The University of Tennessee - Agricultural Economics

Cotton and grain prices fell this week, following a more seasonal trend of price movements.

Corn:
Short Run: Cash corn prices ranged from $5.62 to $6.01 across Tennessee Thursday. Prices fell sharply this week. To some extent I think the price drop reflects a higher ending stock projection for both old and new crop corn from last week’s USDA update. But longer term, it still appears that the market will have to buy in more corn acreage in 2009.
Long Run: Harvest 2008 cash contract prices across Tennessee ranged from $5.33 to $6.00 Thursday. The December 2008 futures contract closed Thursday at $6.50, over 54 cents lower than the previous Thursday’s close. I think the $6.50 level on the December market is a significant support area. A drop below $6.50 could bring further weakness. Seasonally, lower prices are expected. But the past 2 years, prices have turned near or just after harvest to give much higher prices in the winter. Will that happen this year? If demand doesn’t falter, the U.S. will likely face another spring in 2009 where the market has to buy in additional corn acreage. So we are potentially set up for another volatile and price supporting market this winter. Consider having up to 50% of expected production priced at this time. If you haven’t priced any new crop production yet, and you will sell at harvest this year, consider pricing up to 30% of expected production now and look for further pricing opportunities this summer to sell additional bushels.

Cotton:
Short Run: Cotton prices have been trading in a relatively narrow price range the past couple of weeks. As U.S. cotton stocks shift from a huge surplus to a more moderate level, the market looks toward the demand side for some direction. With a troubling economic global outlook, the demand side can limit upside price potential. If foreign stocks stay well below 50 million bales (currently projected at 48 million bales for the new crop), I think there is significant potential for higher prices later this year or early next year.
Long Run: The December 2008 futures contract closed Thursday at 73.11 cents/lb, 0.47 cents lower than the previous Thursday’s close. I don’t see current prices as a good pricing opportunity. Consider holding new crop pricing at 25% of expected production for now.

Soybeans:
Short Run: Cash soybean prices ranged from $14.11 to $14.65 across Tennessee Thursday. Soybean prices fell this week along with corn prices. Prices have fallen over $1 from the highs of a couple of weeks ago. Fundamentals have not changed significantly since then and bean prices may be following corn as much as any other influence.
Long Run: The November 2008 futures price closed Thursday at $14.98, 89 cents lower than the previous Thursday’s close. Cash forward contracts for harvest ranged from $13.58 to $14.22 across Tennessee Thursday. I think corn and cotton will be looking for acreage next year, but beans really don’t have any to give up - assuming demand holds this winter. Therefore, prices may weaken this summer if production looks favorable. But this fall and winter could see another round of volatile and higher prices. For now consider having up to 50% of 2008 expected production priced to help manage price risk this year.

Wheat:
Short Run: The September futures contract closed at $8.095 Thursday, 8.5 cents lower than the previous Thursday’s close. Cash prices ranged from $5.10 to $6.45 across Tennessee Thursday. Last week’s USDA report was somewhat bearish for wheat, with higher stock levels projected. Seasonally, prices would be expected to bottom out over the next few weeks - and that could be as much as 50 cents below today’s prices.
Long Run: The July 2009 futures contract closed Thursday at $8.865, the same as last Thursday’s close. Consider pricing a small portion of expected 2009 production now using hedging or hedge to arrive arrangements.

Weekly Crop Comments