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318729

Crude oil, cotton reach new highs

Inflation concerns are alive and well in the commodities markets as crude oil and cotton prices join oats in reaching multiyear highs.

As of October 5, crude oil is at a seven-year high, 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 spending more money ($5 trillion) this week than total U.S. tax collections annually from our entire population!

Grain markets were tripped up by the stocks report September 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 rose and soybean prices went down significantly ever since. The market is trying to find its footing this week, with some follow-through (up in wheat, down in soys) from last week’s report as well as trading weather.

Weather forecasts continue to be warm and dry for the Corn Belt next week but keep trying to add rain and cooler temperatures in the eight- to 14-day forecast. This time it is in the western Corn Belt where more rain is forecast to fall (above normal rainfall). The eastern Corn Belt is forecast about normal rainfall, and the East Coast above normal. Overall, it’s still a pretty good harvest forecast.

Weekly crop progress shows 29% of the corn is harvested and 34% of the soybeans, so we are about one-third done with both harvests (8% ahead of normal in soybeans and 7% corn). Crop conditions were unchanged: corn at 59% G/E and 58% G/E soybeans, 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 bu/acre corn (exactly equal to the September USDA guess), and 49.1 bu/acre soybeans (1.5 bu 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 the purchases they are making of cotton recently. At least we don’t blame COVID 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 topsoil (up 4%) and 50% subsoil (+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; the wetter conditions since August have reduced drought chances next year. 

Cotton crop conditions also dropped 3% this week, although they are still at 62% rated G/E, quite a bit higher than last year’s 40% rating. The cotton crop is a big one, and 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.

Grain farmers are going to do fine, too, as we have about an average crop of corn and soybeans – but a very good price. While input costs have skyrocketed, at least 2021 will be a profitable year in agriculture. And not because of government payments. China imports have a lot to do with the U.S. farmers’ success. Then again, U.S. imports of Chinese products have a lot to do with Chinese success. For now, that symbiotic relationship works.

Editor's Note: Ray Grabanski is president of Progressive Ag Marketing, Inc., a top-ranked marketing firm in the country. He can be reached at raygrabanski@progressiveag.com. Pro Ag has scheduled 15-minute zoom “Market Update” sessions for every Saturday 7 a.m. at progressiveag.com/videos. Each session will be a technical and fundamental review of the week, with market impacts and a summary of our take on what it all means in your sales process.

The material in this article has been prepared by a sales or trading employee or agent of Progressive Ag Marketing, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Progressive Ag Marketing's Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. 

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