What's in store this year for the nation's cotton producers?
With planting season beginning soon, a few big unknowns hang over the heads of the nation’s cotton producers, who came this week to the annual Beltwide Cotton Conferences (BWCC) in San Antonio looking for answers.
Several of these questions, of course, are perennial. It’s anyone’s guess when cooperative weather and cotton production ambitions will be in sync. And it’s rarely certain just how effective weed-control efforts will be.
But some factors are becoming clearer as planting season approaches across the Cotton Belt. The Chinese government announced last Friday that it would begin drawing down on its immense cotton stocks, which has led to a three-day decline in cotton futures prices. And given the strength of competing corn and soybean prices, it’s a virtual lock that fewer acres will be planted in the United States this year.
How much acreage will be planted?
The futures market already anticipates a decline in acreage planted that could lower cotton planted acres by 2 million or more. The likelihood of reduced supply had buoyed cotton futures prices until last Friday, when China announced it would begin dipping into its cotton stocks at an unspecified time.
Presenting his outlook at BWCC, Gaylon Morgan of Texas A&M AgriLife Extension Service said that virtually every region is reporting a "significant decrease in cotton acres throughout the Cotton Belt—more significant in the Delta region, probably to a lesser degree in the Southwest.
"At the prices we’re looking at," he continued, "we’re going to have to continue to strive to find production efficiency in cotton, just to keep it competitive with the grain crops and the current grain crop prices."
What will happen to prices?
Most analysts were forecasting that cotton prices would rise this year based on constrained U.S. production. Sources contacted for AgWeb's 2013 cotton outlook predicted that prices would probably hold between 75¢ and 85¢.
But prices began falling on Friday, after the Wall Street Journal reported that China would draw down its surplus. China, the world’s No. 1 cotton consumer, began buying for its state reserve during the 2011/2012 marketing year. The country has at least 37.6 million bales of cotton in inventory.
China’s purchases are inflating prices worldwide. Estimates are that 25% of 2012/2013 world supplies are being held away from commercial channels. If the cotton were suddenly free to be traded, U.S. cotton prices could drop 30¢ per pound lower, says John Robinson, an agricultural economist with Texas A&M University.