The main feature this week was the USDA Prospective Plantings report, which was released earlier today.
According to the USDA, cotton is the big loser in the fight for acreage, as farmers are expected to commit just 10.0 million acres to cotton this spring, which would be 2.3 million acres or nearly 19% less than what was actually planted a year ago.
Traders seemed to see the number as neutral to mildly bullish, although they certainly realize that this is still very much a moving target at this point.
Planting intentions for corn and soybeans are nearly identical to what was planted last season, with corn at 97.3 million acres (+0.1 million) and soybeans at 77.1 million acres (-0.1 million).
The big winners in the plantings sweepstakes are wheat at 56.4 million acres (+0.7 million) and sorghum at 7.6 million acres (+1.4 million). It looks like wheat and sorghum are stealing acreage from corn and soybeans in certain parts of the country, whereas corn and soybeans in turn are taking it away from cotton in other areas.
There are still a variety of factors that may alter planting decisions over the next couple of months. Price is the obvious one and cotton continued to make up ground against its closest competitors corn and soybeans, as they got hammered today in the wake of bearish stock reports. November soybeans ended today’s session at 12.51 dollars/bushel, down nearly 27 cents, while December corn closed at 5.38 dollars/bushel, down over 32 cents.
Interestingly, when we take a look at where cotton, corn, soybeans and were trading a year ago, we notice that cotton and corn were almost at identical levels to where they are today, whereas soybeans were trading substantially higher. On March 28 last year, December cotton closed at 90.69 cents/lb, December corn was at 5.36 dollars/bushel and November soybeans closed at 13.20 dollars/bushel.
Based on the above price structure, cotton farmers intended to plant 13.2 million acres a year ago, or 3.2 million acres more than what the USDA is currently projecting! Since cotton has about the same price ratio to corn as last season and is much better off compared to soybeans, such a huge drop in acreage doesn’t seem to make sense. We therefore believe that the last word in regards to cotton acreage is not spoken yet and that some farmers may have a change of heart over the coming weeks.
US cotton continued to be in good demand last week, as another 254’800 running bales of Upland and Pima cotton were sold for both marketing years combined. Shipments were once again excellent at 360’500 running bales. For the current season we now have total commitments at 11.8 million statistical bales, of which 8.1 million have already been exported. Commitments for August onwards amount to 1.3 million statistical bales, which is 0.4 million bales ahead of last season.
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