U.S. cotton planting should increase by about 5% in 2014, said Jarral Neeper of CalCot in Bakersfield, Calif., one of the few market forecasters speaking at the 2014 Beltwide Cotton Conferences in New Orleans.
The primary driver of increased cotton planting will be low corn prices, which will lead farmers to switch to cotton, Neeper said. But strong cotton pricing due to low ending stocks—last year’s cotton crop at 13.1 million bales was the third-smallest since 1988—will also contribute to the likely gain.
Neeper expects U.S. production to rise to 16.4 million bales in 2014, as ending stocks increase from 3 million to 6.5 million bales. He forecasts the biggest planting increases in the mid-South and Southeast, with slight increases in Texas, Oklahoma and Kansas. Planted acres, he estimates, will decrease by at least 12% in the far West due to a continuing drought.
Cotton prices have rebounded in recent weeks because of the small U.S. crop and ending stocks. "The speculative money has jumped back into cotton," Neeper said. "They see something that they like."
Though cotton for delivery next winter will likely trade in the range of 78¢ to 79¢ per pound for a while, it could eventually move up as old-crop prices rise.
"Old-crop will try to make a run once, if not twice, for that 88¢ area," Neeper said. "You might even see a late-season run-up up to 94¢, just because we’re going to have short stocks here in the United States. There’s a lot of uncertainty left in this crop year, and hopefully that’s going to give some incentive to the new crop to move higher as we go through the spring time."
Otherwise, Neeper predicts that next year’s crop will mostly trade in the 76¢ to 88¢ range. Mill interest, he said, declines when prices reach the mid-80s.
Neeper expects Chinese cotton planting to decline by at least 10% this year to 26 million bales, giving the Chinese government a chance to work off its huge stocks. China, he said, won’t need as many imports as it has in the past.
"What will China’s policy be going forward?" Neeper said. "We know they won’t buy cotton going forward. But the one thing they have said they don’t want a collapse in world prices."
He thinks that world production will decline this year by about 3.5%. He estimates world production at 111 million bales, versus 117 million bales last year. Consumption will increase to about 114 million bales.