High on Cotton

Survey indicates farmers may reduce soybean acres in some southern regions.

Mid-South farmers may see double-digit increases in cotton acres this season, Image by Pamela Smith

Weaker competition from soybeans could prompt U.S. farmers to increase cotton acres to an estimated 14.45 million acres this year, according to a National Cotton Council (NCC) survey. If realized, the 2.9% bump would be the fourth straight annual increase. USDA’s forecast is slightly lower, at 14.25 million acres.

“For the 2019 crop year, many producers have indicated a desire to reduce soybean acres due to low returns in 2018,” says Jody Campiche, the NCC’s vice president, economics and policy analysis. “As a result, corn is expected to provide the strongest competition for cotton acres in 2019.”

PRICE OUTLOOK

DTN Lead Analyst Todd Hultman says that, compared to the downside price risk seen in soybean prices, if China doesn’t return as a willing buyer in 2019, the outlook for cotton prices looks safer but is not rosy. Spot futures prices peaked above 96 cents a pound in June 2018 and have been sliding downhill since, pressured by scaled-back world demand. Hultman explains noncommercial investors who were heavily net long at the top of the market in 2018 have been selling on the way down but still have more liquidating to do, especially if more U.S. acres are on the way as the NCC suggests.

Spot cotton is currently trading near 71 cents a pound. Hultman expects prices to remain under pressure early in 2019 with “a better case to be made for world demand and price support around 65 cents.” As usual, weather will be the determining factor for U.S. prices in 2019. In late February, the southeastern U.S. was in a wet pattern that deserves monitoring.

MID-SOUTH GROWTH

According to the NCC’s Annual Early Season Planting Intentions Survey, the biggest percentage bump in acres is expected in the Mid-South, where growers intend to plant 2.3 million acres to cotton, an increase of 13.6% from the previous year, as land is shifted away from soybeans. All states in the region intend to increase cotton plantings, including Arkansas, 14.4%; Louisiana, 22.2%; Mississippi, 18.4%; Missouri, 6.9%; and Tennessee, 5.9%.

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For Dundee, Mississippi, farmer Justin Cariker, cotton is his most competitive crop for 2019 because of current favorable prices and recent positive yield trends. “Five years ago, when we made two bales per acre, we thought we had done a good job,” Cariker explains. “Today, we’re averaging a little shy of three bales an acre on 3,500 acres. So, there’s nothing I can put on my farm that can compete with cotton. If I can get a price in the mid- to high 70s for cotton, I’d really rather go with cotton than corn.”

Cariker plans to increase cotton acres from 3,500 to 4,000 acres this year because of a recent purchase of 500 acres of prime cotton ground, all of which will be planted to cotton. He also intends to plant 1,500 acres of soybeans on ground that is too heavy for cotton.

The NCC projects a decrease of 2.6% in cotton acreage for the Southeast region, from 2.88 million acres to 2.81 million, with more acres in North Carolina and Virginia, and fewer in Alabama, Florida, Georgia and South Carolina.

In October 2018, the Georgia cotton crop sustained an estimated $600 million in damage from Hurricane Michael, and repercussions could gust into 2019, explains Jared Whitaker, Extension cotton agronomist at the University of Georgia.

“There are probably going to be some financial woes from farmers trying to borrow enough money to farm cotton, which is a more expensive crop to grow than some of the grains and soybeans,” he points out. “That would be the big reason why I would worry about cotton acres.”

Without financial obstacles, Whitaker sees cotton acres in Georgia staying the same if not rising. “Peanuts and cotton are what we plant, and we plant soybeans and corn when prices are really good. I don’t see corn acres taking off that much, and soybean acres are not changing at all, or they’re declining. With the contracts for peanuts relatively low, cotton is what’s left to plant. We know we can make a crop. We had a record crop in Georgia before Michael came through.”

In South Carolina, hurricanes and severe weather caused extensive damage to the state’s cotton crop in three of the last four years, notes Michael Jones, Extension cotton specialist at Clemson University. After Hurricane Michael blew through the Southeast in 2018, numerous cotton fields remained unharvested into January because of persistent rainy weather.

COSTS FACTOR IN

Farmers are anxious, Jones says. “They want to plant cotton, but they wonder if they can afford to. It’s been tough on them. But, I don’t think we’re going to be down that much. Most growers are probably going to plant what they did last year.”

In the Southwest, the nation’s largest cotton-producing region, growers intend to plant 8.8 million cotton acres, a 2.2% increase. In Kansas, producers intend to plant 3.4% more cotton, while Oklahoma and Texas are upping acres by 1 and 2.3%, respectively.

Far West producers are expecting to plant 86,000 upland cotton acres, a 2.9% increase from 2018. Cotton acreage is expected to increase in Arizona and California, and decrease in New Mexico. California growers intend to plant 14.4% more upland cotton acres. According to the NCC, water availability may be influencing cotton acreage decisions in the region.

By type, upland cotton planting intentions are 14.2 million acres, up 2.8% from 2018, while extralong staple (ELS) intentions of 264,000 acres would represent a 6.3% increase. Using an average U.S. yield per harvested acre of 840 pounds generates a cotton crop of 22.7 million bales, with 21.9 million upland bales and 782,000 ELS bales.

The NCC questionnaire was mailed in mid-December 2018 to producers across the 17-state Cotton Belt. Survey responses were collected through mid-January.

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