Corn and cotton costs on the rise
Record ethanol production, competition for acreage with soybeans, and wheat, high oil futures prices, the weak US Dollar and global demand might push corn and cotton futures prices to record highs in 2008, predicts T & K Futures and Options Inc.
Recent USDA estimates for 2008/09 crop year would mean that the stocks to usage ratio of corn would drop to 8.7% (the second lowest level in 35 years). The all time low was 5% and corn futures prices hit their all time high that same year. Weather problems or an increase in demand have the potential to create historic tightness in the stocks to usage ratio and push corn futures prices back to all time highs. Visit www.tkfutures.com/corn.htm to learn more.
Corn futures prices need to be high enough to convince farmers not to plant soybeans or wheat in Spring 2008. This battle for the limited available farm acres with soybeans futures prices near US$12/bushel and wheat futures prices over US$10/bushel makes that choice much harder for farmers. Visit www.tkfutures.com/education.htm to learn more.
The weak US Dollar and the increase in global currency availability have led to food inflation. This situation is usually fought by raising interest rates but the sub-prime mess in the financial markets has made that unlikely. Especially when one considers that the financial services industry accounts for more than 30% of the United States' GDP.
Corn over cotton
USDA reports showed that cotton planted acreage has fallen to an 18 year low because farmers are choosing to plant corn and soybeans because of higher profits. If supplies continue to slip at the same level in 2008 as they did in 2007, they may hit the record low levels reached in the 1995/96 years when cotton futures prices went over US$1 per pound. If weather problems arise and there is an increase in demand a price rationing situation may occur. Visit www.tkfutures.com/cotton.htm to learn more.
High oil futures prices decrease the profitability of petroleum based fibers such as nylon and rayon which increases demand for natural fiber based textiles such as cotton. This increase in from the textile industry may further deplete already low supplies of cotton which may affect cotton futures prices in 2008. Visit www.tkfutures.com/education.htm to learn more.
China and India's demand for cotton is roughly 50% of the world consumption. The Chinese and Indian economies are booming and this demand for US cotton may go even higher if the US Dollar remains low compared to foreign currencies. Current global supplies represent roughly a 150 day supply which is the lowest since the 1995/96 season.
Source: eMediaWire.com
