Cotton producers face several key variables going into the 2013 season
What’s the key question for cotton producers going into the 2013 season? John Robinson, a professor and extension economist at Texas A&M, gets asked that question every year. In some years, the big unknown might be what’s going to happen with input costs, or when should I sell my crop.
"This year it’s deciding which crops to plant," said Robinson, referring to the temptingly high prices that cotton farmers can get for corn and soybean crops. Many cotton farmers, especially those in the Mid-South, will plant corn and soybean on land this year that would otherwise be used for cotton.
Early surveys indicate planted acreage could be down about 20%. The USDA's final estimate was that 12.36 million acres of cotton were planted in 2012. A recent survey by Cotton Grower magazine pegged 2013 acres at 9.73 million, a 21% decrease.
"I would expect planted acreage in the Delta to be at least as low as it was in 2008/9," said Robinson.
Robinson was one of several speakers at this year’s Beltwide Cotton Conferences to provide key economic and agronomic advice to cotton farmers going into the 2013 planting season. Robinson explained the move to corn and soybeans with a financial model. Modifying budget targets published by the University of Arkansas, he showed that in some regions you’d need 86-cent cotton to break even with corn, 90-cent cotton to compete with soybeans. July Cotton futures sold for about 77 cents during the conference.
Speaking on the same panel, O.A. Cleveland of Mississippi State University said that cotton prices are probably going up. Cleveland believes cotton futures hit a "long-term low" of 64 cents last year and went into the year backed by wind that could support movement into the 80s. "Now we’re at 74, 76 and we’re making strong sales. I think this market is going to be strong."
Cleveland said that he would have already priced a quarter of his cotton crop in December at 78 cents. He would wait with the rest until the market hits 82.
Joe Nicosia of Lewis Dreyfus Commodities, speaking on an earlier panel, advised farmers to price their cotton during price spikes, which happen when traders focus on limited free stocks, instead of considering reserves, too. "When [traders] get nervous and the market moves up, that’s when you should be pricing your cotton, both old crop and new crop. You’ll have some scares," he said.
In the meantime, what about input costs in 2013? "Nobody’s that worried about surging input costs," said Robinson, adding that hasn’t seen many news accounts of fast-rising inputs. Though many input costs are likely to rise somewhat, Robinson doesn’t expect to see a surge in fertilizer, fuel, or seed prices.
Seed costs, which have gone up strongly over 10 years, leveled off in recent years after some companies froze tech fees, Robinson said. Fertilizer costs may rise a little in 2013 but then fall next year and remain flat. Fuel and labor costs are projected to be stable too. Repairs and machinery, on the other hand, are projected to steadily rise.
Again, the big variable for 2013 will be planted acres. Decisions made this year may have future repercussions, Nicosia said.
"We need to protect cotton acreage," he said. "We don’t want a complete collapse because we know it’s hard to get it back. We saw what happened in 2008/09 when cotton prices collapsed, how hard it was to re-gear production. We had to take prices to substantially higher levels before we got that big push back up in acreage again around the world."
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