Drought Severity Was Reduced For Corn With 15% In Moderate Drought

DR. AARON SMITH

KNOXVILLE, TENNESSEE

The early season U.S. drought picture continues to evolve, with needed moisture helping but not breaking the drought completely in the North- west Corn Belt. As of April 2nd, the USDA Agriculture in Drought report estimated 24% of corn, 22% of soybeans, 8% of cotton, and 18% of winter wheat to be in drought. All four commodities are up 1-2% compared to the previous week. 

Drought severity was reduced for corn with 15% in moderate drought, 7% in severe drought, and 2% in extreme drought and soybeans with 16% in moderate drought, 5% in severe drought, and 2% in extreme drought. Iowa remains the epicenter of the drought for corn and soybeans. Nebraska, Wisconsin, Missouri, and Minnesota also have extensive drought coverage, however with lower levels of severity. Drought covering cotton production is down 38% compared to last year (8% compared to 46%). 7% of cotton is in moderate drought leaving only 1% in severe, extreme, or exceptional drought – most of which is in New Mexico. Almost all of the 18% of winter wheat production in drought is in moderate drought covering Oklahoma, Kansas, and Idaho. 

Bottomline, the early season 2024 drought coverage has had a limited negative impact on production potential so far this year. As a result, 2024 harvest prices have trended mostly sideways to lower. Weather will play an important role as spring planting continues and crops mature through the summer. The current NOAA 30 day forecast for April is for above average temperatures and above average precipitation for a large portion of the corn, soybean, wheat, and cotton growing areas. 

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 55 under to 9 over, with an average of 15 under the May futures at elevators and barge points. Ethanol production for the week ending March 29 was 1.073 million barrels per day, up 19,000 from the previous week. Ethanol stocks were 26.416 million barrels, up 0.324 million barrels compared to last week. Corn net sales reported by exporters for March 22-28 were net sales of 37.3 million bushels for the 2023/24 marketing year and 0.4 million bushels for the 2024/25 marketing year. Exports for the same period were up 33% compared to last week at 64.6 million bushels – a marketing year high. Corn export sales and commitments were 82% 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 90%. May 2024 corn futures closed at $4.34, down 8 cents since last Friday. For the week May 2024 corn futures traded between $4.24 and $4.42. May/Jul and May/ Dec future spreads were 12 and 38 cents. July 2024 corn futures closed at $4.46, down 8 cents since last Friday. 

The Crop Progress report estimated corn planted at 2% compared to 2% last year and a 5-year average of 1%. In Tennessee, corn planting was estimated at 2% compared to 1% last year and a 5-year average of 0%. New crop cash prices ranged from $3.88 to $4.56 at elevators and barge points. December 2024 corn futures closed at $4.72, down 5 cents since last Friday. Downside price protection could be obtained by purchasing a $4.80 December 2024 Put Option costing 38 cents establishing a $4.42 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 10 over the May futures contract, with an average basis at the end of the week of 9 under. Soybean net weekly sales reported by exporters were net sales of 7.1 million bushels for the 2023/24 marketing year. Exports for the same period were down 30% compared to last week at 20.2 million bushels. Soybean export sales and commitments were 87% 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 94%. May 2024 soybean futures closed at $11.85, down 6 cents since last Friday. For the week May 2024 soybean futures traded between $11.68 and $12.01. May 2024 soybean-to-corn price ratio was 2.73 at the end of the week. May/Jul and May/Nov future spreads were 11 and -1 cent. July 2024 soybean futures closed at $11.96, down 9 cents since last Friday. 

In Tennessee, soybean planting was estimated at 0% compared to 0% last year and a 5-year average of 0%. New crop cash soybean prices at elevators and barge points ranged from $11.45 to $11.65. November 2024 soybean futures closed at $11.84, down 2 cents since last Friday. Downside price protection could be achieved by purchasing a $12.00 November 2024 Put Option which would cost 69 cents and set an $11.31 futures floor. Nov/Dec soybean-to-corn price ratio was 2.51 at the end of the week. 

Cotton 

North Delta upland cotton spot price quotes for April 5 were 82.75 cents/lb (41-4-34) and 84.75 cents/lb (31-3-35). Adjusted World Price (AWP) decreased 1.4 cents to 69.48 cents. Cotton net weekly sales reported by exporters were 84,900 bales for the 2023/24 marketing year and 22,900 bales for the 2024/25 marketing year. Exports for the same period were up 2% compared to last week at 367,600 bales. Upland cotton export sales were 94% 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 102%. May 2024 cotton futures closed at 86.25 cents, down 5.13 cents since last Friday. For the week, May 2024 cotton futures traded between 86.17 and 92.9 cents. May/Jul and May/Dec cotton futures spreads were 1.57 cents and -3.6 cents. July 2024 cotton futures closed at 87.82 cents, down 4.15 cents since last Friday. 

The Crop Progress report estimated cotton planted at 3% compared to 3% last year and a 5-year average of 4%. In Tennessee, cotton planting was estimated at 0% compared to 0% last year and a 5-year average of 0%. December 2024 cotton futures closed at 82.65 cents, down 1.34 cents since last Friday. Downside price protection could be obtained by purchasing an 83 cent December 2024 Put Option costing 4.9 cents establishing a 78.1 cent futures floor. 

Wheat 

Wheat net weekly sales reported by exporters were net sales of 0.6 million bushels for the 2023/24 marketing year and net sales of 9.6 million bushels for the 2024/25 marketing year. Exports for the same period were up 27% compared to last week at 19.0 million bushels. Wheat export sales were 97% 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 101%. Wheat cash prices at elevators and barge points ranged from $5.15 to $5.47. May 2024 wheat futures closed at $5.67, up 7 cents since last Friday. May 2024 wheat futures traded between $5.40 and $5.74 this week. May wheat-to-corn price ratio was 1.31. May/Jul and May/Sep future spreads were 14 and 31 cents. 

The Crop Progress report indicated winter wheat condition at 56% good-to-excellent and 11% poor-to-very poor; and winter wheat headed at 4% compared to 5% last year and a 5-year average of 2%. In Tennessee, winter wheat condition was estimated at 72% good-to-excellent and 5% poor-to-very poor; winter wheat jointing at 38%; and winter wheat headed at 1%. July 2024 wheat futures closed at $5.81, up 6 cents since last Friday. Downside price protection could be obtained by purchasing a $5.85 July 2024 Put Option costing 36 cents establishing a $5.49 futures floor. New crop wheat cash prices at elevators and barge points ranged from $5.31 to $5.51. September 2024 wheat futures closed at $5.98, up 7 cents since last Friday.  ∆

DR. AARON SMITH: University of Tennessee