Can Cotton Acres Come Back?

August 27, 2008 12:32 PM
 
 

Past National Cotton Council chairman John Pucheu, at left with brother Bill, thinks that cotton acreage could eventually climb, but it all comes down to the ethanol market and commodity prices.
Photo by the author
 
Sitting in the orderly office in Tranquillity, Calif., he shares with his brother, Bill, John Pucheu takes the long view of the cotton world. Past National Cotton Council chairman (NCC), Pucheu spent years traveling the world meeting U.S. cotton customers and competitors alike. That gives him a vantage point few people share.
 
He sees U.S. cotton eventually regaining some of the acreage lost to corn, soybeans and other crops. It may not happen in the short term, however.
 
"I think cotton acres will eventually come back, though they'll probably drop again in 2009. All over the world we're seeing a shift in crops. Here in California, where cotton acreage has dropped dramatically, just about everything has looked better than cotton the last year or two. If we get cotton prices where they need to be, and that could happen, the acreage decline should slow,” he says.
 
He sees a few promising signs. World cotton stocks appear to be decreasing. China dropped its acreage, as well, mostly due to food price inflation. Texas, blessed with exceptional cotton crops the past couple of years, had weather problems this season.
 
"There is hope for cotton. But I'm stressing ‘hope' rather than ‘faith' it'll come back,” Pucheu says.
 
"For cotton to come back, though, it's going to have to be price-competitive with grains, which may depend on what happens to ethanol,” he adds. "We're seeing a lot of discussion about ethanol and the negative effects of the government's program for ethanol. I think ethanol is going to have a harder time keeping its subsidies.”
 
At Servico Gin in Courtland, Ala., Bobby Greene also debates if cotton can make a comeback. President and CEO of the high-tech gin and NCC chairman in 2003, he saw cotton acreage in his trade area drop 54% from 2006 to 2008. Weather problems sliced cotton yields, as well.
 
"We're going to have to see cotton price come up for it to compete. Cotton prices in the high 70s are not competitive with historically high numbers on the other crops. I don't see much change in 2009,” Greene says.
 
On the upside. Some positives do exist. Much higher cottonseed prices, pushed by the oilseeds market, could boost cotton as much as $50 a bale. Better crop rotations, thanks to the push for corn acres, should improve cotton yields, too.
 
Greene looks for infrastructure problems if cotton acreage stays down. Gin numbers continue a decades-long decline, with fewer than 900 in business.
 
"It wouldn't surprise me if we lose 200 more gins the next couple of years. There's plenty of gin capacity out there. The issue is, where is it?” Greene says.
 
At his Memphis office, NCC president and CEO Mark Lange also worries about gins and industry suppliers. "I'm concerned not so much about the loss of acres during this three- or four-year event but more about the loss of infrastructure. That won't come back,” he says. "To compete with $13 soybeans, cotton needs to push $1 per pound. That's not in the cards with the world carrying the cotton stocks it has.”
 
Lange also worries about weather further reducing the U.S. crop. The mid-South, the Cotton Belt's most weather-stable region, recorded the biggest cotton acreage drop. Far riskier Texas, however, kept most of its acreage.
 
"A bad year in Texas means a bad production year. If Texas gets dry, like it does every few years, the U.S. industry is going to have a hard time serving customers,” Lange says.     
 

 
You can e-mail Charles Johnson at cjohnson@farmjournal.com.
 

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