New-crop acreage less urgent
On the heels of the January reports, the case for acre wars is much weaker, says Jerry Gulke of Strategic Marketing Services in Chicago. "The January stocks report has a history of being a blockbuster, and this year was no exception. The trade was blindsided by corn usage being cut 316 million bushels and carryover increasing to 1.8 billion. Even though I talked about demand destruction, this was more than I expected."
Although soybean carry-out also was raised, it is not as burdensome, Gulke adds. "I'm thinking of going out and ordering all soybean seed now, and sidestepping a big fertilizer bill."
Gulke isn't alone in not locking in his seed early. U.S. corn and soybean acreage decisions were still a work in progress in mid-December, when Farm Journal Media polled growers. Roughly half had not yet finalized their plans, with about three-quarters of those on the fence saying they were waiting to see whether fertilizer prices fall and/or corn prices rise.
Perhaps the February crop insurance deadlines for much of the Corn Belt will push initial decisions ahead, Gulke says. —Linda H. Smith
Uphill battle for wheat
Unless the U.S. dollar does a quick nosedive or cash basis levels deteriorate significantly, the early 2009 futures price rally will only make U.S. wheat increasingly uncompetitive in world markets, says Don Riffe of Informa in Memphis. "The current supply/demand outlook is very different from a year ago, when higher prices were needed to ration usage. Current price levels and higher will be very difficult to sustain without a major production problem for the 2009/10 crop," he says. — Linda H. Smith
Fewer South Am beans
Last month, due to dry weather in key production areas, the crop estimating division of the Brazilian government (Conab) dropped its estimate of soybean production 1 million metric tons (mmt) to 52.3 mmt.
Likewise, Informa of Memphis reduced its Brazilian soybean production estimate 1 mmt to 59.5 mmt and reduced its estimates for Paraguay and Bolivia 300,000 metric tons each.
Informa left Argentina's estimate unchanged—although dry, the country's more southerly location meant it was too early in the growing season there to warrant reductions.
USDA's Jan. 12 reports show Brazilian production at 59 mmt and Argentina at 49.5 mmt.
Following Pro Farmer's annual South American crop tour, consultant Michael Cordonnier issued the following estimates:
Cotton crunch continues
The economic situation that chopped cotton acreage and suppressed prices for the crop the past couple of years will likely continue in 2009.
Analysts at the Beltwide Cotton Conferences in early January said it is likely cotton acreage will continue to slip—even in Texas, now home to half the nation's cotton crop.
Textile mill use is expected to drop 5.5%, the biggest single-year textile tail-off in history, USDA says. China, with 40% of the world's mill output, expects its first decline since 1998.
Reduced oil prices make man-made fibers more competitive. In early January, the cotton/polyester ratio rose to 160% in China.
A number of U.S. cotton farmers already have unsteady financial footing. Mark Lange, National Cotton Council president and chief executive officer, said many were hurt when cotton merchant Paul Reinhart, Inc., filed for Chapter 11 bankruptcy on October 15 when the company was unable to meet margin calls. Reinhart says it had about 450 "unperformed" contracts with farmers and merchants around the U.S. —Charles Johnson
"Global growth in 2009–10 (0.9% and 3.3%) could be the second weakest in the post-war period." Richard Berner, Morgan Stanley
"The markets could say, ‘we don't care what you plant.'" Jerry Gulke, Strategic Marketing Services
"Grow or die." George Land, cofounder of business consultancy Leadership 2000
"A $1/bu. increase in corn price boosts food price inflation 0.8%, led by meat and dairy." Dermot Hayes, Iowa State University economist
Top Producer, February 2009