Tariff Escalation Remains A Major Source Of Uncertainty

DR. AARON SMITH

KNOXVILLE, TENNESSEE

Prices settled down this week as tariff and trade rhetoric cooled slightly. Tariff escalation remains a major source of uncertainty that could substantially move corn, soybean, wheat, and cotton markets in the coming weeks. Managing some futures price risk based on the current rally is worth considering given the uncertainty. As mentioned last week, incrementally pricing into a futures market rally is a good way to reduce price risk exposure as futures prices in- crease (with adherence to pricing a predetermined percent of anticipated production). Two simple methods of removing futures price risk are a short hedge or a hedge-to-arrive (HTA) contract. 

A short hedge involves the farmer selling a futures contract (typically, the September or December corn contract or the November contract for soybeans) as a temporary substitute for selling corn in the local cash market. The idea of a short hedge is offsetting cash and futures market transactions to lock in a futures market price for the commodity that will be produced this growing season (or held in storage). Gains in the futures market are offset by losses in the cash market, or vice versa – excluding movements in local basis. A short hedge is an effective way to remove futures price risk. One disadvantage is margin calls, particularly in an elevated interest rate environment. A margin call occurs when additional funds are required to be deposited into a brokerage account to cover potential losses on futures contract positions. Thus, the farmer needs to ensure access to cash to fulfill this potential need. This can generate increased interest expense. 

An alternative to a short hedge is an HTA. An HTA is a contract that sets the futures price for delivery of the commodity sometime in the future - typically at harvest. HTAs establish the futures price for the commodity and allow the farmer to set the basis later. HTA contracts do not require the farmer to maintain a margin account and they are not subject to margin calls. Additionally, HTA contracts can have a rolling component that allows the delivery date to be changed to another time usually within the same marketing year. Rolling versus non-rolling HTAs will be specified in the contract. HTA contracts can have higher transaction costs and do provide farmers with potential exposure to counter party risk based on who offers the contract. 

Corn

Across Tennessee, average corn basis (cash price-nearby futures price) strengthened 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 25 under to 30 over, with an average of 11 over the May futures at elevators and barge points. Ethanol production for the week ending April 11 was 1.012 million barrels per day, down 9,000 compared to the previous week. Ethanol stocks were 26.814 million barrels, down 0.220 million barrels compared to last week. Corn net sales reported by exporters for April 4-10 were net sales of 61.5 million bushels for the 2024/25 marketing year and 0.4 million bushels for the 2025/26 marketing year. Exports for the same period were up 11% compared to last week at 74.0 million bushels – a marketing year high. Corn export sales and commitments were 87% of the USDA estimated total annual exports for the 2024/25 marketing year (September 1 to August 31) compared to the previous 5-year average of 91%. Cash prices ranged from $4.56 to $5.15 at elevators and barge points. May 2025 corn futures closed at $4.82, down 8 cents since last Friday. For the week, May 2025 corn futures traded between $4.79 and $4.90. July 2025 corn futures closed at $4.90, down 7 cents since last Friday. May/Jul and May/Dec future spreads were 8 and -16 cents. 

Nationally, the Crop Progress report estimated corn planted at 4% compared to 2% last week, 6% last year, and a 5-year average of 5%. In Tennessee, corn planted was estimated at 7% compared to 3% last week, 12% last year, and a 5-year average of 12%. December 2025 corn futures closed at $4.66, up 3 cents since last Friday. Downside price protection could be obtained by purchasing a $4.70 December 2025 Put Option costing 35 cents establishing a $4.35 futures floor. This week, Oct/Nov cash contracts ranged from $4.40 to $4.70 at elevators and barge points. 

Soybeans

Across Tennessee the average soybean basis strengthened or remained unchanged at West, Northwest, North-Central, West- Central, and Mississippi River elevators and barge points. Average basis ranged from 33 under to 25 over the May futures contract, with an average basis at the end of the week of 1 over. Soybean net weekly sales reported by exporters were net sales of 20.4 million bushels for the 2024/25 marketing year and 6.7 million bushels for the 2025/26 marketing year. Exports for the same period were down 6% compared to last week at 26.5 million bushels. Soybean export sales and commitments were 94% of the USDA estimated total annual exports for the 2024/25 marketing year (September 1 to August 31), compared to the previous 5-year average of 95%. Cash soybean prices at elevators and barge points ranged from $10.03 to $10.67. May 2025 soybean futures closed at $10.36, down 6 cents since last Friday. For the week, May 2025 soybean futures traded between $10.28 and $10.49. The May soybean-to-corn price ratio was 2.15 at the end of the week. July 2025 soybean futures closed at $10.47, down 6 cents since last Friday. May/Jul and May/Nov future spreads were 11 and -4 cents. 

Nationally, the Crop Progress report estimated soybeans planted at 2% compared to 3% last year and a 5-year average of 2%. In Tennessee, soybeans planted were estimated at 5% compared to 2% last week, 7% last year, and a 5-year average of 3%. Oct/ Nov cash prices at elevators and barge points were $9.88 to $10.32 for the week. November 2025 soybean futures closed at $10.32, up 7 cents since last Friday. Downside price protection could be achieved by purchasing a $10.40 November 2025 Put Option which would cost 61 cents and set a $9.79 futures floor. Nov/Dec 2025 soybean-to-corn price ratio was 2.21 at the end of the week. Oct/Nov cash contracts ranged between $9.37 and $10.03 this week at elevators and barge points. 

Cotton

North Delta upland cotton spot price quotes for April 17 were 65.38 cents/lb (41-4-34) and 67.38 cents/lb (31-3-35). Adjusted World Price (AWP) increased 0.33 cents to 53.43 cents. Cotton net weekly sales reported by exporters were net sales of 202,000 bales for the 2024/25 marketing year and 65,900 bales for the 2025/26 marketing year. Exports for the same period were down 13% compared to last week at 328,200 bales. Upland cotton export sales were 106% of the USDA estimated total annual exports for the 2024/25 marketing year (August 1 to July 31), compared to the previous 5-year average of 103%. May 2025 cotton futures closed at 66.32 cents, up 0.43 cents since last Friday. For the week, May 2025 cotton futures traded between 63.75 and 66.44 cents. July 2025 cotton futures closed at 67.13 cents, up 0.12 cents since last Friday. May/Jul and May/ Dec cotton futures spreads were 0.81 cents and 2.12 cents. 

Nationally, the Crop Progress report estimated cotton planted at 5% compared to 4% last week, 8% last year, and a 5-year average of 8%. In Tennessee, cotton planted was estimated at 1%. December 2025 cotton futures closed at 68.44 cents, down 0.07 cents since last Friday. Downside price protection could be obtained by purchasing a 69 cent December 2025 Put Option costing 4.3 cents establishing a 64.7 cent futures floor. 

Wheat 

Wheat net weekly sales reported by exporters were net sales of 2.8 million bushels for the 2024/25 marketing year and 10.1 million bushels for the 2025/26 marketing year. Exports for the same period were up 43% compared to last week at 17.8 million bushels. Wheat export sales were 97% of the USDA estimated total annual exports for the 2024/25 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 $4.76 to $4.99. May 2025 wheat futures closed at $5.48, down 7 cents since last Friday. The May wheat-to-corn price ratio was 1.14. May 2025 wheat futures traded between $5.37 and $5.55 this week. May/Jul and May/Sep future spreads were 14 and 28 cents. 

Nationally, the Crop Progress report estimated winter wheat condition at 47% good-to-excellent and 19% poor-to-very poor and winter wheat headed at 8% compared to 5% last week, 10% last year, and a 5-year average of 8%. Spring wheat planted was estimated at 7% compared to 3% last week, 6% last year, and a 5-year average of 7%. In Tennessee, winter wheat condition was estimated at 69% good-to-excellent and 9% poor-to-very poor; winter wheat jointing at 60% compared to 38% last week, 69% last year, and a 5-year average of 70%; and winter wheat headed at 2% compared to 0% last week, 10% last year, and a 5-year average of 6%. July cash contracts at elevators and barge points ranged from $5.11 to $5.54. July 2025 wheat futures closed at $5.62, down 8 cents since last Friday. Downside price protection could be obtained by purchasing a $5.65 July 2025 Put Option costing 28 cents establishing a $5.37 futures floor. September 2025 wheat futures closed at $5.76, down 8 cents since last Friday.   ∆

DR. AARON SMITH: University of Tennessee