Since mid-December, new crop (Dec. 2012) cotton futures have improved about 10 cents.

The trek north looks to have lost a little steam, “stabilizing” in the 93 to 94-cent area. As I write this on Jan. 20, December is around 93 and change.

While cotton has shown a rebound in recent weeks, corn and soybeans have not. Corn futures (Dec. 2012) are now below $6 and soybeans (Nov. 2012) hover around $12.

It is generally expected that cotton acreage will decline in 2012. I too believe it will — but the magnitude of the decline may be overstated. The longer cotton stays above the 90-cent level, the less the acreage decline is likely to be.

Many farmers tell me that cash/contract cotton below 90 cents will likely result in acres shifting to other crops. This means futures in the low to mid 90s.

The decline in price we’ve witnessed from $1.50 or more to now less than $1, can be attributed largely to very weak demand (down over 4 million bales from last season) and a 10 million bale increase in foreign production.

It seems clear to me that 2012 prices will depend largely on improved demand or a reduction in production to bring supply and demand in closer balance. Stronger prices, while good for the grower, may lessen the acreage decline and stall any potential improvement in demand.

That is why prices at the current level are an opportunity for pricing — because the longer-term outlook is potentially more downward than upward — unless demand begins to show signs of improvement.

Estimates by myself and colleagues at the University of Georgia show preliminary comparison of net returns on cotton compared to other crops. These estimates are based on Georgia production and the expected average prices shown, average yield, and variable costs (direct operating expenses) only.

Your state and farm will be different than our budgets, but based on these numbers, we expect peanut acreage to obviously increase. At $700 per ton, no other crop is close to being competitive.