Weather Continues To Dominate Price Direction

DR. AARON SMITH

KNOXVILLE, TENNESSEE

Weather continues to dominate price direction. Corn planting progress has fallen 11% behind last year’s pace and 5% behind the five-year average due to rain delaying planting in many states. Iowa, Illinois, Nebraska,
and North Dakota are all greater than 10% behind the five-year average corn planting progress estimated by USDA. More rain is in the five-day forecast which could amplify planting delays. Widespread rain has reduced drought affected areas substantially across the Corn Belt and Southern Plains. Currently only 6% of cotton, 9% of soybean, 12% of corn, and 25% of winter wheat production are estimated to be in drought. 

Weather concerns are also prevalent in South America. Southern Brazil and Argentina have had harvest delays due to rainfall which may lower corn and soybean yields and calls into question the crop quality in unharvested area. 

While weather will continue to dictate price direction, there are challenges with demand that could increase US carryover stocks into the next marketing year. US corn, cotton, soybean, and wheat export commitments continue to lag compared to the five-year average and last year. As of May 9th, corn export commitments were 89% of the projected marketing year total compared to 96% last year and a five-year average of 97%. Soybean export commitments were 92% compared to 97% last year and a five-year average of 98%. Cotton export commitments were 102% compared to 107% last year and a five-year average of 109%. Wheat export commitments were 97% compared to 106% last year and a five-year average of 105%. The slower export commitments can be partially attributed to increased global supplies, a strong US dollar, and tepid global demand. 

The July wheat contract has closed +26, +23 1⁄2, -14 1⁄2, -6 3⁄4, -2 1⁄2, and -12 cents the last six trading days. This also coincided with an increase in daily trading ranges and may indicate a top in soft red winter wheat markets has been obtained. Prices are still $1.10 higher than the March 8th low of $5.37 3⁄4. 

Corn

Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at West, North-west, West-Central, North-Central, and Mississippi River elevators and barge points. Overall, basis for the week ranged from 65 under to 8 over, with an average of 26 under the July futures at elevators and barge points. Ethanol production for the week ending May 10 was 1.0 million barrels per day, up 35,000 from the previous week. Ethanol stocks were 24.489 million barrels, up 0.289 million barrels compared to last week. Corn net sales reported by exporters for May 3-9 were net sales of 29.2 million bushels for the 2023/24 marketing year and 5.0 million bushels for the 2024/25 marketing year. Exports for the same period were down 23% compared to last week at 37.5 million bushels. Corn export sales and commitments were 89% 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 97%. July 2024 corn futures closed at $4.52, down 17 cents since last Friday. Jul/Sep and July/Dec future spreads were 10 and 24 cents. For the week July 2024 corn futures traded between $4.51 and $4.75. 

The Crop Progress report estimated corn planted at 49% compared to 36% last week, 60% last year, and a 5-year average of 54%; and corn emerged at 23% compared to 12% last week, 25% last year, and a 5-year average of 21%. In Tennessee, corn planting was estimated at 73% compared to 65% last week, 85% last year, and a 5-year average of 78%; and corn emerged at 45% compared to 32% last week, 58% last year, and a 5-year average of 52%. September 2024 corn futures closed at $4.62, down 18 cents since last Friday. New crop cash prices ranged from $4.07 to $4.75 at elevators and barge points. December 2024 corn futures closed at $4.76, down 16 cents since last Friday. Downside price protection could be obtained by purchasing a $4.80 December 2024 Put Option costing 36 cents establishing a $4.44 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 38 under to even the July futures contract, with an average basis at the end of the week of 19 under. Soybean net weekly sales reported by exporters were net sales of 9.8 million bushels for the 2023/24 marketing year and 0.9 million bushels for the 2024/25 marketing year. Exports for the same period were up 46% compared to last week at 16.3 million bushels. Soybean export sales and commitments were 92% 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 98%. July 2024 soybean futures closed at $12.28, up 9 cents since last Friday. For the week July 2024 soybean futures traded between $12.03 and $12.32. July 2024 soybean-to-corn price ratio was 2.72 at the end of the week. Jul/Aug and Jul/Nov future spreads were -3 and -25 cents. August 2024 soybean futures closed at $12.25, up 5 cents since last Friday. 

The Crop Progress report estimated soybeans planted at 35% compared to 25% last week, 45% last year, and a 5-year average of 34%; and soybeans emerged at 16% compared to 9% last week, 17% last year, and a 5-year average of 10%. In Tennessee, soybean planting was estimated at 46% compared to 38% last week, 47% last year, and a 5-year average of 30%; and soybeans emerged at 25% compared to 12% last week, 18% last year, and a 5-year average of 11%. New crop cash soybean prices at elevators and barge points ranged from $11.71 to $12.00. November 2024 soybean futures closed at $12.03, down 2 cents since last Friday. Downside price protection could be achieved by purchasing a $12.20 November 2024 Put Option which would cost 75 cents and set an $11.45 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 May 16 were 71.99 cents/lb (41-4-34) and 73.99 cents/lb (31-3-35). Adjusted World Price (AWP) decreased 0.18 cents to 59.46 cents. Cotton net weekly sales reported by exporters were 156,500 bales for the 2023/24 marketing year and 140,600 bales for the 2024/25 marketing year. Exports for the same period were down 4% compared to last week at 238,800 bales. Upland cotton export sales were 102% 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 109%. July 2024 cotton futures closed at 75.89 cents, down 1.42 cents since last Friday. For the week July 2024 cotton futures traded between 73.68 and 78.43 cents. Jul/Dec and Jul/Mar cotton futures spreads were -0.92 cents and 0.69 cents. 

The Crop Progress report estimated cotton planted at 33% compared to 24% last week, 31% last year, and a 5-year average of 31%. In Tennessee, cotton planting was estimated at 28% compared to 16% last week, 34% last year, and a 5-year average of 26%. December 2024 cotton futures closed at 74.97 cents, down 0.16 cents since last Friday. Downside price protection could be obtained by purchasing a 75 cent December 2024 Put Option costing 4.32 cents establishing a 70.68 cent futures floor. March 2025 cotton futures closed at 76.58 cents, down 0.15 cents since last Friday. 

Wheat 

Wheat net weekly sales reported by exporters were net sales of 2.9 million bushels for the 2023/24 marketing year and net sales of 11.2 million bushels for the 2024/25 marketing year. Exports for the same period were up 33% compared to last week at 16.5 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 105%. Wheat cash prices at elevators and barge points ranged from $6.15 to $6.61. 

The Crop Progress report indicated winter wheat condition at 50% good-to-excellent and 18% poor-to-very poor; winter wheat headed at 57% compared to 43% last week, 46% last year, and a 5-year average of 44%; spring wheat planted at 61% compared to 47% last week, 35% last year, and a 5-year average of 48%; and spring wheat emerged at 25% compared to 12% last week, 11% last year, and a 5-year average of 18%. In Tennessee, winter wheat condition was estimated at 84% good-to- excellent and 4% poor-to-very poor; winter wheat headed at 89% compared to 83% last week, 91% last year, and a 5-year average of 90%; and winter wheat coloring at 7%. July 2024 wheat futures closed at $6.51, down 12 cents since last Friday. July wheat-to-corn price ratio was 1.44. Jul/Sep and Jul/Jul future spreads were 21 and 67 cents. July 2024 wheat futures traded between $6.50 and $6.97 this week. Downside price protection could be obtained by purchasing a $6.55 July 2024 Put Option costing 32 cents establishing a $6.23 futures floor. New crop wheat cash prices at elevators and barge points ranged from $6.30 to $6.72. September 2024 wheat futures closed at $6.72, down 10 cents since last Friday. July 2025 wheat futures closed at $7.18, down 4 cents since last Friday.  ∆

DR. AARON SMITH: University of Tennessee