Currently South America has a record Soybean crop under harvest. Brazil has harvested 80% of their crop, Argentina near 30%. There are transportation issues in South America: Brazilian transportation infrastructure is under development and progress is good. Argentina had a dock workers strike slowing exports that has been reslolved. Argentina had a quality dispute over soyoil exported to China that is under negotiation.
The issues in Argentina and Brazill will be relsolved. Export inspections, Export sales and Export deliveries from the United States will drop. It is likely prices will fall. If the U. S. crop does not get planted and later if the yield is poor, prices will go back up. These two scenarios are unlikly. In the short term U. S. soybeans are in short supply and prices are holding up. Watching Vantage Point for turning indicators to the downside in soybeans will help time selling. Expect soybean prices to drop significantly after the crop is planted. Look to sell July or September.
Corn fundamentals are different. It is possible that corn acres will be reduced by weather. At this time there are ample supplies of corn. However, demand for meat is increasing worldwide and corn is mostly used for feeding chickens, hogs and cattle. At this point, South America has a bumper corn crop harvested and the U. S. has ample stored corn. If acres shift to soybeans this season, corn supplies will go down more than expected.
Corn ethanol demand is increasing. Do not forget that corn used for ethanol looses about half the bulk but that distillers grain has twice the protein feed value. Ethanol produces not only fuel but higher quality animal feed. China buys large quantities of U. S. corn as distillers grain. Summer gasoline use is the highest of the season and we are coming into greater fuel demand.
Wheat is higher protein feed value than corn. Wheat supplies worldwide are at record high levels. World production in wheat has dropped because lower prices drove acres planted into other crops. Wheat is storage is high, and the capacity of Euasian countries to produce wheat is great. Lower quality wheat out of Asia is going into the feed mills competing with corn. It is unlikely wheat prices will rise significantly. Remember we grow winter wheat and spring wheat. It goes to market two times each year making wheat fundamentally less predictable. Asian wheat is taking part of the South American market away from the United States.
Rice is thinly traded and difficult to make trades reliably. However, rice supplies can change very quickly. At this time rice supplies are ample. Vietnam is selling rice a bargain basement prices. Thailand is selling stored rice at higher prices than Vietnam but below U. S. prices. U. S. rice is moving into countries where we have a transportation advantage like Canada, Central America and Mexico. Cuba will open up. Rice acres are increasing but demand will eventually catch up to supply. In the short term, the trend is lower.
Cotton supplies are tight. I repeat my advice from last spring. Cotton prices have gone from 40 cents to 80 cents a pound. Sales of clothing and cotton goods are depressed in this economy. Clothing prices must rise. Cotton supplies are tight. We are buying close at bargain prices made with 40 cent cotton. Clothing and cotton goods must increase in price. Now is the time to buy what you can before prices rise.
Cotton prices have more upside potential. Cotton acres in the United States will increase 15% but that is not enough to make up for tight supplies. The current carryover estimate is 3 million bales. We use or export about 6 million bales each year. Current supply is less than 5 million bales. We are headed for cotton prices to reach record high levels. Export demand is limited because people are putting off buying clothing. The economy is in recovery and eventually demand for cotton will increase. We do not have the cotton to supply normal demand let alone pent up demand. Cotton must go higher.
