Agfax Buzz:
    April 13, 2012

    Johnson On Cotton: Urea Prices Further Depressing Cotton Acreage

    AgFax.Com - Your Online Ag News Source

    By Sharon C. Johnson, Analyst, Penson Commodities, Atlanta, Georgia

    Looking toward the upcoming NASS planting report on Friday, June 29, reports are become more widespread across the Southeast and Delta regions of producers switching corn, cotton and rice area to soybeans. Since Mar 1, May soybeans have gained 1.46 cents (low to high) with the November contract, up just over 1.15 cents.

    The price rally, though, does not paint the entire picture as soybeans are not just up but at the current price of 14.46 and 13.80 with May and Nov respectively, very high priced.

    Corn and cotton prices, old and new crop, are sideways to down over the same time frame, making these two crops less desirable despite the very high fixed price with the revenue insurance available with cotton. In addition, high input costs such as urea, a key component in fertilizer has risen to such a level that per AgFax, rice producers are also moving to soybeans. Soybeans do not require nitrogen, unlike corn, cotton and rice. So, if it has not been applied, soybeans can be planted instead.

    Weather is and will continue to be a critical component for the SW region as average if not above average rainfall will allow more area to be devoted to other crops than cotton such as sorghum in South Texas. If conditions remain as dry as they currently are in the High Plains, producers will follow last year’s path and plant more cotton since insurance programs will guarantee a high price despite its costs.

    Nearly every commercial I have spoken with in the past two weeks is anticipating a loss in cotton area from the March Intentions to the June Planting in the SE and Delta regions with the Southwest a coin toss. As for the Far West, since final water allocations were not until near the end of the survey period, a further decrease is expected in Calif.

    As to yields, cotton can survive in periods of low/no rainfall with little impact if only one season is involved meaning planting or growing but not both. If El Nino returns this fall as some early talk suggests, rainfall will be above normal, not what is wanted during harvest. The start to planting is worrisome but not critical yet. Weather over the next few weeks will play a huge role in how well cotton is situated going into this summer and ultimately if the final crop size is closer to 18 mln vs 16 mln bales.


    PRICE IMPACT/COMMENTARY

    Once commercials and funds finish the bulk of their rolling, delivery possibilities will play a much larger role in how the May trades in the last 7 sessions. In addition, with more puts in the money than calls, additional buying as puts are exercised is likely but that phenomena should only be in place for a day or two early next week. The bigger question for those long or short in July is will it repeat the rally just prior to its FND as was the case with Mar and May. How well US exports hold up if not advance will dictate if the trade wants to take delivery vs those who may want to make delivery. Plus, how well weather is cooperating here and key producing countries such as China, India, Pakistan, etc could influence hedgers’ decisions re: owning cert stocks.

    Sharon C Johnson, @Copyright 2012

    The information contained in this report is taken from sources we believe to be reliable but is not guaranteed by us as to accuracy or completeness and is sent to you for information purposes only. Penson/First Capitol Group bases its market recommendations solely on the judgment of its personnel. Reproduction in whole or in part or any part or any other use without permission is prohibited.   

    Tags: ,

    Leave a Reply

    Name and Email Address are required fields. Your email will not be published or shared with third parties.

    Agfax Cotton News

    Georgia: Chemical Mixing Problems4-18

    Arctic Warming Tied to Extreme Weather – DTN4-18

    CBOT Markets Closed on Good Friday4-18

    Keith Good: China’s Secret – Contaminated Farmland; Expect Drought Persistence4-18

    Cleveland on Cotton: Nervous Market Nellies; Chinese Plant 20-25% Less4-17

    Doane Cotton Close: Heavy Volatility Continues in Old-Crop Prices4-17

    AFB Cotton Close: New-Crop Continues to Show Strength4-17

    DTN Cotton Close: Finishes Mixed Ahead of Long Weekend4-17

    U.S. Drought Outlook: Improvement Expected in Midwest, Central and Southern Great Plains4-17

    DTN Cotton Open: Trades Slightly Lower Nearby4-17

    U.S. Energy: Oil and Gas Spending Favors Exploration, Development4-17

    Gasoline Prices: Average Jumps 6 Cents4-17

    Propane Stocks: Increase by 0.8M Barrels4-17

    Diesel Prices: Average Down a Penny4-17

    Keith Good: Beige Book — Observations on Ag Economy4-17

    Keith Good: China’s Rejection of GMO Corn May Have Cost U.S. Ag $2.9B4-17

    Doane Cotton Close: Strong Finish Despite Continued Dry Weather4-16

    International Buying and Selling a Balancing Act to Get the Best Deal – DTN4-16

    AFB Cotton Close: Regains Losses and Then Some4-16

    Missouri: Insect Spray Guides Are Now Available (Better Late Than Never)4-16

    DTN Cotton Close: Triple-Digit Old-Crop Gains4-16

    DTN Cotton Open: Futures Trading in Green4-16

    Keith Good: Cold Snap on East Coast Troubling; Wheat Futures Up Again4-16

    Doane Cotton Close: Market Gives Back Gains4-15

    Texas: Conservation Farming Meeting Weslaco, April 294-15

    AFB Cotton Close: Prices Move Lower4-15

    DTN Cotton Close: Loses Ground as Intercrop Spreads Narrow4-15

    Fertilizer Prices on the Rise but Still Lower Than Last Few Years4-15

    Texas Crop Weather: Freeze Puts Wheat at Risk of Injury4-15

    Tennessee: Late-Season Burndown Options for Cotton, Soybeans4-15

    AgFax Cotton Review: Now’s a Good Time to Price New-Crop; Rains in Texas but Not Enough4-15

    DTN Fertilizer Trends: Rail Delays Affecting Prices in Upper Midwest4-15

    DTN Cotton Open: Trades Mixed in Quiet Dealings4-15

    Keith Good: Ukraine Concerns, Weather Behind Surge in Grain Prices4-15

    Crop Progress: 3% of National Corn Crop Planted, Wheat Continues Decline – US-DA4-14

    Doane Cotton Close: New-Crop Down Despite Triple-Digit Old-Crop Gains4-14

    Arizona: Cotton Planting Reaches 35% – US-DA4-14

    California: Cotton Planting Advances Rapidly – US-DA4-14

    Louisiana: Glyphosate Resistance Confirmed in Italian Ryegrass4-14

    Texas: Wheat Conditions Continue to Decline – US-DA4-14

    DTN Cotton Close: Settles on Strong Old-crop Gains4-14

    Oklahoma: Small Grain Crop Conditions Declining – US-DA4-14

    DTN Cotton Open: Jumps to Triple-Digit Old-Crop Gains4-14

    Keith Good: Farm Incomes Expected to Drop 27%; Cotton Market Overheating4-14

    Doane Cotton Close: Freaky Friday with Last Minute Price Surge4-11

    DTN Cotton Close: Flat to Higher on Late Rally4-11

    AFB Cotton Close: Dec. Posts Strong Gains4-11

    DTN Cotton Open: Market Bounces Up After Settling in Red 3 of Last 4 Sessions4-11

    Keith Good: Senators Defend GMO Technology; Crop Insurance Distribution by State4-11

    Doane Cotton Close: Triple-Digit Losses on Disappointing Exports4-10

    DTN Cotton Close: Sharp Losses Nearby4-10

    AFB Cotton Close: Nearby Ends Below 90 for 1st Time in a Month4-10

    DTN Cotton Open: New Session Low Following Export Report4-10

    Keith Good: Drought Continues to Ravage California and Texas4-10