Market analyst: Crude oil and cotton reach new highs

Ray Grabanski
Special to the Farm Forum
Columnist

Crude oil is at a seven year high this week, while cotton prices are the highest in 11 years. These two commodities recently joined oats at new multi-year highs, showing inflation concerns are alive and well in the commodities markets.

And why not? Congress is considering $5 trillion in spending this week. If you don't think that's going to cause inflation, you're probably wrong.  

Grain markets were tripped up by the stocks report Sept. 30, with a bullish wheat stocks report (smaller stocks/production than expected) and a bearish soybeans stocks report (30% more stocks than expected from a revision in last year's yields/acres).

It was quite a surprise to the market, so wheat prices have risen and soybean prices have dropped significantly ever since. The market is trying to find its footing this week, with some follow through. Wheat is up, but soybeans are down from last week's report.

Weather will continue to be warm and dry for the Corn Belt next week, but there may be rain and cooler temperatures in the 8-14 day forecast. More rain is expected to fall at an above normal rate in the western Corn Belt. The eastern Corn Belt and East Coast are forecast to have about normal rainfall.

Overall, it's still a pretty good harvest forecast.  

Weekly crop progress shows 29% of corn is harvested and 34% of soybeans, so we are about one-third done with both harvests (8% ahead of normal in soybeans and 7% in corn).

Crop conditions were unchanged for the week. Corn is rated 59% good/excellent and soybeans are 58% good/excellent, with Pro Ag yield models not changing much.

Once we hit 50% harvested, there will be no more crop ratings, so the final Pro Ag yield models will be at 176.3 bushels per acre for corn (exactly equal to the Septelber USDA guess), and 49.1 bushels per acre for soybeans (1.5 bushels below USDA's 50.6 September guess).  

There's a Wall Street Journal article highlighting cotton, now at the highest price in 11 years (as we've been saying).  They blame it on China, and their recent cotton purchases.  At least we don't blame COVID-19 like everyone else for price rises, production delays and shortages of materials.

Winter wheat is 47% planted, 1% ahead of normal and 19% germinated (1% behind normal). We note that subsoil moisture levels rose last week to 54% rated adequate/surplus for topsoil (up 4%) and 50% subsoil (up 2%). That puts soil moisture levels about equal to last year at this time, despite the big drought in the western Corn Belt this summer. That's actually a little negative, as the wetter conditions since August have reduced drought chances for next year. 

Cotton crop conditions also dropped 3% this week, although they are still at 62% rated good/excellent — which is quite a bit higher than last year's 40% rating. The cotton crop is a big one. With farmers getting a big price, there's a lot of money in cotton this year.

Many of the southern U.S. cotton farmers have been waiting for a year like this for a long time, and here it is.

Grains farmers are going to do fine, too, as we have an average crop of corn and soybeans at a very good price. While input costs have skyrocketed, at least we will have a profitable year in agriculture for 2021 (and not because of government payments.) 

China imports have a lot to do with the U.S. farmers' success. But then again, U.S. imports of Chinese products have a lot to do with Chinese success.  For now, that symbiotic relationship works.  

Ray Grabanski can be reached at raygrabanski@progressiveag.com.