Jeff Lander provides crop marketing and crop insurance services.
The 2018 season for VA & NC saw very mixed yields - from outstanding to zero. So far, the 2019 season has been very wet, but we are now beginning to dry and the temps are slowly trying to warm up. As it stands, VA/NC will have a slight build in acres and it is hard to disagree with numbers put forth by USDA at the moment. The final planting date for insurance is May 25th, with a 5 day late planting period. We have struggled the last two years to get cotton planted ahead of these dates and we sure hope this year is a little more kind to us.
Most farmers in this area have begun to apply some burn down applications and will soon try to start planting corn in the next week or so. With tobacco acres getting cut and corn and bean prices weak it does feel like we could see some acreage increase over the coming months. The US needs a exceptional growing season to have above average yields and below average abandonment. I hope it comes to pass, but we have seen far too many times of major yield losses at the end of the growing season. Growers have many decisions yet to be made with respect to the 2019 farm bill and the ARC & PLC elections. There is a good case for either one but with the crop insurance price at 73 cent range most in this area are considering PLC with a few areas looking at ARC. ARC looks attractive if you were in a disaster area this past season.
Keep in mind that the elections you choose are good for 2019 & 2020 where you will have the opportunity to make changes at that time.
With respect to marketing, basis levels are a touch weaker than in previous years and growers are now beginning to lock in some basis and placing orders to price in the 76-78 cent range. My recommendation is to be aware and to either price or hedge at these levels. It does seem more likely that we are on the cusp of a trade deal and that we could see old crop challenge the 200 day average soon and could potentially push in to the 80's. This should help new crop move towards 76/78 giving growers a chance to price or hedge.
There are many things to keep a eye on that could be supportive to cotton prices. One is when and how does China begin to restock, another is the India monsoon season. Skymet is currently forecasting this season's monsoon to produce precipitation that is below normal. And then there isthe US crop - it is easy to project a record crop before the seed has been put in the ground, but we have many hurdles to overcome such as hurricanes or Noreasters in the East, flooding/hurricnes in the Delta/Mid South and drought, wind and hail in the TX area. These all could have big implications if they come to pass. My point is that we could see some price volatility, so be prepared.
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This post was written by Louis Rose