What is in this article?:
- Managing risks in cotton market is a whole new ballgame
- Larger than predicted
- Acreage by region
“We’re at a point now to where you really have to make careful decisions about selling your crop because you’re well above the loan rate and you won’t have that to fall back on — it’s a riskier environment,” said Don Shurley, University of Georgia Extension economist.
Larger than predicted
If USDA’s estimate holds true for this year, the crop will end up being 1 or 1.5 million bales more than originally predicted, in the 17-million-bale range, he says.
Other countries that are important to the U.S. — either as competitors or buyers in the export market — are having good crop years, says Shurley, and as a result, demand is flat.
“It’s bad that we’ve had a drought, but a short U.S. crop is what’s holding the market because demand isn’t doing anything,” he says.
Crop conditions have pretty much been poor to fair all year, he says, and have worsened towards the end of the season.
“Georgia had recovered up until July, and it turned dry in August. Georgia’s cotton crop has gone downhill fast. The estimated yield isn’t bad, considering conditions, but we’re walking away from one-third of the crop.”
The U.S. has seen a rebound in cotton acreage in the last couple of years after strong competition from corn and soybeans, says Shurley, adding that he expects competition from corn and soybeans to intensify more next year.
The first acreage number that came out this year was from the National Cotton Council, with 12.5 million acres being forecast.
But cotton prices improved into spring, and that number grew. As a result, the March USDA number agreed with the Council’s number. The June acreage report upped it to almost 14 million acres, and the final planting number, based on USDA’s September report, is 14.7 million acres.
“Imagine the crop we would have had if we weren’t walking away from one-third of it,” he says.
“With demand as weak as it has gotten, and with key foreign countries on pace to have a pretty decent year — given what transpired in terms of acreage — it’s apparent the market right now is being driven by weak demand.”