What is in this article?:
- Industry expectations of cottonâ€™s acreage decline may be overstated
- Strong acreage competition
• The longer cotton prices stay above the 90-cent level, the less the acreage decline is likely to be.
• Stronger prices, while good for the grower, may lessen the acreage decline and stall any potential improvement in demand.
• Survey estimates from the National Cotton Council will be out Feb. 11. USDA estimates will be released on March 31.
Strong acreage competition
But we expect the peanut acreage increase to be “controlled” by contract price, contract pounds or acreage, and contract availability. After contract peanuts, acreage decisions come down to un-contracted peanuts vs. cotton vs. corn. Soybeans, at least under our conditions and assumptions, do not appear as attractive as other crops.
At 90- cents for non-irrigated cotton, a peanut price of roughly $600/ton would be needed to provide the same net return. Likewise, at $700 peanuts, cotton would have to be about $1.08 for irrigated and $1.15 for non-irrigated.
At $6 for corn, cotton would have to be about 90 cents for irrigated production and 95 cents for non-irrigated. At 90 cents for cotton, corn would need to be about $5.50 for non-irrigated and $6 for irrigated.
In Georgia, dryland corn is very risky so regardless of price, cotton likely maintains its advantage in non-irrigated situations.
Cotton acreage will likely decline in 2012. Survey estimates from the National Cotton Council will be out Feb. 11. USDA estimates will be released on March 31.
Generally, I think the industry is expecting a reduction in the neighborhood of 15 percent. However, if prices remain strong (90 cents or better) into spring, the eventual actual acreage planted may be more than we might currently expect.
If U.S. acreage does decline about 15 percent (to say 12.5 million acres), a U.S. average yield of 800 pounds per acre and a more normal abandonment would produce a crop of 18 million bales — 2.33 million bales more than in 2011.
So, reducing the supply side (bringing supply and demand more in balance), will depend even more so on foreign acreage and yield.
Given strong prices for competing crops and given that foreign production was up significantly this year, total world production will most likely be down in 2012.
That being the case, if demand can mount a comeback, the price outlook looks a lot less bearish.
(For a deeper look into the cotton situation, please visit http://southeastfarmpress.com/markets/cotton-prices-start-2012-uptrendand http://southeastfarmpress.com/cotton/government-debt-could-be-limiting-factor-cotton-prices. You also might be interested in the article at http://southeastfarmpress.com/markets/2012-cotton-market-fundamentals-resemble-2011).