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• “World cotton growers produced 24 million bales more than we consumed in 2011," says O.A. Cleveland, Jr., Mississippi State University Extension agricultural economics professor emeritus.
• “The bottom line to that is world carryover increased from about 49 million bales to almost 75 million bales — a record increase and a record world carryover. I could never have imagined I would see that kind of carryover; it’s difficult to even grasp it.” Given the excessive cotton supply, price tanked, Clevleand says.
JAMES ENGLAND, from left, and Pat Riley, and Dan Riley, right, all oft Eupora, Miss., visit with Chip Upchurch, Staplcotn, Greenwood, Miss., at the the joint annual meeting of the Mississippi Boll Weevil Management Corporation and the Mississippi Farm Bureau Federation’s summer cotton policy committee.
Consumption recovery will be slow
Consumption is going to improve steadily, but slowly, Cleveland says.
“While I think U.S. consumption is going to slip some more, in the long term I think the trend is up. Since this meeting was held two years ago, 150 million more people have been added to the world’s population — a lot of mouths to feed, a lot of bodies to clothe. Population growth is more and more a demand factor that’s underpinning prices for many commodities, including cotton.”
Cotton production, Cleveland says, will also be influenced by strong prices for other crops, specifically the cotton/corn price ratio and cotton/soybean price ratio.
“These ratios are strongly favoring grains and oilseeds, and that’s going to continue. Those crops are now the dog and cotton is the tail — those crops, not cotton demand, are going to dictate how much cotton is planted in the short run.
“I would suggest that in 2013, given cotton and grain/oilseed price ratios, we could reduce cotton production not only in the U.S., but worldwide, by as much as 20 percent, and it could drop as much as 25 percent for planted acres.
“By the end of the 2013 season, we will have disappeared the entire excess carryover of cotton that we have in the U.S. We’ll be back down to 45 million to 50 million bales, and that very easily supports a price of $1.25 to $1.35. With great weather and higher production, it could drop to $1.15 to $1.20; but, throw in some problems with the crop, and it could get up to $1.45 to $1.50.
“Looking to toward the end of 2013, I think we can make a case for $1.25.”
Planting of the 2013 crop will begin in Brazil and Australia within the next three months or so, Cleveland says, and acreage could be down 20 percent to 25 percent. “They say, ‘Why grow cotton, when we’re looking at $16 soybeans and $8 corn?’ Consequently, when southern hemisphere planting cranks up and acreage reductions become reality, we should get a bump in cotton prices.
“I’m of the opinion that cotton is undervalued by 15 cents to 25 cents per pound. I know that’s a strong statement, given what some other analysts are saying. But, I think the competition for land by soybeans and corn, is an important key, and that next season we’ll see more cotton ground shifting to those crops.”