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MGEX Research

RSS By: Joe Victor, AgWeb.com

Joe Victor is a Business Development Specialist with Minneapolis Grain Exchange, Inc., where he monitors cash grain activity and cash grain opportunities. He provides marketing advice through this blog.

Feed Grain, Not Cotton

Feb 05, 2009
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?
 
Allendale would appreciate your comments 800 551 4626 or research@allendale-inc.com
 
 
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Get the answers, call 800-262-7538 or go to Allendale, Inc.
 
 
The thoughts expressed and the basic data from which they are drawn are believed to be reliable but cannot be guaranteed. Any opinions expressed herein are subject to change without notice. Hypothetical or simulated performance results have certain inherent limitations. Simulated results do not represent actual trading. Simulated trading programs are subject to the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. Commodity trading may not be suitable for recipients of this publication. This is not a solicitation of the purchase or sale of any commodities. Those acting on this information are responsible for their own actions. Any republication, or other use of this information and thoughts expressed herein without the written permission of Allendale, Inc., is strictly prohibited. Allendale Inc. c2009
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COMMENTS (2 Comments)

Anonymous
I agree. The worse thing is as farms get larger swings become larger profits/losses. For the most part farmers are lemmings for only so long. We all ought to stop listening to this propaganda.
4:05 PM Feb 5th
 
Anonymous
With the potential added feed grain acres, could the value of corn be influenced?
Yes, but I think it will probably be more influenced by artificial "volatility" created by the traders so that they can make money. Just watch (all of us farmers have) the daily ranges of all commidities. Farmers for the most part are realist. There is NOTHING you analyst can say that will make us believe these daily ranges and markets are anything but baloney. Eaten once and awhile is OK, but 3 times a day for 12 months makes one vomitous. Nobody believes any of your analysis'!
1:00 PM Feb 5th
 

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