Shurley: A Brief Outlook for Old Crop and New Crop
We’ve learned and experienced the evidence of how crop markets – especially cotton, it seems – can be impacted by “secondary” factors on the demand side. Factors that one may think have little or nothing to do with cotton but, in reality, can be thought of as a proxy of how things are going on the consumer and demand side – factors such as the value of the dollar, inflation, interest rates, the U.S. stock market, and COVID impacts here and abroad.
Prices for the remaining 2022 crop on the March futures currently seem to be bound in a range of mostly 78 to 87 cents. Prices are in a downtrend right now and in the lower part of that range at around 81 to 82 cents.
Prices could move lower (below 78), but prices at that level back in late October did not hold. A rally to 85 to 88 or better could be considered as a selling opportunity. Higher prices are possible, but this seems limited under the current poor demand environment.
USDA’s monthly supply/demand estimates released Dec. 9 also did little to help the situation:
The expectation likely already is that acres may be down for 2023. Because of demand concerns, however, the prospect of lower acreage and production is not going to move the market. Let’s also remember that, even with lower acres, 2023 production can be greater than 2022 if abandonment is more normal.
Corn has dropped about 5% over recent months but currently is still about $6.00. Soybeans have held price better – currently just under $14. Peanut contracts will be whatever they need to be to be competitive with other crops (especially cotton) and attract enough acres to meet expected demand.