Friday. 

December 2024 corn futures closed at $4.49, down 9 cents since last Friday. Downside price protection could be obtained by purchasing a $4.50 December 2024 Put Option costing 36 cents establishing a $4.14 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 48 under to 26 over the March futures contract, with an average basis at the end of the week of 3 over. Soybean net weekly sales reported by exporters were net sales of 2.1 million bushels for the 2023/24 marketing year – a marketing year low. Exports for the same period were down 18% compared to last week at 44 million bushels. Soybean export sales and commitments were 83% 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 87%. March 2024 soybean futures closed at $11.33, down 39 cents since last Friday. For the week March 2024 soybean futures traded be- tween $11.30 and $11.88. Cash soybean prices for March at elevators and barge points ranged from $11.42 to $12.02. March 2024 soybean-to-corn price ratio was 2.84 at the end of the week. Mar/May and Mar/Nov future spreads were 8 and -3 cents. May 2024 soybean futures closed at $11.41, down 35 cents since last Friday. 

November 2024 soybean futures closed at $11.30, down 18 cents since last Friday. Downside price protection could be achieved by purchasing an $11.40 November 2024 Put Option which would cost 74 cents and set a $10.66 futures floor. Nov/ Dec soybean-to-corn price ratio was 2.52 at the end of the week. 

Cotton

North Delta upland cotton spot price quotes for February 22 were 91.71 cents/lb (41-4-34) and 93.71 cents/lb (31-3-35). Adjusted World Price (AWP) increased 1.68 cents to 75.12 cents. Cotton net weekly sales reported by exporters were 130,500 bales for the 2023/24 marketing year and 46,600 bales for the 2024/25 marketing year. Exports for the same period were down 7% compared to last week at 255,500 bales. Upland cotton export sales were 90% 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 92%. March 2024 cotton futures closed at 94.93 cents, up 1.06 cents since last Friday. For the week, March 2024 cotton futures traded between 90.5 and 95.42 cents. Mar/May and Mar/Dec cotton futures spreads were -1.44 cents and -11.54 cents. May 2024 cotton futures closed at 93.49 cents, down 0.93 cents since last Friday. 

December 2024 cotton futures closed at 83.39 cents, down 0.69 cents since last Friday. Downside price protection could be obtained by purchasing an 84 cent December 2024 Put Option costing 5.65 cents establishing a 78.35 cent futures floor. 

Wheat

Wheat net weekly sales reported by exporters were net sales of 8.6 million bushels for the 2023/24 marketing year and 1.7 million bushels for the 2024/25 marketing year. Exports for the same period were down 8% compared to last week at 13.1 million bushels. Wheat export sales were 91% 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 93%. Wheat cash prices at elevators and barge points ranged from $5.68 to $6.04. March 2024 wheat futures closed at $5.73, up 13 cents since last Friday. March 2024 wheat futures traded be- tween $5.55 and $6.00 this week. March wheat-to-corn price ratio was 1.44. Mar/May and Mar/Jul future spreads were -4 and -3 cents. May 2024 wheat futures closed at $5.69, up 10 cents since last Friday. 

July 2024 wheat futures closed at $5.70, up 9 cents since last Friday. Downside price protection could be obtained by purchasing a $5.80 July 2024 Put Option costing 42 cents establishing a $5.38 futures floor. New crop wheat cash prices at elevators and barge points ranged from $5.48 to $5.71.  ∆

DR. AARON SMITH: University of Tennessee