Rainfall, demand keys to 2014 commodity outlook

COLLEGE STATION – Texas A&M AgriLife Extension Service economists recently provided 2014 projections for major commodities produced in Texas, with many pointing to past drought conditions as a key factor in making or breaking a crop.

The Plains region of Texas and part of South Texas were dealt a severe blow in 2013 with drought conditions. However, AgriLife Extension economists say if positive weather patterns develop and lead to periods of timely rainfall, there’s reason for optimism for the 2014 crop year. Livestock markets are also projected to continue to show strength, particularly beef cattle, as inventory levels have yet to recover from lows not seen since the 1950s.

Dr. Mark Welch, AgriLife Extension grains marketing economist in College Station, said 2013 brought record supplies of corn and wheat, but demand remains strong.

Cotton prices will be determined by a variety of factors, said Dr. John Robinson, AgriLife Extension cotton economist, College Station.

“The outlook for cotton prices will be determined by a combination of planting and growing conditions for the 2014 new crop, and how much cotton China uses from out of their massive government reserves,” he said. “If China maintains their reserves at their current levels, cotton prices in Texas may range from the upper 60s to mid-70s (cents per pound). If China were to start auctioning off large amounts of their reserves, then Chinese mills would not have to import as much cotton, leaving more surpluses of cotton in the U.S. that would lower prices another five to 10 cents.”

Steve Amosson, Regents Fellow, professor and management economist, District: 1 – Panhandle:

Outlook on Grains: “Large feed grain carryovers nationwide, stagnant ethanol demand combined with a marginally increasing feed demand should cap corn prices in the $4 to $4.50 price range, making production in the Panhandle marginally profitable at best. Therefore, I expect planted feed grain acreage in the area to fall 5 to 10 percent.

– Outlook on Cotton: Current 2014 projected cotton price for the area is 73 cents. At that price, irrigated cotton appears to be slightly more profitable than irrigated feed grains. Given the lower water requirement of irrigated cotton compared to corn, I expect cotton acreage to increase approximately 10 percent this year in the Panhandle as producers attempt to manage their available irrigation water more effectively.”

– Outlook on Livestock markets: “Profitability of area feedlot operations has improved with falling feed prices and strong fed beef prices. However, they will continue to be under stress because of low inventory numbers due to record low cow herd. The lower feed prices have led to higher calf prices making cow-calf operation profitability rise to the highest level in recent years. This profitability combined with somewhat marginally improving range conditions should lead to some rebuilding of the cow herds in the area where cow inventories had decreased 30 to 50 percent because of the drought.”

– 2014 General Outlook for Region (weather, yields, other factors): “Right now I expect average yields for most crops in the Panhandle. Three-year droughts of record for the area, which occurred in the 50s, were followed in both cases with a normal or above normal rainfall year. Maybe we’ll get lucky again!

“This is going to be a tough year for producers to make a profit even with normal rainfall. It is critical they use a sharp pencil in determining the crop mix they are going to plant and be proactive in marketing their crops when the market offers them the opportunity to price in a profit.”