2 thoughts on “Summary of the USDA’s Prospective Plantings and Grain Stocks Report

  1. The Profitability Update uses .72 per pound as the expected price for new crop cotton. There are three components to this price. My question is which component has the most certainty of being realized and which has the least? In the depressed Ag commodity price climate we are in nothing can be taken for a given when making decisions on what to plant or when to sell. I think the seed check and hauling rebate from a gin is the most vulnerable of the three components to be less than what the Update projects or maybe even zero.
    If the loan rate is the closest to a sure thing, where does the equity payment fall? Can it be vulnerable to being than less than .12 to .13 cents?

    1. Richard,
      Thanks for the question. I am currently comfortable with all three components, however, I would think there is a margin or range of a few cents from the 72 cents. Certainly, adjustments could be made to any of the three. The loan rate will depend on the quality of cotton so premiums or discounts could occur. The equity or loan option payments are currenty quoted in a 10 – 12 cent range and are somewhat based on cotton being put in the loan and redeemed out at the lower AWP (Adjusted World Price) which creates the equity value. I suppose there could be a combination of future prices and AWP that could erode that equity price, but I think overall it is stable in that 10-12 cent range. The last component as you mentioned could be vulnerable if cottonseed (for feed, oil, etc.) prices collasped. However, I think with the current projected acres of cotton and the increased turnout levels that the cottonseed market would remain firm. So, overall, I think cotton prices including all 3 components is reasonable in a 70-74 cent range.

Comments are closed.