Weather, War Between Russia And Ukraine Continue To Make Markets Unpredictable
DR. AARON SMITH
KNOXVILLE, TENNESSEE
New harvest contract highs for corn and cotton were set this week. The last time the December corn contract was this high was 2012. That year the December contract peaked at $8.38 ¾ on August 21. Where was the December 2012 contract at the end of April? $5.43 ¼. The contract added nearly $3.00 between the end of April and the third week in August. Every year is different, and some weather concerns are factored into the current futures price, however if weather conditions are uncooperative over the next four months, we likely have another substantial leg up in this year’s corn market. Weather and the war between Russia and Ukraine will continue to make markets unpredictable and dramatic movements up or down cannot be ruled out at this juncture.
December cotton’s new contract high is 126.15 cents (so far). There is still bullish momentum in the market and the drought conditions in the Southern Plains could push the December futures contract to the December 2011 contract high of 142 cents. On the demand side, export shipments of cotton will need to continue at a robust pace to avoid carry-over into the next marketing year. Next marketing year (2022/23) sales are already over 2.8 million running bales compared to 1.67 million last year at this time.
Since the end of February, harvest soybean futures have proceeded more cautiously than corn or cotton. Prices are up 6 percent from February 28, compared to 22.2 percent for cotton and 24.3 percent for corn.
Uncertainty regarding how high US planted acreage will be has held back the soybean market. With prices well above $15.00, and input costs less than corn or cotton, now is a good time to take some of the downside price risk off the table for soybeans.
This year will very likely be the highest harvest price for wheat in Tennessee ever. Currently, cash prices at elevators and barge points are $10-$11 bushel. That means that producers with state average yields of 70-75 bu/acre will generate gross revenue of $700-$825/acre.
Increased input prices will take a bite out of the bottom line, but if harvest weather cooperates this year is shaping up to be very profitable for Tennessee wheat growers.
Corn
Ethanol production for the week ending April 22 was 0.963 million barrels per day, up 16,000 from the previous week. Ethanol stocks were 23.965 million barrels, down 377,000 compared to last week. Corn net sales reported by exporters for April 15-21, 2022, were up compared to last week with net sales of 34.1 million bushels for the 2021/22 marketing year and 33.2 million bushels for the 2022/23 marketing year. Exports for the same period were up 31 percent from last week at 61.5 million bushels. Corn export sales and commitments were 91 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 92 percent. Across Tennessee, average corn basis (cash price-nearby futures price) weakened at North-Central elevators and barge points and strengthened or remained unchanged at West, Northwest, West-Central, and Mississippi River elevators and barge points. Overall, basis for the week ranged from 38 under to 18 over, with an average of 4 under the May futures at elevators and barge points. May 2022 corn futures closed at $8.18, up 25 cents since last Friday. For the week, May 2022 corn futures traded between $7.81 and $8.27. May/Jul and May/Dec future spreads were -5 and -67 cents. July 2022 corn futures closed at $8.13, up 24 cents since last Friday.
Nationally, the Crop Progress report estimated corn planted at 7 percent compared to 4 percent last week, 16 percent last year, and a 5- year average of 15 percent; and corn emerged at 2 percent compared to 3 percent last year and a 5-year average of 3 percent. In Tennessee, corn planted was estimated at 17 percent compared to 7 percent last week, 45 percent last year, and a 5-year average of 37 percent; and corn emerged at 3 percent compared to 0 percent last week, 16 percent last year, and a 5-year average of 13 percent. New crop cash prices at elevators and barge points ranged from $6.99 to $7.54. December 2022 corn futures closed at $7.51, up 27 cents since last Friday. Downside price protection could be obtained by purchasing a $7.60 December 2022 Put Option costing 79 cents establishing a $6.81 futures floor.
Soybeans
Net sales reported by exporters were down compared to last week with net sales of 17.7 million bushels for the 2021/22 marketing year and 21.3 million bushes for the 2022/23 marketing year. Exports for the same period were down 20 percent compared to last week at 26.1 million bushels. Soybean export sales and commitments were 100 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 96 percent. Across Tennessee, average soybean basis strengthened or remained unchanged at West, Northwest, West-Central, North-Central, and Mississippi River elevators and barge points. Basis ranged from 24 under to 30 over, with an average basis of 12 over the May futures contract. May 2022 soybean futures closed at $17.08, down 8 cents since last Friday. For the week, May 2022 soybean futures traded between $16.85 and $17.36. May/Jul and May/Nov future spreads were -24 and -194 cents. May 2022 soybean-to-corn price ratio was 2.09 at the end of the week. July 2022 soybean futures closed at $16.84, down 4 cents since last Friday.
Nationally, the Crop Progress report estimated soybean planted at 3 percent compared to 1 percent last week, 7 percent last year, and a 5- year average of 5 percent. In Tennessee, soybeans planted were estimated at 3 percent compared to 1 percent last week, 7 percent last year, and a 5-year average of 4 percent. Nov/Dec 2022 soybean-to-corn price ratio was 2.02 at the end of the week. New crop cash soybean prices at elevators and barge points ranged from $14.68 to $15.55.
November 2022 soybean futures closed at $15.14, up 9 cents since last Friday. Downside price protection could be achieved by purchasing a $15.20 November 2022 Put Option which would cost 98 cents and set a $14.22 futures floor.
Cotton
Net sales reported by exporters were down compared to last week with net sales of 121,100 bales for the 2021/22 marketing year and 49,500 bales for the 2022/23 marketing year. Exports for the same period were up 5 percent compared to last week at 386,000 bales. Upland cotton export sales were 104 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 103 percent. Delta upland cotton spot price quotes for April 28 were 146.68 cents/lb (41-4-34) and 148.93 cents/lb (31-3-35). Adjusted world price (AWP) was down 2.82 cents at 133.38 cents. May 2022 cotton futures closed at 152.33 cents, up 12.87 cents since last Friday. For the week, May 2022 cotton futures traded between 138.32 and 155.15 cents. May/Jul and May/Dec cotton futures spreads were -6.7 cents and -30.26 cents. July 2022 cotton futures closed at 145.63 cents, up 9.78 cents since last Friday.
Nationally, the Crop Progress report estimated cotton planted at 12 percent compared to 10 percent last week, 12 percent last year, and a 5-year average of 11 percent. December 2022 cotton futures closed at 122.07 cents, up 2.91 cents since last Friday. Downside price protection could be obtained by purchasing a 123 cent December 2022 Put Option costing 13.24 cents establishing a 109.76 cent futures floor.
Wheat
Wheat net sales reported by exporters were down compared to last week with net sales of 1.2 million bushels for the 2021/22 marketing year and 4.6 million bushels for the 2022/23 marketing year. Exports for the same period were down 51 percent from last week at 9.0 million bushels. Wheat export sales were 92 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 104 percent.
Wheat cash prices at elevators and barge points ranged from $10.12 to $10.46. May 2022 wheat futures closed at $10.43, down 22 cents since last Friday. May 2022 wheat futures traded between $10.43 and $10.96 this week. May wheat-to-corn price ratio was 1.28. May/Jul and May/Sep future spreads were 15 and 12 cents.
Nationally, the Crop Progress report estimated winter wheat condition at 27 percent good-to-excellent and 39 percent poor-to-very poor; winter wheat headed at 11 percent compared to 7 percent last week, 16 percent last year, and a 5-year average of 19 percent; spring wheat planted at 13 percent compared to 8 percent last week, 27 percent last year, and a 5-year average of 15 percent; and spring wheat emerged at 2 percent compared to 7 percent last year and a 5-year average of 4 percent. In Tennessee, winter wheat condition was estimated at 62 percent good-to-excellent and 6 percent poor-to-very poor; winter wheat jointing at 82 percent compared to 79 percent last week, 87 percent last year, and a 5-year average of 91 percent; and winter wheat heading at 18 percent compared to 9 percent last week, 30 percent last year, and a 5-year average of 38 percent. New crop wheat cash prices at elevators and barge points ranged from $9.94 to $10.60.
July 2022 wheat futures closed at $10.55, down 20 cents since last Friday. Downside price protection could be obtained by purchasing a $10.60 July 2022 Put Option costing 64 cents establishing a $9.96 futures floor. September 2022 wheat futures closed at $10.53, down 15 cents since last Friday. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee