Cotton Roots Return

September 3, 2014 09:21 PM
 
Cotton Roots Return

Weakening grain prices support crop switch

After several years of corn, soybean and other crops gobbling up acres in the Cotton Belt, cotton planting increased this year to 11.37 million acres—a 9% increase from 2013. Higher acres and favorable weather have set the stage for what might be a large crop.

This year, USDA estimates total cotton production at 17.5 million 480-lb. bales. In 2013, production reached 12.9 million bales. Yields are set to average 820 lb. per harvested acre, essentially the same as last year.

Farmers increased cotton acres for two main reasons, says John Robinson, cotton specialist with Texas A&M University. 

"At the beginning of the year, when farmers were deciding on their crop mixes, we had weakening corn prices," he explains. "In the Delta, where you have crop choices, corn and soybeans would typically pencil out over cotton. This year, it was pretty much an even proposition." 

The other reason is weather. Drought has gripped Texas and Oklahoma for several years. "When it is dry before or at planting time, you can guarantee farmers will plant more cotton because it works out better from an insurance standpoint," Robinson notes. 

Although drought conditions remain in the western Cotton Belt, rains offered a reprieve to this year’s crop. For the past two years, more than 25% of planted cotton acres were not harvested because of drought. This year, abandonment is expected to be only 10%.

Big Supply, Low Prices. The downside of high production is potential oversupply. Ending stocks this year are forecast to be at the highest level since 2008/09. "At the end of the marketing year, the world will have 90% of all the cotton we will be likely to use left over from the previous year," Robinson notes. 

By 2015, USDA estimates world cotton inventories will climb to an all-time high, in part because of record stocks in China, the biggest cotton buyer and user. China has built stocks for the past three years, which likely will result in reduced demand for U.S. exports to China, adds Don Shurley, cotton economist at the University of Georgia. "Increased production and flat or reduced exports is not a good combination," he says.
TP 049 T14222 V2

Of the 17 states that grow a significant amount of upland cotton, the most common U.S. variety, 11 increased acreage this year compared to 2013. Upland cotton acreage this year is estimated at 11.2 million, up 10% from 2013. Yellow states are major cotton producers; red states increased cotton acreage.

 

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