Feed Grain, Not Cotton:
As the Texas winter wheat conditions continue to spiral downward, news wire reports are beginning to surface of the possibility of fewer winter wheat acres and increasing cotton acres. It is important to note Texas is the US’s fourth largest winter wheat producer annually and the nation’s largest cotton producer. From Jan 4th, 2009 through Feb 1, 2009 winter wheat crop conditions for the Fair category have fallen from 35% to 24%, the Poor category have remained relatively stable at 29% but just as quickly as the fair conditions have fallen, the Very Poor category has risen from 17% to 35%.
Thus as of Feb 1, the poor to very poor wheat conditions are a combined 64% vs just 46% a month earlier. Viewing vegetative health index maps support the facts of declining crop conditions.
As farmers in the South Plains (heavy cotton region) begin for spring plantings, the perception by the trade is the possibility of wheat acres to be removed and cotton acres to increase. However crop insurance economics suggest any wheat acres which are removed and spring planted insured cotton acres, the wheat insured value will be reduced by 65%!
South Plain farmers are becoming increasingly interested in planting uninsured sorghum (feed grain) for the following reasons. Present new crop budgets on a per acre basis suggest a profit of $23.70 for wheat, $48.94 loss for cotton and with new crop sorghum forward prices of $6.29 per hundred weight, a per acre loss of $5.66.
Farmers within the region are also considering the drought tolerance of sorghum vs that of cotton as well as the potential for end user demand for cotton vs sorghum, presently favoring the sorghum.
Sources suggest the present dry conditions are comparable to the most recent 2006 year. In checking 2006 planting intentions vs planted acreage reports for Texas, winter wheat acres declined 100,000 while sorghum acres increased by 100,000.
In conclusion, present economics during weather related deterioration, may imply, Texas farmers may be more inclined to replace non functioning winter wheat acres with sorghum and increase US feed grain supplies. Weather, futures, basis and cash levels of new crop warrant monitoring for Texas as well as states of Oklahoma and Kansas.
Consider the impact the decisions farmers in the southern Plains are coping with. With the potential added feed grain acres, could the value of corn be influenced?
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