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
Market Analysis

Shurley on Cotton: Recent Events and Market Direction

April 22, 2016

Although it’s a painful time for cotton right now, there are potential positive factors on the horizon that could eventually lead to better prices.

Market Analysis

Cleveland: Chinese Program Providing Market Stability, Price Boost

April 25, 2016

Cotton prices continue to advance, thanks to stability from an unlikely source – China.

Market Analysis

Shurley on Cotton: Trying to Decipher the Numbers

April 4, 2016

Spending a little time discussing acres planted is fine for now. But it will all come down to how the weather impacts planted acres, and what happens during the growing season.

OA Cleveland
Market Analysis

Of Demand, Adidas and Planting Intentions

April 4, 2016

The market wants to make a major move. USDA says cotton acres will be will up. Yet demand remains the only game in town – everything else is window dressing.

Market Analysis

Riding Out Cotton’s Flooded Market

April 2, 2016

Joe Nicosia says better days are coming. But American cotton must persevere as China finally unloads its massive reserves.

Market Analysis

Cleveland: All Eyes on USDA Planting Intentions

March 28, 2016

As prices remain unchanged and China remains quiet, the cotton market awaits the USDA planting intentions report for possible good news.

Market Analysis

China Still Sits Heavy on the Market

March 21, 2016

Chinese reserve stocks still sit as a heavy hat on cotton prices, providing little reason to break above the 59-cent price resistance.

Around The Gin
Product News

Meister Media Worldwide Website Relaunches With New Resources

April 22, 2016

Meister Media Worldwide — publisher of Cotton Grower magazine – has relaunched its corporate website, highlighting information and services available from one of agriculture’s leading media companies.

Product News

ReinCloud Promises Remote Control

April 18, 2016

New software set to combine irrigation management and data collection – all in the palm of your hand.

Product News

Search Begins for Deltapine Class of 17

April 14, 2016

Deltapine’s NPE program is nine years old, and the search for the company’s Class of 17 cotton varieties is underway.

Product News

Texas Farmer First to Plant Enlist Cotton Variety

April 11, 2016

Dean Hansen of El Campo, TX, was the first cotton grower in North America to plant the first commercially-available cottonseed with the Enlist cotton trait.

Product News

New Options for Roundup Ready PLUS Program

March 25, 2016

The Roundup Ready PLUS Crop Management Solutions program for 2016 includes a new tool for weed management and new incentives for farmers looking to fight insect pests in corn.

Product News

Greenleaf Launches easyFlow Closed Transfer System

March 24, 2016

Greenleaf Technologies has launched the company’s new easyFlow closed transfer system for the North American market.

Product News

AgLogic Launches Aldicarb Product in Georgia

March 15, 2016

Growers in Georgia will be able to use a new aldicarb pesticide in 2016 for nematode and early season pest control.

Product News

Moss Joins Mid-South Team for Brake Herbicide

February 29, 2016

Ag sales veteran Larry Moss has joined SePRO Corporation as a technical specialist for Brake herbicide in the Mid-South.

Latest News
Market Analysis

Cleveland: Chinese Program Providing Market Stability, Price Boost

April 25, 2016

Cotton prices continue to advance, thanks to stability from an unlikely source – China.

Market Analysis

Shurley on Cotton: Recent Events and Market Direction

April 22, 2016

Although it’s a painful time for cotton right now, there are potential positive factors on the horizon that could eventually lead to better prices.

Market Analysis

Bulls and Bears Collide in Eventful Market Week

April 18, 2016

An exciting, bullish week for cotton prices turned bearish, as prices ran ahead of demand, the Chinese announced reserve sale plans, and USDA released its April WASDE report.

Market Analysis

Prices Tick Upward as Demand Debate Continues

April 11, 2016

Cotton prices moved higher in New York at week’s end. But all O.A. Cleveland heard about were his comments on Adidas and demand. So naturally, there’s more.

Market Analysis

Shurley on Cotton: Trying to Decipher the Numbers

April 4, 2016

Spending a little time discussing acres planted is fine for now. But it will all come down to how the weather impacts planted acres, and what happens during the growing season.

Market Analysis

Of Demand, Adidas and Planting Intentions

April 4, 2016

The market wants to make a major move. USDA says cotton acres will be will up. Yet demand remains the only game in town – everything else is window dressing.

Market Analysis

Riding Out Cotton’s Flooded Market

April 2, 2016

Joe Nicosia says better days are coming. But American cotton must persevere as China finally unloads its massive reserves.

Market Analysis

Cleveland: All Eyes on USDA Planting Intentions

March 28, 2016

As prices remain unchanged and China remains quiet, the cotton market awaits the USDA planting intentions report for possible good news.

Market Analysis

China Still Sits Heavy on the Market

March 21, 2016

Chinese reserve stocks still sit as a heavy hat on cotton prices, providing little reason to break above the 59-cent price resistance.

Market Analysis

Cleveland: Quality Premiums Are Coming

March 13, 2016

The quality premium for U.S. cotton has been holding steady, but improvement is on the horizon. Hold for it.

Market Analysis

Cleveland: No Moral Victories in the Market

March 7, 2016

The cotton market is famous for giving second chances, but it also takes no prisoners. We are not talking horseshoes here.

Market Analysis

Shurley on Cotton: Prices “Lost In Space”

March 7, 2016

Much like the space family in the popular 1960s TV show “Lost in Space,” cotton, too, has been under a “meteor shower” of negative news and overall bearish market sentiment.

Market Analysis

Cotton Prices Appear Range-Bound in Near Term

February 23, 2016

Cotton prices are projected to remain range-bound in the near term due to large stocks held by China and depressed prices for all agricultural commodities.

Market Analysis

Market Still Bearish, as Prices Tick Upward

February 22, 2016

The New York March contract settled one tick above 60 cents, helping avoid the deep bearishness, but keeping technical signals weak.

Market Analysis

Shurley on Cotton: No Valentines for Cotton

February 16, 2016

February has thus far been a brutal month for cotton prices.