The drought situation is not over and we will likely still be in a weather market the rest of the season and especially so if acreage comes in at less than 13 million.

World production for 2012 is expected to be down by 6.35 million bales. Production in the U.S. is expected to be up, but China down, India down, Pakistan down, Australia and Brazil down.

World cotton consumption for 2012/13 is expected to increase by almost 3.5 million bales. This is good news. But although production will be down, it will still outpace demand by almost 7 million bales. As a result, 2012 crop Ending Stocks are expected to balloon to almost 74 million bales — almost 7 million bales more than 2011. It is this potential continued growth in stocks hanging over the market that has caused prices to tumble.

As mentioned in previous newsletters, this problem has been building for months now. USDA’s May report for 2012 just further exacerbates the situation.

So, recent rains withstanding, although we could still be in a bit of a weather market, this large stocks situation in plain terms means the market doesn’t need to care as much about that. This means that although a weather-driven rally is still a possibility, it will likely be a tougher hill to climb.

At this point, prices have fallen so far so fast that you hate to panic and jump in to add to sales now. It might be risky, but it seems better to wait for a recovery first. That being said, given the stocks situation, a rally back to the 83 to 85-cent level would be quite an achievement.

The end of June USDA acreage report will have some influence. The March number for Georgia was 1.4 million acres. I thought at the time that was a little too much. With prices weakening, cotton acreage has likely slipped nationally, but perhaps not as much here.

I think Georgia acreage will likely be around 1.3 million. We are long past prime corn planting time and soybeans, although attractive price-wise, are too risky in non-irrigated situations. Cotton wins in non-irrigated situations.

Soybeans may gain some acres, but at this point in time, I think the swing acreage is between cotton and peanuts. Weaker cotton prices tend to play in favor of peanuts, but cotton remains more attractive from a risk management/crop insurance perspective (94 cents projected price).