Overall, The WASDE Report Provided Limited Changes To U.S. And Global Balance Sheets

DR. AARON SMITH

KNOXVILLE, TENNESSEE

On January 17, May cotton futures closed at 82.69 cents, 29-trading days later (February 28) prices peaked at 103.8 cents. Fast-forward another 31-trading days (April 12) and prices are close to where they started on
January 17, closing Friday at 82.62 cents. A 60-trading day price range of 81.7 to 103.8 cents, a 27% move in value. Looking at USDA supply and demand estimates show little rationale for such a dramatic price swing. From January to April, U.S. average yield estimates declined 23 lbs per acre, decreasing production by 330,000 bales. U.S. cotton demand increased 50,000 bales, due to a 200,000-bale increase in exports and a partially offsetting reduction in domestic consumption of 150,000 bales. As a result of the supply and demand changes, U.S. projected ending stocks decreased from 2.9 million bales to 2.4 million bales. Foreign stocks also decreased 900,000 bales from 81.48 million to 80.58 million bales. In totality, the accumulated changes were bullish for cotton prices. However, other factors (speculators, mill fixations, weather outlook/drought, national and global planting and production expectations, and consumer demand) con- tributed to the runup and rapid decline in cotton prices.

On Thursday, the USDA released the April WASDE report. Overall, the report provided limited changes to the U.S. and global balance sheets. For the day, futures prices for corn, cotton, soybeans, and wheat all closed down. The report will not change the established price ranges for corn, soybeans, and wheat. On May 10th the USDA will release initial WASDE estimates for the 2024/25 marketing year. The May report has the potential to be a market mover. 

Details of the April USDA WASDE report and market reaction for corn, cotton, soybeans, and wheat can be found at: https:// arec.tennessee.edu/extension/tennessee-market-highlights/monthly-crop-comments/.

Corn

Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at Northwest, West-Central, North-Central, and Mississippi River elevators and barge points and weakened at West elevators and barge points. Overall, basis for the week ranged from 55 under to 7 over, with an average of 15 under the May futures at elevators and barge points. Ethanol production for the week ending April 5 was 1.056 million barrels per day, down 17,000 from the previous week. Ethanol stocks were 26.208 million barrels, down 0.208 million barrels compared to last week. Corn net sales re- ported by exporters for March 29-April 4 were net sales of 12.8 million bushels for the 2023/24 marketing year – a marketing year low – and 0.4 million bushels for the 2024/25 marketing year. Exports for the same period were down 5% compared to last week at 61.3 million bushels. Corn 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 92%. May 2024 corn futures closed at $4.35, up 1 cent since last Friday. For the week May 2024 corn futures traded between $4.27 and $4.37. May/Jul and May/Dec future spreads were 12 and 37 cents. July 2024 corn futures closed at $4.47, up 1 cent since last Friday. 

The Crop Progress report estimated corn planted at 3% compared to 2% last week, 3% last year, and a 5-year average of 2%. In Tennessee, corn planting was estimated at 7% compared to 2% last week, 4% last year, and a 5-year average of 5%. New crop cash prices ranged from $3.86 to $4.53 at elevators and barge points. December 2024 corn futures closed at $4.72, 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 the average soybean basis strengthened 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 8 under. Soybean net weekly sales reported by exporters were net sales of 11.2 million bushels for the 2023/24 marketing year. Exports for the same period were down 8% compared to last week at 18.5 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 95%. May 2024 soybean futures closed at $11.74, down 11 cents since last Friday. For the week May 2024 soybean futures traded between $11.51 and $11.93. May 2024 soybean-to-corn price ratio was 2.7 at the end of the week. May/Jul and May/Nov future spreads were 12 and 2 cents. July 2024 soybean futures closed at $11.86, down 10 cents since last Friday. 

In Tennessee, soybean planting was estimated at 4% compared to 1% last week, 1% last year, and a 5-year average of 0%. New crop cash soybean prices at elevators and barge points ranged from $11.31 to $11.65. November 2024 soybean futures closed at $11.76, down 8 cents since last Friday. Downside price protection could be achieved by purchasing an $11.80 November 2024 Put Option which would cost 61 cents and set an $11.19 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 April 11 were 79.87 cents/lb (41-4-34) and 81.87 cents/lb (31-3-35). Adjusted World Price (AWP) decreased 4.05 cents to 65.43 cents. Cotton net weekly sales reported by exporters were 81,500 bales for the 2023/24 marketing year and 35,700 bales for the 2024/25 marketing year. Exports for the same period were down 25% compared to last week at 274,100 bales. Upland cotton export sales were 95% 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 103%. May 2024 cotton futures closed at 82.62 cents, down 3.63 cents since last Friday. For the week, May 2024 cotton futures traded between 81.7 and 88.24 cents. May/Jul and May/Dec cotton futures spreads were 1.97 cents and -2.51 cents. July 2024 cotton futures closed at 84.59 cents, down 3.23 cents since last Friday. 

The Crop Progress report estimated cotton planted at 5% compared to 3% last week, 5% last year, and a 5-year average of 6%. 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 80.11 cents, down 2.54 cents since last Friday. Downside price protection could be obtained by purchasing an 81 cent December 2024 Put Option costing 4.97 cents establishing a 76.03 cent futures floor. 

Wheat

Wheat net weekly sales reported by exporters were net sales of 3.0 million bushels for the 2023/24 marketing year and 10.1 million bushels for the 2024/25 marketing year. Exports for the same period were up 21% compared to last week at 23 million bushels. Wheat export sales were 98% 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 102%. Wheat cash prices at elevators and barge points ranged from $5.21 to $5.56. May 2024 wheat futures closed at $5.56, down 11 cents since last Friday. May 2024 wheat futures traded between $5.48 and $5.73 this week. May wheat-to-corn price ratio was 1.28. May/Jul and May/Sep future spreads were 14 and 30 cents. 

The Crop Progress report indicated winter wheat condition at 56% good-to-excellent and 12% poor-to-very poor; winter wheat headed at 6% compared to 4% last week, 7% last year, and a 5-year average of 5%; and spring wheat planted at 3% compared to 1% last week, 1% last year, and a 5-year average of 3%. In Tennessee, winter wheat condition was estimated at 67% good-to -excellent and 9% poor-to-very poor; winter wheat jointing at 59% compared to 38% last week, 60% last year, and a 5-year average of 51%; and winter wheat headed at 2% compared to 1% last week, 1% last year, and a 5-year average of 1%. July 2024 wheat futures closed at $5.70, down 11 cents since last Friday. Downside price protection could be obtained by purchasing a $5.75 July 2024 Put Option costing 32 cents establishing a $5.43 futures floor. New crop wheat cash prices at elevators and barge points ranged from $5.36 to $5.64. September 2024 wheat futures closed at $5.86, down 12 cents since last Friday.  ∆

DR. AARON SMITH: University of Kentucky