The corn market crash could trigger a bump upward in 2010 cotton acreage.
"We are closely watching the relationship between harvesttime prices of corn, soybeans and cotton,” says Mark Lange, National Cotton Council (NCC) president and CEO.
"The past several years, those ratios have been very telling, and we could watch the systematic drop in cotton acreage as a result,” Lange says.
"If the current ratios continue, we anticipate a modest increase in cotton acreage in the mid-South and Southeast, reversing some of the downward trend we've seen the past few years. That's good news for our cotton growers who also have investments in gins and cotton warehouses, since there is not much you can do with those except run cotton through them,” Lange says.
Decreasing stocks could also put some punch into cotton prices. Gary Adams, NCC economist, anticipates U.S. stocks drawing down to 4 to 5 million bales during the coming months from 10 million at the beginning of the previous marketing year. World stocks stand at 51% of use, still high but nearly 5% less than a year ago.
"That changes the tone of the cotton market to some degree. If we get a reduction in stocks on a global basis, that paints a scenario that's more supportive of higher prices,” Adams says.
The global economic crisis could continue to hold stocks high and cap cotton markets, however. Since the demise of most of the U.S. textile industry in the 1990s, the U.S. became the world's largest cotton exporter. This marketing year, the U.S. will export 10.2 million of its 13.2-million-bale crop, according to USDA projections.
China buys more U.S. cotton than any other nation. Pinpointing China's use and needs is difficult. The economic recession clipped China's cotton textile exports for the first time in 13 years. USDA projects China's cotton imports at 8 million bales this marketing year, well below the 19.3 million bales the country imported in the 2005/06 marketing year. That means China could use less U.S. cotton for the foreseeable future, says Stephen MacDonald, USDA economist.
Any way you look at it, lots of questions still face U.S. cotton as growers decide which crop to plant in 2010. Right now, though, some positive cotton prospects exist, which were absent at decision time for the 2009 crop.
Economic Woes Hurt
U.S. consumers used 12% less cotton in the 2008/09 marketing year than in the previous year, USDA says. They bought about 20 million bale-equivalents, the lowest since 2001/02, when they used a half-million bales less than that.
Reduction in retail demand is just one reason for the decline, USDA economists say. Cotton lost market share to man-made fibers. The housing market collapse resulted in a 14% decrease in furniture and home furnishings sales during the first half of 2009, pinching cotton demand.
Pima Cotton Fails to Gain Upland Acres
In 2009, western Upland cotton barely registers on the scale of total cotton acreage, the fifth straight year of decline. USDA projected the western Upland crop at 688,000 bales, the lowest since 1945 despite the crop's better than average per-acre production.
California planted 65,000 acres of Upland, Arizona 140,000 acres and New Mexico 30,000 acres. USDA expected western region yields to average 1,430 lb. per acre, the third highest on record. The 235,000 acres planted to Upland cotton in the West is the least since 1922.
Pima cotton acreage failed to pick up the slack, coming in with 150,000 acres, the lowest since 1987. California planted 130,000 acres of Pima, with Texas growing 17,000 acres and Arizona and New Mexico the rest. USDA projected Pima yield at 1,205 lb. per acre, which is less than normal. That results in a 15% decline from 2008 and the smallest Pima crop in 15 years.
You can e-mail Charles Johnson at email@example.com.
- Mid-November 2009