What is in this article?:
- Corn market enters 2013 production season in bearish mood
- Turned around last three years
- Trend has changed quickly
- Midwestern analysts
- From a price perspective, unless there’s a recurrence of drought, it’s going to be hard to put $6.50 back on a new-crop corn price for a September delivery.
- We could very easily see a ‘4’ in front of this crop.
Trend has changed quickly
“That has turned off a lot of farmers in the last month. My company covers the Southeast, pulling grain from Alabama, Georgia, Florida, Tennessee, North Carolina and South Carolina. We’ve barely received a phone call in the past two weeks from anyone wanting to sell grain.
“We’ve got record amounts of grain on the books. When corn was $7 and wheat was $8 and $9, we were buying grain left and right. But this $1.50 drop in the market from previous highs has turned off a lot of growers.
“Wheat has dropped by $2, and we have a lot of wheat coming in from the Southeast. Some growers are ripping up the wheat and planting something else. Those guys didn’t contract when it was $8 or $9.”
The cotton market, on the other hand, has rebounded, and there is a lot of parity among commodities, says Wheeler. “Previously, it was a no-brainer — people were going to plant a lot of wheat and a lot of corn. Now, it may pay you to wait a little longer to see what gets you the best bang for your buck.”
One thing impacting the market is that China is the largest consumer, he says.
“Right now, they have about 55 percent of the world’s stock of cotton within the country’s border. If they release it to the market, cotton prices will come down sharply. Are they going to continue to be an accumulator, or will they slowly meter it out?”
There’s an expectation in Georgia of a sharp increase in corn acreage, with cotton taking a small hit, and peanuts showing a significant decrease. Wheeler, however, thinks cotton could continue to gain ground going into the spring.
“When guys in the Southeast plant their corn, they want to get it out of the field in July. If you look at the July corn futures, there’s a premium of $1.10 versus new-crop corn. For any corn grower in south Georgia and north Florida, there’s a huge premium for them to get it out of the field early and into the marketplace.”
Last year, 1.18 billion bushels of corn were harvested prior to Sept. 1 in the U.S., says Wheeler.
“Farmers have figured out if they go and get it, and get it soon enough, that the premium more than pays off. In extreme south Georgia and north Florida, there are even producers planting corn behind corn.”
For corn to compete with cotton, considering cotton’s current rally, it would require $5.75 for irrigated corn, says Wheeler. “The returns for corn are very similar now to cotton. Earlier, there was no discussion — farmers were planting corn.”