Ukraine-Russia conflict continues to inflict chaos on global wheat markets
DR. AARON SMITH
KNOXVILLE, TENNESSEE
Corn futures have traded in a tighter range than cotton, soybeans, and wheat this fall. Since August 29, the December corn contract has traded between $6.54 and $7.06 1⁄2, a 52 1⁄2 cent range. A reasonably consistent trading range when compared to the other commodities. U.S. ending stocks are projected, by USDA, to be 1.172 billion bushels, which provides solid price support. However, export sales are well behind the five-year average (26% of the marketing year total at this time of year compared to 41%), which is providing resistance to a potential upside move in corn prices.
This week January and March soybean futures moved higher with contracts closing the week at $14.62 1⁄4 and $14.69. Basis remains severely depressed in West Tennessee due to low water levels continuing to provide transportation challenges. Producers storing soybeans into the new year may want to consider securing a futures price while allowing for potential improvements in basis. There remains a substantial amount of downside risk in soybeans due to the potential for Brazil to produce a record crop, so some price protection for the stored crop is warranted.
Cotton futures had a great week, after establishing a low of 70.1 cents on October 31, the March contract rebounded 15.57 cents closing on Friday at 85.67 cents. Next week will be critical for short term price direction. Will upward price momentum be maintained pushing prices towards 90 cents or will prices seek to establish a trading range between 77 and 86 cents? Cotton markets have been incredibility volatile with macro-economic forces driving expected global demand for cotton. It seems very unlikely that volatility will leave cotton markets anytime soon.
The Ukraine-Russia conflict continues to inflict chaos on global wheat markets. This week December futures closed up 53 cents, up 20 1⁄4 cents, down 56 1⁄2 cents, down 5 1⁄2 cents, and up 7 1⁄4 cents. The net weekly movement was up 18 1⁄2 cents. Russia’s initial indication of restrictions on grain movement out of the regional ports led to the price increase before an agreement to continue to allow grain shipments was reached. There does not appear to be a long-term, stable solution for grain movement in the region so wild swings are likely to continue.
Corn
Ethanol production for the week ending October 28 was 1.040 million barrels per day, up 7,000 from the previous week. Ethanol stocks were 22.232 million barrels, down 59,000 compared to last week. Corn net sales reported by exporters for October 21-27 were 14.7 million bushels for the 2022/23 marketing year. Exports for the same period were down 27% compared to last week at 17.7 million bushels. Corn export sales and commitments were 26% of the USDA estimated total annual exports for the 2022/23 marketing year (September 1 to August 31) compared to the previous 5-year average of 41%. Nationally, the Crop Progress report estimated corn harvested at 76% compared to 61% last week, 73% last year, and a 5-year average of 64%. In Tennessee, corn harvested was estimated at 97% compared to 94% last week, 90% last year, and a 5-year average of 95%. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at West, Northwest, North-Central, West-Central, and Mississippi River elevators and barge points. Overall, basis for the week ranged from 75 under to 25 over, with an average of 13 under the December futures at elevators and barge points. New crop cash prices ranged from $6.24 to $7.26 at elevators and barge points. December 2022 corn futures closed at $6.81, up 1 cent since last Friday. For the week, December 2022 corn futures traded between $6.78 and $7.00. Dec/Mar and Dec/Dec future spreads were 5 and -56 cents.
March 2023 corn futures closed at $6.86, unchanged since last Friday. December 2023 corn futures closed at $6.25, up 4 cents since last Friday. Downside price protection could be obtained by purchasing a $6.30 December 2023 Put Option costing 60 cents establishing a $5.70 futures floor.
Soybeans
Across Tennessee, average soybean basis strengthened at West, Northwest, West-Central, North-Central, and Mississippi River elevators and barge points. Basis ranged from 100 under to 10 over, with an average basis of 29 under the January futures con- tract. Soybean net weekly sales reported by exporters were 30.5 million bushels for the 2022/23 marketing year. Exports for the same period were down 4% compared to last week at 97.4 million bushels. Soybean export sales and commitments were 58% of the USDA estimated total annual exports for the 2022/23 marketing year (September 1 to August 31), compared to the previous 5-year average of 57%. Nationally, the Crop Progress report estimated soybeans harvested at 88% compared to 80% last week, 78% last year, and a 5-year average of 78%. In Tennessee, soybeans harvested was estimated at 73% compared to 61% last week, 53% last year, and a 5-year average of 62%. Nov/Dec 2022 soybean-to-corn price ratio was 2.13 at the end of the week. November 2022 soybean futures closed at $14.51, up 64 cents since last Friday. For the week, November 2022 soy- bean futures traded between $13.85 and $14.53. Nov/Jan and Nov/Nov future spreads were 11 and -52 cents.
January 2023 soybean futures closed at $14.62, up 62 cents since last Friday. Cash soybean prices at elevators and barge points ranged from $13.20 to $14.96. November 2023 soybean futures closed at $13.99, up 40 cents since last Friday. Downside price protection could be achieved by purchasing a $14.00 November 2023 Put Option which would cost 103 cents and set a $12.97 futures floor. Nov/Dec 2023 soybean-to-corn price ratio was 2.24 at the end of the week.
Cotton
Delta upland cotton spot price quotes for November 3 were 84.25 cents/lb. (41-4-34) and 86.50 cents/lb. (31-3-35). Adjusted world price (AWP) was down 3.49 cents at 65.46 cents. Cotton net weekly sales reported by exporters were 191,800 bales for the 2022/23 marketing year and 11,200 bales for the 2023/24 marketing year. Exports for the same period were down 33% compared to last week at 119,000 bales. Upland cotton export sales were 74% of the USDA estimated total annual exports for the 2022/23 marketing year (August 1 to July 31), compared to the previous 5-year average of 63%. Nationally, the Crop Progress report estimated cotton bolls opening at 96% compared to 92% last week, 94% last year, and a 5-year average of 94%; and cotton harvested at 55% compared to 45% last week, 44% last year, and a 5-year average of 47%. In Tennessee, cotton condition was estimated at 51% good-to-excellent and 15% poor-to-very poor; cotton bolls opening at 99% compared to 96% last week, 93% last year, and a 5-year average of 99%; and cotton harvested at 65% compared to 51% last week, 40% last year, and a 5-year average of 58%. December 2022 cotton futures closed at 86.93 cents, up 14.82 cents since last Friday. For the week, December 2022 cotton futures traded between 70.21 and 87.87 cents. Dec/Mar and Dec/Dec cotton futures spreads were -1.26 cents and -8.56 cents.
March 2023 cotton futures closed at 85.67 cents, up 13.6 cents since last Friday. December 2023 cotton futures closed at 78.37 cents, up 7.21 cents since last Friday. Downside price protection could be obtained by purchasing a 79 cent December 2022 Put Option costing 11.32 cents establishing a 67.68 cent futures floor.
Wheat
Wheat net weekly sales reported by exporters were 12.8 million bushels for the 2022/23 marketing year. Exports for the same period were down 14% compared to last week at 4.3 million bushels. Wheat export sales were 58% of the USDA estimated total annual exports for the 2022/23 marketing year (June 1 to May 31), compared to the previous 5-year average of 63%. Wheat cash prices at elevators and barge points ranged from $7.90 to $8.80. December 2022 wheat futures closed at $8.47, up 18 cents since last Friday. December 2022 wheat futures traded between $8.27 and $9.04 this week. December wheat-to- corn price ratio was 1.24. March 2023 wheat futures closed at $8.66, up 17 cents since last Friday. Dec/Mar and Dec/Jul future spreads were 19 and 33 cents.
Nationally, the Crop Progress report estimated winter wheat condition at 28% good-to-excellent and 35% poor-to-very poor; winter wheat planted at 87% compared to 79% last week, 86% last year, and a 5-year average of 85%; and winter wheat emerged at 62% compared to 49% last week, 65% last year, and a 5-year average of 66%. In Tennessee, winter wheat condition was 45% good-to-excellent and 6% poor-to-very poor; winter wheat planted at 63% compared to 46% last week, 58% last year, and a 5-year average of 57%; and winter wheat emerged at 36% compared to 20% last week, 36% last year, and a 5-year average of 35%. New crop wheat cash prices at elevators and barge points ranged from $8.14 to $8.95. July 2023 wheat futures closed at $8.80, up 19 cents since last Friday. Downside price protection could be obtained by purchasing an $8.90 July 2023 Put Option costing 107 cents establishing a $7.83 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee