April 3, 2009

2 Min Read

The March USDA crop report came and went without much fanfare as prices in corn, soybeans, wheat and cotton all trended with crude oil rather than the fundamentals of the respective markets. Whether it be good or bad, the large sums of cash invested in index funds and their heavy weighting to the energy markets dictate that grain prices will follow the energy market unless or until the rules are changed.

Planted acreage will be the key issue on the fundamental side over the next couple of months. Even with high input costs, the arguments that farmers will cut back on planting does not hold much water. Crops will get planted — the only question is how much.

New-crop corn prices hovering just over $4.00 and soybean prices approaching the mid-$8 range are not highly profitable, but the incentives are large enough to get the crop in the ground. My guess is we will still plant close to 85 million acres of corn versus last year's 86 million and soybean acres could jump to 78 million acres or higher versus last year's 75.7 million.

Prices rarely drop substantially as the market is battling over acreage. However, there are a few things to keep in mind in your marketing plans for the months ahead.

If the sharp increase in soybean acres materializes, the price of soybeans will be substantially lower come harvest-time than they are today.

In corn, acreage numbers are not substantially bearish, but the fact that producers have now put over 900 million bushels under loan would seem to indicate the basis levels will be wide come July and August and the pressure consequently would be put on flat prices as well.

This will likely be another year when the best selling opportunities in grain will occur between now and the end of planting season.

In the cotton market, the bearish fundamentals have been discounted. Acreage is going to be down. Prices are under loan rate. There is no need to be bearish this market. Cotton prices likely have more upside potential than any other crop you can grow this year.

Subscribe to receive top agriculture news
Be informed daily with these free e-newsletters

You May Also Like