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

    Doane Cotton Close: Another Choppy Week Ends Slightly Ahead12-19

    Arkansas: State Plant Board Approves Enlist Duo, Dicamba Weed Control Systems12-19

    Mississippi Crop Values to Top $7B for 3rd Straight Year12-19

    AFB Cotton Close: Mixed as Futures Continue to Consolidate12-19

    Cleveland on Cotton: India Stirs the Bears; China Releases Reliable Stock Estimates12-19

    Texas Ag Benefits from Normalized U.S.-Cuba Relations, Says Expert12-19

    DTN Cotton Close: Narrowly Mixed on Light Volume12-19

    Weekly Cotton Market Review12-19

    DTN Cotton Open: Ticks Quietly Just Below Unchanged12-19

    Georgia Cotton: NexGen Variety Trial Results Posted12-19

    Keith Good: New Cuba Policy Could Open Huge Market for U.S. Wheat12-19

    Nitrogen Fertilizer: Oversupply, Geopolitical Risk Overshadow Strong Global Demand – DTN12-18

    AFB Cotton Close: Gains Continue but Unable to Break Through Resistance12-18

    Doane Cotton Close: Choppy Sideways Action Continues12-18

    Georgia: 2015 Ag Forecast Meetings in Mid-January12-18

    DTN Cotton Close: Modest Gains in Choppy Trade12-18

    U.S. Drought Outlook: Improvement Expected Across California12-18

    Ag Trade Should Benefit from Thaw in U.S.-Cuba Relations12-18

    DTN Cotton Open: Futures Start Slightly Lower12-18

    U.S. Energy: Heating Oil Expenditures Expected to Drop This Winter12-18

    Gasoline Prices: Decline in All Regions12-18

    Propane Stocks: Decrease by 0.8M Barrels12-18

    Diesel Prices: Average Drops 12 Cents12-18

    Keith Good: Viptera Corn Ban Lifted by China; Wheat Prices Soaring12-18

    AFB Cotton Close: Market Higher in Middle of Consolidation Range12-17

    Virginia Govt. Joins USDA, EPA in Fighting Nutrient Runoff – DTN12-17

    Doane Cotton Close: Choppy Sideways Trade Continues12-17

    Tennessee: TAPA Winter Agronomic Workshop and Cotton Focus, Jackson, Feb. 11-1212-17

    DTN Cotton Close: Jumps to Session High on Fed Statement12-17

    Tennessee: 2015 Cotton Variety Guide Available Online12-17

    DTN Cotton Open: Futures Show Little Change12-17

    Senate Passes Tax Extenders Bill with Key Provisions for Ag — DTN12-17

    Keith Good: EPA Moving Ahead with Plans to Finalize Clean Water Rule12-17

    Doane Cotton Close: Prices Pressured Lower12-16

    DTN Fertilizer Outlook: Global Phosphorous Demand to Increase12-16

    DTN Cotton Close: Wipes Out Most of 3-Day Gain12-16

    California: New Pesticide Resistance Online Course Offered12-16

    DTN Cotton Open: Slips as Oil Prices Sink12-16

    Keith Good: Ag Industry Preparing to Launch New Biotech Seeds12-16

    Doane Cotton Close: 3rd Day of Gains12-15