Maintaining Rotations Best Course Of Action For Producers This Year If Possible

DR. AARON SMITH

KNOXVILLE, TENNESSEE

   Cotton futures prices jumped this week, gaining between 6.5 and 9.32 cents for the week, depending on the futures contract. May futures closed Friday up 5 cents indicating a strong likelihood of additional price gains early next week. After a January 31 to March 17 price lull, where cotton prices moved sideways between 115 and 125, nearby futures have broken to the upside. Increased energy prices, competition for planted acres, strong global demand, low global exportable supplies, and US Southern Plains drought concerns have propelled cotton prices higher. The December cotton contract closed on Friday at 111.74 cents.

   Last year the U.S. (Tennessee) planted acreage was estimated at: 93.4 million acres of corn (1.02 million); 11.2 million acres of cotton (0.275 million); and 87.2 million acres of soybeans (1.55 million). 

   2022 USDA projections, from the outlook forum, were 92 million acres of corn, 88 million acres of soybeans, and 12.7 million acres of cotton. Next week, USDA will release the Projected Plantings report indicating estimated acres based on farmer surveys. While the report will be closely monitored it may have a muted impact on markets, due to uncertainty.

   This year is one of the most difficult years to project national and state planted acreage. Maintaining rotations is the best course of action for producers this year, if possible, as rotation provides long term benefits for fertility, weed, pest, and disease control, soil health, and long-term capital investments. However, we will likely see small amounts of acreage continue to move between commodities based on price swings, fertilizer costs, and chemical availability. 

   Additionally, weather will play a deciding factor in total acres planted this spring. While the vast majority of intended planted acreage is set, the bottom line is estimates are highly uncertain and likely to change as this challenging year continues.

   Corn

   Ethanol production for the week ending March 18 was 1.042 million barrels per day, up 16,000 from the previous week. Ethanol stocks were 26.148 million barrels, up 0.203 million compared to last week. Corn net sales reported by exporters for March 11-17, 2022, were down compared to last week with net sales of 38.6 million bushels for the 2021/22 marketing year and 0.2 million bushels for the 2022/23 marketing year. Exports for the same period were up 17 percent from last week at 58.7 million bushels. Corn export sales and commitments were 83 percent of the USDA estimated total exports for the 2021/22 marketing year (September 1 to August 31) compared to the previous 5- year average of 84 percent. Across Tennessee, average corn basis (cash price-nearby futures price) weakened or remained unchanged at West, Northwest, West-Central, and Mississippi River elevators and barge points and weakened at North-Central elevators and barge points. 

   Overall, basis for the week ranged from 35 under to 27 over, with an average of 3 under the May futures at elevators and barge points. May 2022 corn futures closed at $7.54, up 13 cents since last Friday. For the week, May 2022 corn futures traded between $7.42 and $7.70. May/ Jul and May/Dec future spreads were -20 and -85 cents. July 2022 corn futures closed at $7.34, up 22 cents since last Friday.

   New crop cash prices at elevators and barge points ranged from $6.29 to $6.92. December 2022 corn futures closed at $6.69, up 24 cents since last Friday. Downside price protection could be obtained by purchasing a $6.70 December 2022 Put Option costing 79 cents establishing a $5.91 futures floor.

   Soybeans

   Net sales reported by exporters were down compared to last week with net sales of 15.1 million bushels for the 2021/22 marketing year and net sales cancelations of 0.5 million bushes for the 2022/23 marketing year. Exports for the same period were down 23 percent compared to last week at 20.2 million bushels. Soybean export sales and commitments were 95 percent of the USDA estimated total annual exports for the 2021/22 marketing year (September 1 to August 31), compared to the previous 5-year average of 91 percent. Across Tennessee, average soybean basis weakened or remained unchanged at Northwest, West, West- Central, North-Central, and Mississippi River elevators and barge points. Basis ranged from 20 under to 34 over, with an average basis of 6 over the May futures contract. May 2022 soybean futures closed at $17.10, up 42 cents since last Friday. For the week, May 2022 soybean futures traded between $16.66 and $17.36. May/Jul and May/Nov future spreads were -22 and -214 cents. May 2022 soybean-to-corn price ratio was 2.27 at the end of the week. July 2022 soybean futures closed at $16.88, up 43 cents since last Friday.

   Nov/Dec 2022 soybean-to-corn price ratio was 2.24 at the end of the week. New crop cash soybean prices at elevators and barge points ranged from $14.63 to $15.37. November 2022 soybean futures closed at $14.96, up 30 cents since last Friday. Downside price protection could be achieved by purchasing a $15.00 November 2022 Put Option which would cost 117 cents and set a $13.83 futures floor.

   Cotton

    Net sales reported by exporters were down compared to last week with net sales of 307,500 bales for the 2021/22 marketing year and 67,400 bales for the 2022/23 marketing year. Exports for the same period were up 36 percent compared to last week at 442,700 bales – a marketing year high. Upland cotton export sales were 100 percent of the USDA estimated total annual exports for the 2021/22 marketing year (August 1 to July 31), compared to the previous 5-year average of 96 percent.  Delta upland cotton spot price quotes for March 24 were 131.9 cents/lb (41-4-34) and 134.15 cents/lb (31-3-35). Adjusted world price increased 8.81 cents to 122.07 cents. May 2022 cotton futures closed at 135.9 cents, up 9.04 cents since last Friday. For the week, May 2022 cotton futures traded between 127.1 and 135.9 cents. May/Jul and May/Dec cotton futures spreads were -3.55 cents and -24.16 cents. July 2022 cotton futures closed at 132.35 cents, up 9.32 cents since last Friday.

   December 2022 cotton futures closed at 111.74 cents, up 6.5 cent since last Friday. Downside price protection could be obtained by purchasing a 112 cent December 2022 Put Option costing 12.68 cents establishing a 99.32 cent futures floor.

   Wheat

   Wheat net sales reported by exporters were up compared to last week with net sales of 5.7 million bushels for the 2021/22 marketing year and 13.5 million bushels for the 2022/23 marketing year. Exports for the same period were up 47 percent from last week at 13.5 million bushels. Wheat export sales were 88 percent of the USDA estimated total annual exports for the 2021/22 marketing year (June 1 to May 31), compared to the previous 5-year average of 99 percent. Wheat cash prices at elevators and barge points ranged from $10.05 to $10.40. May 2022 wheat futures closed at $11.02, up 39 cents since last Friday. 

   May 2022 wheat futures traded between $10.61 and $11.69 this week. May wheat-to-corn price ratio was 1.46. May/Jul and May/Sep future spreads were -10 and -33 cents.

   New crop wheat cash prices at elevators and barge points ranged from $9.74 to $10.56. July 2022 wheat futures closed at $10.92, up 48 cents since last Friday. Downside price protection could be obtained by purchasing an $11.00 July 2022 Put Option costing 120 cents establishing a $9.80 futures floor. September 2022 wheat futures closed at $10.69, up 64 cents since last Friday. ∆

   DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee