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More declines for cotton, corn?

Quinn, who works jointly with the Mississippi Farm Bureau Federation and the Mississippi Cooperative Extension Service, presented his market outlook for cotton, soybeans and corn to farmers attending the 2002 Delta Ag Expo in Cleveland, Miss.

“The greatest motivator is pain, and we’ve sure got a lot of it to deal with in farming right now,” he says. “Whether or not we see the seasonal price trends work as they normally do is still to be seen. They didn’t work as normal in 2001.

“If we get a seasonal spike of anywhere between 40 and 45 cents in December cotton futures, it may be the time to obtain some price protection with a put option.”

Quinn predicts 2002 cotton will trade between 35 and 45 cents on the cash market and between 30 and 50 cents on December futures.

“We could dip into the 20s, if mill use continues to decline and consumers don’t start buying more cotton,” he says. “Ultimately it will be world supply and world demand that move the price of U.S. cotton.”

Also weighing heavily on the commodity market is the uncertainty of farmers’ planting intentions for 2002. “Planted acreage is going to be the big thing and we don’t even have planting intentions yet. I’m not sure where we’re going, but I think most planting decisions will have to be made before we see a new farm bill signed into law.”

Cotton production in 2002 is expected to be somewhere around 15 million acres in the United States, but according to Quinn, that’s 3 million more acres than the market needs.

“Production will drop into the 18-million bale range, but it needs to come down from there to solve the overproduction problem,” says Quinn. “We’re looking at a 10-million-bale carryover this year. We’ve just got a lot of cotton here and a lot of it all over the world. We really can’t stand more than a 5-million-bale carryover to get prices to a level where we can afford to grow cotton.”

Quinn expects the “exceptional” cotton yields of 2001 to drop slightly in 2002, and says cotton exports should hit the 10-million bale mark this year. However, he says, sluggish consumer demand will continue to adversely affect cotton prices.

“Mill use is killing us, and I just don’t see the situation with stopping anytime soon. To make matters worse, while mills are closing here, we’re also hearing about foreign cutbacks,” he says. “Cotton may be healing itself right now, but it’s been a very sick industry.”

Corn yields are also likely to drop off from 2001 levels. However, according to Quinn, the 77 million acres of corn growers could plant in 2002 will drag the market down somewhat.

“I was favorable to corn throughout all of 2001 and all corn prices did were go down. It seems now that we are in more of a sideways trend even with a tighter supply outlook,” he says. “With average yields in 2002 we should see corn stocks tighten slightly. If corn futures go above $2.50 per bushel you should probably start pricing some of your crop.”

While Quinn thinks the potential is there for that price level, he is projecting cash corn prices will range between $2 and $2.50 per bushel this market year. December corn futures, he estimates, will fluctuate between $2.25 and $2.50 per bushel. “Growers should not expect a loan deficiency payment (LDP) for corn in 2002,” he says.

Any rally in corn prices will likely come during the early part of 2002, with the possibility for higher prices likely followed by another drop in corn prices sometime after March, Quinn says.

However, Quinn says he believes the market will wait until it sees the grain leave the country before making any upward move. Helping support corn prices is a corn-wheat price ratio that doesn’t favor feeding wheat over corn. Weather, though, will be the final factor in determining the value of the 2002 corn crop.

In comparison, Quinn is somewhat optimistic in his market outlook for soybeans.

Despite the current low prices, Quinn still believes that the soybean market is a healthy market. “I don’t see a big rally in soybean prices, but I do see some upside potential.

Expecting only a slight reduction in 2002 acreage over 2001 levels, he anticipates that average U.S. yields will drop slightly to 38 or 39 bushels per acre.

“We could see some rally in March, April or May if corn starts pulling some acreage out of beans, but if South America comes in with a record crop in February, soybeans could go to $3.75,” he says. “We could be seeing a pricing opportunity now with soybeans.”

“With average yields, world soybean stocks grow, and as with corn, weather will be the final factor. In fact, South America weather is already moving the price of U.S. soybeans,” he says.

Ultimately, Quinn is projecting 2002 soybean prices to range between $4 and $4.50 on the cash market, and between $3.75 and $5 on November futures. Growers can expect to receive an LDP for their soybean crop in 2002, he says.

“We need to remember that every six months we’re harvesting a huge crop of soybeans somewhere on this planet. And, although we keep growing more of them, we keep using more of them. We’re selling the fool out of soybeans,” he says.

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