The U.S. cotton industry could be headed for a big fall in 2008, unless weather patterns begin to turn more favorable in the weeks ahead.

National Cotton Council economists are projecting U.S. cotton growers could produce 15.4 million bales in 2008. That would be the smallest crop since the 1998 harvest of 13.9 million bales.

But Council Vice-President Gary Adams says it's not “unrealistic” that 2008 U.S. production could drop to as low as 12 million bales, given the range of weather events that could influence the 2008 season.

The NCC production estimate of 14.8 million bales of upland cotton and 600,000 bales of extra-long-staple or Pima cotton is based on a mid-December survey of producers that indicated growers could plant 9.32 million acres of upland and 231,000 acres of ELS in 2008.

“Obviously, weather can have a dramatic impact on the final crop size, particularly in light of the fact Texas is expected to account for 50 percent of the U.S. cotton area” says Adams, the NCC's vice-president for economics and policy analysis.

“Under ideal conditions, 18 million bales would not be out of the question, while weather problems could also push the crop to between 12 million and 13 million bales.” (Either of the latter would be the smallest crop since the 7.7 million bales in the payment-in-kind year of 1983.)

Nearly ideal conditions on the High Plains helped U.S. producers harvest a record national average yield of 871 pounds in 2007. The record, which surpassed the previous high of 855 pounds in 2004, occurred despite adverse growing conditions in the Southeast and Mid-South, said Adams.

Growing conditions varied dramatically across the Cotton Belt with portions of the Southeast and Mid-South experiencing one of the driest years on record. Meanwhile, moisture on the High Plains and other regions was adequate to above normal, he noted.

“States in the Southeast experienced above normal abandonment rates due to the prolonged drought conditions,” he said. “In the Southwest, favorable weather assured that very few acres went un-harvested. Across all cotton acres, abandonment fell to just 3.1 percent, equaling the low set in 2005.” (By comparison, the average five-year abandonment is 9.4 percent.)

History could repeat itself in 2008, but that may not be likely given the way moisture conditions are shaping up in west Texas.

“They still have another six weeks or so before they plant, but it is very doubtful Texas can begin the growing season with even as much as 50 percent of the moisture levels of last season,” O.A. Cleveland, professor emeritus at Mississippi State University, said during a recent interview.

Cleveland was commenting on a forecast by Carl Anderson, retired Extension marketing specialist at Texas A&M University, at the Beltwide Cotton Conferences. The veteran market analysts said New York futures could reach $1 a pound in 2009 — if U.S. production fell below trend line yield levels.

Should that happen, U.S. production could be on the low side of Cleveland's range of estimates of 14 million to 15 million bales and U.S. carryover stocks could slip as low as 3.5 million bales from the current level of more than 9 million bales.

As a result, Cleveland says, the December New York Cotton Exchange futures contract “will touch 80 cents and could go as much as 10 cents a pound higher, depending on the size of the 2008 crop.”

U.S. cotton production fell to 19.03 million bales in 2007, which was down more than 2.5 million bales from 2006's 21.59 million. Attracted by sharply higher corn prices during the winter of 2006-07, U.S. growers reduced their cotton acreage from 15.27 million to 10.83 million acres or a decline of about 30 percent.

If farmers plant only 9.5 million acres this spring, that would mean the second straight year of double-digit reductions. A combination of reduced planting and low moisture conditions on the High Plains could have a decidedly negative impact on the U.S. cotton industry.

Agriculture Secretary Ed Schafer made headlines at USDA's annual Outlook Forum Feb. 21 when he announced U.S. agricultural exports could reach a record $101 billion for fiscal year 2008 (Oct. 1, 2007-Sept. 30, 2008), up $19 billion from the 2007 total.

70 percent

Based on current market conditions, Schafer said, “bulk grain, oilseed and cotton exports should rise $13.2 billion and account for 70 percent of the overall increase in export value for 2008.”

In a background paper issued with Schafer's speech, USDA's Foreign Agriculture Service said it had lowered its forecast for FY 2008 cotton exports $200 million from the November estimate to $5.6 billion due to anticipated lower export volume and decreased import demand. But FAS said the $5.6 billion figure would still be a record.

Adams told delegates to the National Cotton Council's annual meeting in Memphis, Tenn., Feb. 9, the NCC was estimating total exports of 15.2 million bales for the 2007-08 marketing year (Aug. 1-July 31), which would be several hundred thousand bales below USDA's estimate at that time.

“And, we still have some work to do to get to that number,” said Adams. “We need to average just over 300,000 bales per week for the remainder of the marketing year. Purchases by China will dictate our ability to hit that number.”

For the 2008 marketing year, Council economists are projecting exports could decline to 14.7 million bales due to increased competition from India, Brazil and West Africa and lower U.S. supplies available for exports.

If U.S. growers harvest a crop of 15.38 million bales in 2008, those bales combined with expected beginning stocks of 8.69 million bales on Aug. 1 would give the United States a total supply for the 2008-09 marketing year of 24.09 million bales, a decrease of more than 4 million bales from the 2007 level and the lowest total since 2003.

High Plains

But if adverse weather conditions on the High Plains or elsewhere reduced the 2008 crop to 12 million bales, the total supply for the 2008-09 marketing year would fall to 20.69 million bales.

Exports of 14 million to 15 million bales and domestic mill use of 4 million to 4.6 million bales (The NCC is forecasting 4.57 million) imply a total offtake of 18 million to 19.6 million bales in 2008-09. That, most observers say, would be unrealistic because it could leave less than a million bales of ending stocks.

Under that scenario, textile mills in China, India, Pakistan and other countries in the Far East would be forced to turn to other suppliers, making further inroads into the U.S. position as the world's residual supplier of cotton.

Adams said world cotton production is expected to increase to 122.4 million bales in 2008 as larger crops in China, India, Brazil, Pakistan, Australia and West Africa offset potentially lower U.S. production. India is now the second largest producer and processor of cotton, devoting more area to cotton than any other country.

“While their textile industry has been expanding, the most notable development in the Indian market is cotton production that has more than doubled in the last five years, and is estimated at almost 25 million bales in 2007,” Adams said. The NCC sees India producing more than 26 million bales in 2008 and expects them to remain a significant exporter — perhaps as much as 7 million bales.

On the demand side, Adams said even with slower growth in China mill cotton use, that country's textile sector still could consume a healthy 57 million bales — 16.6 million bales imported — in the 2008 marketing year. He said China also will continue to be the largest export customer of U.S. cotton.

“Demand is expected to grow but at a slower pace due to overall economic performance and strength in cotton prices relative to competing fibers,” he said.

“However, total use is expected to exceed production, which will further tighten stocks.”

The bigger question may be how much of that increasing demand U.S. growers can share in if U.S. acreage and production continues to fall.