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.
Acreage by region
Turning to acreage planted by region, Shurley says the key is the Mid-South. The Southeast had a 31 percent increase while the Mid-South had an acreage boost of about 29 percent.
“In 2006, we planted a little over 15 million acres. Every region is about where we were back in 2006 except for the Mid-South. Due to competition from corn and soybeans, even with strong cotton prices, those acres haven’t shifted back. What we do as far as acres next year will hinge on what growers in the Mid-South decide to do.”
Global demand has flattened due to the economic downturn, says Shurley. And while most U.S. cotton is shipped overseas, a lot of cotton shipped out of this country comes back as finished products, so even the U.S. economic slowdown has an impact on exports.
“Another thing that has worked against us is world demand. We’re making more crop than we thought we would in the U.S., and each month since May and June, USDA’s estimated global demand has been adjusted downward.”
A relatively short U.S. crop this year is being offset by good crops in China, India and Pakistan, although the final outcome of these crops isn’t certain yet, says Shurley.
“As far as the stocks-to-use ratio, we’re up around 45 percent this year worldwide, so supply has eased up in relation to demand. We’re still pretty tight in the U.S. in stocks, about 29 percent this year compared to 14 percent last year. The U.S. is the No. 1 exporter of cotton, so as long as our stocks stay tight, price will stay fairly level.”
Looking to 2012, issues that might come into play including U.S. acres, he says. “I don’t see it growing. This year’s drought has hurt a lot of people, and competition for corn and beans has intensified. The best-case scenario is that we hold acreage at about the same as this year, maybe a little lower.”
Foreign acres, says Shurley, likely will be down.
“If demand begins to improve, I don’t see any reason why we can’t stay in the ballpark where we are now as far as price goes. If demand doesn’t pick up and global economic conditions worsen, I don’t see how we can hold these prices. Some are saying already that we’ll be in the 50 to 60-cent range next year, but I don’t see that.
“At the price peanuts have been bringing, they’ll bring competition, and as long as we’re seeing the competition from other crops, I don’t think cotton will fall too far.”