Next Year Corn? Soybeans? Cotton? Peanuts?
Posted by romeethredge on August 4, 2012
Here’s a quick market outlook from Dr Nathan Smith , UGA Extension Ag Economist.
“Right now I feel like corn and beans are going to drive the market. My gut feeling says the market for corn and beans will peak sometime in the next month unless demand doesn’t slow down for corn and beans. Beans appear to have the stronger demand because of China. Corn demand will slow later this year because of liquidation of cattle and probably slower placements of chicks. High corn prices should slow export demand and ethanol production is already slowing according to media and newsletter articles.
Because of such a short fall in corn and potentially beans, the high prices should remain awhile but slowly slide into next year, similar to what we were saying for this year. If folks forward contracting their corn for $7 this year are “upset” about missing $8, think about taking advantage of current prices for next year. Can book over $7 right now.
Not saying to do a large percentage but the odds say this is a good time to price next year’s crop. Beans will be really tight but South America has planted for a record size crop with these prices. So by end of the year there will be downward pressure on beans. However, it will be interesting to see if an acreage battle will emerge between corn and beans, probably depends on size of South America production. An acreage battle would help cotton and peanut prices.
As far as peanuts go, corn will impact price some but cotton prices will drive it more like last year. Right now cotton demand isn’t looking too strong, we need to get Dr. Don Shurley’s thoughts, but Dec cotton is around 76 cents so 71-72 right now which will probably mean peanuts $500 per ton at most. So, peanuts and cotton aren’t looking too good right now.
I think as Don says, patience is needed on peanuts and cotton as we are likely to see a bottom during harvest and hopefully demand will pickup in 2013. ”
Here are further comments from Dr Smith, 8-6-12, due to timeframe questions concerning his $500 peanut price comments ……”Actually both, with where cotton prices are right now, $500 to $550 per ton in Spring would be my guess as to what would be competitive with 70-75 cent cotton. The $500 per ton price in Fall would reflect a 2.5 million ton crop with carryover in 700,000 to 750,000 ton range. Definitely refilling the pipeline but not a burdensome level like in 2009. But the market is the market and it is bearish on peanuts with a large crop loaming. Bids were at 60 cent which would indicate $600 to $550 per ton FS price. A drop to 55 cents or below would indicate $500 to $550 in my mind.
Definitely a roller coaster.”
Here are some crop cost and return estimates, based on Dr. Smith’s outlook.
mace said
Rome, what is the context of Dr. Smith’s comment re: $500 peanuts? Is that a likely fall price, or a spring contract price, maybe both? I can’t see that getting many irrigated acres planted next spring, but thats the rollercoaster we are on: high to low.
romeethredge said
Here are further comments from Dr Smith……
Actually both, with where cotton prices are right now, $500 to $550 per ton in Spring would be my guess as to what would be competitive with 70-75 cent cotton. The $500 per ton price in Fall would reflect a 2.5 million ton crop with carryover in 700,000 to 750,000 ton range. Definitely refilling the pipeline but not a burdensome level like in 2009. But the market is the market and it is bearish on peanuts with a large crop loaming. Bids were at 60 cent which would indicate $600 to $550 per ton FS price. A drop to 55 cents or below would indicate $500 to $550 in my mind.
Definitely a roller coaster.