Corn Crashes Cotton’s Party?

Cotton growers have had a peaceful coexistence with what Native Americans called “maize” for a couple of decades. Maybe longer. A cotton/corn rotation is a case of mutualism: both crops benefit. Corn builds organic matter and is not the best host for the nematodes that cruise the Cotton Belt; cotton herbicides take down weeds that corn herbicides can’t.

The most common rotation has been 2-3 years in cotton, 1 year in corn. And that 1 year in — at least 1 year in — for potentially thousands of growers, will be 2007. The basic functions of supply and demand have driven corn futures to 10-year highs. Despite a bumper crop in 2006 — the third largest in history — the stocks-to-use ratio is the lowest since people started tracking such things. In other words, corn is short. And at the same time, cotton is not.

But what has driven this historic demand for corn? A couple of things:

• The world’s consumers, economists say, have the pocket money to buy more grains as protein sources. And as for competing sources of protein, there’s that pesky health thing with red meat and some fish. Right now hamburger lovers are being bombarded with health warnings that would make C. Everett Koop proud. (You remember Koop, right? Looked like a heavy-weight Abraham Lincoln. Hated cigarettes.) And ocean fish has a lot of mercury in it, some say. Besides, if you believe what noted eco-specialist Ted Danson said 15 years ago, the oceans died 5 years ago. So nothing is biting anyway.

• “Bio”fuel demand has skyrocketed. Over the past 4 years, according to the PotashCorp – a world leader in nitrogen, phosphate and potash production – production of ethanol has doubled to more than 12 billion gallons per year. About one billion gallons of biodiesel — “the second most popular alternative fuel made from plant sources,” the company says — were produced.

On the Chicago Board of Trade, corn futures are trending in the $3.50-$4.00 range, and some analysts say it will take $5 per bushel to slow down demand. Even at the current price, that’s a jump of 77% in the past year.

A Wall Street source told Bloomberg News that for every 10-cent rise in corn prices, a nickel is taken off the share-price of Tyson Foods’ stock, due to increased feed costs. Bloomberg says even Coca-Cola, which uses corn syrup as a sweetener, is feeling it. Cattle and hog producers are too. Obviously the price of corn flakes is going up; less obviously, so is the price of ice cream. (I wonder if the price of corn hooch has gone up?)

So growers are reducing cotton acres and increasing the corn. And that’s maybe another case of mutualism: growers take advantage of skyrocketing corn prices and the cotton inventory chain takes a deep breath, then purges itself to some extent. We think. We hope.

But corn is not the least expensive crop to grow. It takes a lot of water, and thousands and thousands of tons of nitrogen fertilizer. (The Indians used to plant maize by putting a dead fish in with each seed to fertilize it. These guys were the original eco-specialists.) The price of natural gas has gone down for nitrogen fertilizer manufacturers, but increased demand may keep farmer prices where they are. High.

And of course, the cotton infrastructure will take a direct hit. Among other things, cotton seed companies will sell less seed, consultants will scout fewer acres and gins will gin less cotton.

Such is life in the commodities game. At some point you can count on growers saying they are getting back into cotton due to the crash in corn prices. (In fact, they said it before planting the 2006 crop.) It’s called equilibrium, and eventually everything finds it. But until then, pass the corn hooch.

Leave a Reply

Market Analysis Stories
OA Cleveland
Market Analysis

Dog Days of August Keep Market on a Lazy Pace

July 31, 2015

In the absence of a weather event in the near turn, the dog days of August will keep this low volatility market backing and filling at a very slow pace.

Market Analysis

Cleveland: Market Movement Still Stuck in the Mud

July 24, 2015

It looks as if the cotton market is frozen in time, and some teeth may have to be pulled in order to get the market moving again.

Market Analysis

July Supply Demand Report Proves to Be a Bear in Bull’s Clothing

July 13, 2015

The release of USDA’s July supply demand report quickly turned a big bull report day into a date with the big bear.

Market Analysis

Shurley On Cotton: A New Floor for Planted Acres

July 2, 2015

  By Dr. Don Shurley The long-awaited and much anticipated first estimates of actual crop acres planted for 2015 are

Market Analysis

Will Spring Rains Offer Price Relief in 2015?

July 2, 2015

Will this year’s decline in planted acres offer some price release sometime soon? That’s the question waiting for an answer.

OA Cleveland
Market Analysis

Late Week Fireworks Could Signal Something Bullish for Cotton

June 29, 2015

Round and round and round she goes… Where she stop no one knows. The circus crier could have found employment

Market Analysis

Unchanged Variables Keep Market Moving Nowhere Fast

June 22, 2015

It’s the lull before the storm, and nothing in the cotton market will change until Mother Nature makes her decisions.

Around The Gin
Product News

On-Farm Research Helps Ease Grower Questions About Enlist System

July 31, 2015

Southern cotton and soybean growers who have worked with the Enlist Weed Control System in on-farm research plots are now sharing their experiences.

Product News

Nufarm Introduces Panther SC Herbicide

July 24, 2015

Nufarm is introducing Panther SC herbicide, a new broad-spectrum herbicide for use in cotton and other Southern row crops.

Product News

USDA Deregulates Dow AgroSciences’ Enlist Cotton Trait

July 23, 2015

The USDA has deregulated Dow AgroSciences’ Enlist cotton trait in the United States.

Product News

Ratting Out Copper Theft

June 10, 2015

A simple alarm technology is helping to stop copper thieves who target irrigation systems.

Product News

EPA Approves New Premix for 2016 for Cotton, Soybean Weed Control

May 29, 2015

Cotton and soybean growers will have a new weed control option in 2016 with Warrant Ultra Herbicide, a premix of acetochlor and fomesafen.

Product News

Deltapine NPE Program Begins Eighth Year of On-Farm Variety Evaluation

April 28, 2015

Nearly 200 farmers will be part of the Deltapine New Product Evaluator program this year to help evaluate cotton variety candidates for the Deltapine Class of 16.

Product News

EPA Approves Enlist Duo Herbicide for Use in Additional States

April 2, 2015

The EPA has approved Enlist Duo herbicide for use in nine additional states, including four in the Cotton Belt.

Product News

New 2015 CROPLAN Cotton Varieties Feature Bollgard II XtendFlex Technology

March 19, 2015

WinField is adding Monsanto’s new Bollgard II XtendFlex cotton trait to two new CROPLAN cotton varieties for 2015.

Latest News
Market Analysis

Dog Days of August Keep Market on a Lazy Pace

July 31, 2015

In the absence of a weather event in the near turn, the dog days of August will keep this low volatility market backing and filling at a very slow pace.

Market Analysis

Cleveland: Market Movement Still Stuck in the Mud

July 24, 2015

It looks as if the cotton market is frozen in time, and some teeth may have to be pulled in order to get the market moving again.

Market Analysis

Shurley on Cotton: The Path to 70 Cents Is Still Negotiable, but Rocky

July 24, 2015

The goal of 70 cents is still possible, but each passing day likely lowers the odds that we can get there. We just need to make sure we know what our alternatives are and act accordingly.

Market Analysis

Shurley on Cotton: Prices Tracking Back Down the Same Row

July 13, 2015

If cotton prices were a piece of heavy farm machinery, the market would have a serious compaction problem, tracking over the same ground time after time after time.

Market Analysis

July Supply Demand Report Proves to Be a Bear in Bull’s Clothing

July 13, 2015

The release of USDA’s July supply demand report quickly turned a big bull report day into a date with the big bear.

Market Analysis

Shurley On Cotton: A New Floor for Planted Acres

July 2, 2015

  By Dr. Don Shurley The long-awaited and much anticipated first estimates of actual crop acres planted for 2015 are

Market Analysis

Will Spring Rains Offer Price Relief in 2015?

July 2, 2015

Will this year’s decline in planted acres offer some price release sometime soon? That’s the question waiting for an answer.

Market Analysis

Late Week Fireworks Could Signal Something Bullish for Cotton

June 29, 2015

Round and round and round she goes… Where she stop no one knows. The circus crier could have found employment

Market Analysis

Unchanged Variables Keep Market Moving Nowhere Fast

June 22, 2015

It’s the lull before the storm, and nothing in the cotton market will change until Mother Nature makes her decisions.

Market Analysis

Marking Time Thanks to USDA, China and Mother Nature

June 14, 2015

The cotton market marked time this past week, thanks to USDA, China and Mother Nature.

Market Analysis

Shurley on Cotton: June Numbers Leave Bulls in the Corral for Now

June 12, 2015

Cotton growers are optimistically waiting for prices to break to the upside. But patience is wearing thin.

Market Analysis

Cotton Market Poised to Respond to Mother Nature

June 8, 2015

The range bound trading continues for cotton without any change in sight until time passes and Mother Nature does what

Market Analysis

Mother Nature Now Controls the Market

June 1, 2015

Mother Nature has taken control of the market, thanks to weather-related acreage losses in the U.S., India and China.

Market Analysis

Shurley on Cotton: Prices Steady, But Tempting Downside Support

May 27, 2015

Amid the volatility and unknowns of the cotton market, this much we know – cotton production in 2015 will require patience, a clear understanding of the risks and careful evaluation of marketing tools and choices.

Market Analysis

Weather Worries Put Cotton Market on the Defensive

May 26, 2015

The cotton market found itself on the defensive this past week, as weather issues in all cotton-producing countries helped drive the dollar higher and prices lower.