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Corn Market Outlook. December corn futures have lapsed into trading range activity over the past month. The good news is that prices did not collapse following the August crop report indicating nearly a 10 billion bushel crop. Look for a small short term rally that Georgia farmers should use to price any crop that needs to be sold at harvest but then brace for lower prices once the harvest begins in earnest in the Midwest. Keep an eye on futures prices, your local basis and the LPD quotes. We need to maximize our income using all three factors.
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Soybean Market Situation. Traders in Chicago shrugged off USDA's estimates of a nearly 3 billion bushel crop. November delivery prices have even rallied off the double bottom formed during June and July activity. This may be the last pricing opportunity before the harvest pressure begins. Look for prices to move down to test that double bottom at $4.46. If the large crop keeps getting larger, then prices could move lower. The good news is that these weak prices are stimulating demand and may work to limit acreage planted in South America this fall.
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Wheat Market Overview. Hopefully we have seen the worst of the price weakness in wheat. The fundamentals continue to show promise of better things ahead despite continued large carry out stocks. The weak new crop prices, under $3.00 in Chicago, will work to limit acreage this fall and next spring. If you plan on growing wheat this winter, look for a rally during the December - January period to forward price. (George Shumaker)
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Dairy Outlook. The milk supply in the South and the rest of the east coast is tight. Imports are increasing to meet demand but milk prices are not rising. The problem continues to be growing U.S. cow numbers and the potential for higher milk production levels. Many dairy farmers I have spoke with report that replacement costs are still very high, reflecting strong demand.
Dairy producers are getting a chance to offset low milk prices with low feed costs thanks to what is projected to be the largest corn crop in US history. USDA says the 10.4 billion bushel crop will drive prices even lower than in 1999. However, any problems before harvest, a short crop next year or higher than expected corn use overseas could drive feed costs higher. (Bill Thomas)
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Cotton's Rally Betting On A Smaller Crop and Strong Exports. December cotton futures prices are now approaching 67 cents per pound and have gained over 6 cents per pound since July 27th. Prices are currently at the highest levels in almost 3 months. USDA currently has this year's crop estimated at just under 19.2 million bales which would place 2000/01ending stocks at roughly 5 million bales-- the highest since the 1992 crop year. Clearly the market doesn't believe these numbers, however, otherwise we would not be witnessing the recent strong uptrend in price. Crop conditions have deteriorated for 5 consecutive weeks and currently almost 60% of the crop is rated as "fair" or worse. For this reason, most observers feel the crop will most certainly come in below 19 million bales. But regardless of crop size (whether it's 19.2 or 18.2 million bales) price direction will also have to depend on exports. There is a risk that with higher prices that export sales may slow and this will place downward pressure on prices. This will depend on the US price and A-Index relationship and the value of Step 2 certificates. Current prices levels are among the most attractive in several years and producers not already priced on 1/3 to ½ of the 2000 crop, may want to use the current rally to catch up on sales. (Don Shurley)
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2000 Peanut Crop Is A Mixed Bag. Peanut production has been heavily stressed in the Southeast due to drought. Yields and grades will vary widely between dryland and irrigated production. The Virginia-North Carolina region is looking at a very good crop going into September while Southwest crop conditions are just above fair.
The August USDA report estimates U.S. peanut production to be 1.896 million tons, down 1% from 1999. The U.S. average yield is projected to be 2587 pounds per acre with Georgia estimated at 2500 pounds. The Southeast average yield will be down significantly while the Virginia-North Carolina average yield will increase over 1999.
Planted acreage continues a downward trend since 1996 as 1.495 million acres of peanuts were planted this year. Much of the Southeast planted into a drought and acreage is down 55,000 acres. Georgia planted 510,000 acres which is down 36,000 from 1999. U.S. harvested acreage is actually projected to be 30,000 acres more than 1999 at 1.466 million. This could change due to drought in the Southeast where harvested acreage is likely to adjusted down, especially in Alabama. Texas abandoned 80,000 acres in 1999 but is expected to lose only 8,000 this year.
On the demand side, domestic food use of peanuts continues to slowly increase from a low in 1995. The latest figures for total shelled peanuts (1999/2000 marketing year) show an increase of nearly 3% over last year. The increase is attributed to peanut butter and snack use while candy use has declined this past year. Edible consumption for the 2000 crop is forecasted at 1.15 million tons which is an increase of 2.6% from last year.
Carry-in stocks on August 1, 1999 were estimated to be 696 million tons farmer stock equivalent. Projected ending stocks on July 31, 2000 is 650 million tons. A reduction in ending stocks is an encouraging sign that demand is picking up and the use of buybacks is limited. (Nathan Smith)
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Feed and Ingredient Prices. In spite of the drought felt in the Southeast, USDA predictions are for a near record harvest of feed grains grown in the Midwest and Corn Belt regions. With yields forecast at these levels, feed manufacturers are busy trying to clear elevator and bagged inventory space to make way for the anticipated cheaper feed grains. Consequently, poultry and livestock producers should move to guarantee these historically low feed prices into the winter months and the new year, thus locking in much of their feed costs. When feed is the largest cost in animal production, it is a good idea to fix as much of that cost as possible since it dramatically affects the producer's bottom line. (Forrest Stegelin)
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