Argentina Is Expected To Be A Significant Source Of Competition For U.S. Corn Exports

DR. AARON SMITH

KNOXVILLE, TENNESSEE

Nearby corn futures are up almost 30 cents off the recent low, however the rally appeared to stall this week. Large U.S. and global corn stocks combined with export sales weakness will keep a lid on futures prices.
U.S. corn export commitments (accumulated exports + outstanding sales), as a percent of the total USDA marketing year projected exports, were 76% compared to the previous 5-year average of 82%. To meet the current USDA export projection of 2.1 billion bushels, new weekly commitments will need to average over 20 million bushels, with corresponding export shipments. 

Argentina is expected to be a significant source of competition for U.S. corn exports as USDA projects Argentina’s corn exports to increase 68% year-over-year. Brazil is currently projected to have 4% lower year-over-year corn exports. Dry conditions in Brazil could be a potential path to higher prices as soil moisture, to carry the second corn crop through to harvest, remains a concern. Until more information is known about Brazil’s second corn crop and U.S. corn plantings, it is likely that nearby corn futures will trade mostly sideways between $4.10 and $4.60. 

May soybeans have rallied off the contract lows near $11.40. Lower expected production out of Brazil has helped set the bottom of the current trading range of $11.40 to $12.50. U.S. projected planted acreage could be the next major market mover. Currently, the November/December soybean-to-corn price ratio is neutral to slightly favoring increased soybean acreage. 

The USDA will release the Prospective Plantings report on March 28. The Report will be closely watched for changes in planting intentions compared to the USDA Outlook acreage estimates (corn 91 million acres, soybeans 87.5 million acres, and cotton 11 million acres) and private estimates. 

Corn 

Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at Northwest, West-Central, and North-Central elevators and barge points and weakened at West and Mississippi River elevators and barge points. Overall, basis for the week ranged from 65 under to 10 over, with an average of 17 under the May futures at elevators and barge points. Ethanol production for the week ending March 8 was 1.024 million barrels per day, down 33,000 from the previous week. Ethanol stocks were 25.782 million barrels, down 0.269 million barrels compared to last week. Corn net sales reported by exporters for March 1-7 were net sales of 50.5 million bushels for the 2023/24 marketing year. Exports for the same period were up 9% compared to last week at 49.5 million bushels. Corn export sales and commitments were 76% 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 82%. May 2024 corn futures closed at $4.36, down 3 cents since last Friday. For the week May 2024 corn futures traded between $4.31 and $4.45. May/Jul and May/Dec future spreads were 13 and 34 cents. July 2024 corn futures closed at $4.49, down 3 cents since last Friday. 

New crop cash prices ranged from $3.87 to $4.55 at elevators and barge points. December 2024 corn futures closed at $4.70, down 2 cents since last Friday. Downside price protection could be obtained by purchasing a $4.80 December 2024 Put Option costing 42 cents establishing a $4.38 futures floor. 

Soybeans 

Across Tennessee the average soybean basis weakened or remained unchanged at West, Northwest, West-Central, North- Central, and Mississippi River elevators and barge points. Basis ranged from 33 under to 15 over the May futures contract, with an average basis at the end of the week of 5 under. Soybean net weekly sales reported by exporters were net sales of 13.8 million bushels for the 2023/24 marketing year and 3.5 million bushels for the 2024/25 marketing year. Exports for the same peri- od were down 33% compared to last week at 34.8 million bushels. Soybean export sales and commitments were 85% 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 91%. May 2024 soybean futures closed at $11.98, up 14 cents since last Friday. For the week May 2024 soybean futures traded between $11.75 and $12.17. May 2024 soybean-to-corn price ratio was 2.75 at the end of the week. May/ Jul and May/Nov future spreads were 14 and -8 cents. July 2024 soybean futures closed at $12.12, up 17 cents since last Friday. 

New crop cash soybean prices at elevators and barge points ranged from $11.40 to $11.68. November 2024 soybean futures closed at $11.90, up 17 cents since last Friday. Downside price protection could be achieved by purchasing a $12.00 November 2024 Put Option which would cost 73 cents and set a $11.27 futures floor. Nov/Dec soybean-to-corn price ratio was 2.53 at the end of the week. 

Cotton

North Delta upland cotton spot price quotes for March 14 were 90.73 cents/lb (41-4-34) and 92.73 cents/lb (31-3-35). Adjusted World Price (AWP) decreased 0.78 cents to 76.1 cents. Cotton net weekly sales reported by exporters were 85,800 bales for the 2023/24 marketing year and 112,700 bales for the 2024/25 marketing year. Exports for the same period were down 11% compared to last week at 293,300 bales. Upland cotton export sales were 92% 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 97%. May 2024 cotton futures closed at 93.94 cents, down 1.34 cents since last Friday. For the week, May 2024 cotton futures traded between 93.2 and 97.53 cents. May/Jul and May/Dec cotton futures spreads were -0.35 cents and -10.26 cents. July 2024 cotton futures closed at 93.59 cents, down 0.33 cents since last Friday. 

December 2024 cotton futures closed at 83.68 cents, up 0.69 cents since last Friday. Downside price protection could be obtained by purchasing an 84 cent December 2024 Put Option costing 5.5 cents establishing a 78.5 cent futures floor. 

Wheat

Wheat net weekly sales reported by exporters were net sales of 3.1 million bushels for the 2023/24 marketing year – a marketing year low - and 3.0 million bushels for the 2024/25 marketing year. Exports for the same period were up 23% compared to last week at 16.7 million bushels. Wheat export sales were 96% 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 97%. Wheat cash prices at elevators and barge points ranged from $5.02 to $5.53. May 2024 wheat futures closed at $5.28, down 9 cents since last Friday. May 2024 wheat futures traded between $5.23 and $5.56 this week. May wheat-to-corn price ratio was 1.21. May/Jul and May/Sep future spreads were 16 and 32 cents. 

July 2024 wheat futures closed at $5.44, down 6 cents since last Friday. Downside price protection could be obtained by purchasing a $5.50 July 2024 Put Option costing 37 cents establishing a $5.13 futures floor. New crop wheat cash prices at elevators and barge points ranged from $5.17 to $5.45. September 2024 wheat futures closed at $5.60, down 4 cents since last Friday.  ∆

DR. AARON SMITH: University of Tennessee