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Crude oil and cotton reach new highs

On October 5th, crude oil is at a seven-year high, while cotton prices hit their highest in 11 years. These two commodities recently joined oats at new multiyear highs, showing that inflation worries in commodity markets are alive and well. And why not? Congress is considering spending more money ($ 5 trillion) this week than the total US tax revenue collects from our entire population annually!

Grain markets were hit by the September 30th stock report with a bullish report on wheat stocks (smaller stocks / production than expected) and a declining report on soybean stocks (30% more than expected due to a revision of last year’s yields / acre) Misled. It was quite a surprise to the market, with wheat prices rising and soybean prices falling significantly since then. The market is trying to find its level this week with some implications (up on wheat, down on soy) from last week’s report and trading weather.

The corn belt weather forecast will remain warm and dry next week, but will continue to try to incorporate rain and cooler temperatures into the 8 to 14 day forecast. This time it is in the western corn belt where more rain is forecast (above normal precipitation). The eastern corn belt is forecast with normal rainfall and the east coast above normal. Overall, it’s still a pretty good harvest forecast.

The weekly harvest progress shows that 29% of the corn and 34% of the soybeans are harvested, so we are about a third done with both crops (8% more than normal for soybeans and 7% corn). The growing conditions were unchanged: maize with 59% w / e and 58% w / e soybeans, although the Pro Ag yield models did not change significantly. Once we get 50% of the crop there will be no more crop evaluations, so the final Pro Ag yield models at 176.3 bu / acre corn (exactly the same as the USDA estimate from September) and 49.1 bu / acre Soybeans (1.5 bu below) are USDA’s estimate of 50.6 from September).

There’s an article in the Wall Street Journal highlighting cotton, now at its highest price in 11 years (as we said). They blame China and the recent purchases they have been making in cotton. At least we don’t blame COVID like everyone else for price increases, production delays and material shortages.

Winter wheat is 47% planted, 1% above normal and 19% germinated (1% below normal). We note that last week the subsoil moisture content increased to 54% as sufficient / excess topsoil (plus 4%) and 50% subsoil (+ 2%). This means that the soil moisture at this point in time is roughly the same as last year, despite the major drought in the western corn belt this summer. That’s actually a little negative; the wetter conditions since August have reduced the chances of drought next year.

Cotton growing conditions are also down 3% this week, although they are still at 62% of the G / E rating, a fair bit higher than last year’s 40% rating. The cotton harvest is big, and since the farmers get a high price, there is a lot of money in cotton this year. Many of the southern U.S. cotton farmers have long waited for a year like this – and here it is.

The grain farmers will be fine too, because we have an average harvest of corn and soybeans – but at a very good price. While input costs have skyrocketed, at least 2021 will be a profitable year in agriculture. And not because of government payments. China imports have a lot to do with the success of US farmers. On the other hand, US imports of Chinese products have a lot to do with Chinese success. Right now this symbiotic relationship works.

Editor’s Note: Ray Grabanski is President of Progressive Ag Marketing, Inc., a leading marketing firm in the country. He can be reached at [email protected] Pro Ag has scheduled 15-minute zoom “market updates” every Saturday at 7 a.m. at progressiveag.com/videos. Each session will be a technical and fundamental look back at the week, with market implications and a summary of our assessment of what all means in your sales process.

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