Taken at face value, USDA numbers perhaps could indicate the cotton market has finally turned a corner, says Don Shurley, University of Georgia Extension economist.

“Looking at these numbers on the surface, you can’t deny we have at least turned the corner, and we’re looking better on the demand side and that is more important than anything else,” said Shurley, speaking at the Georgia Cotton Conference held in Tifton.

Going back to last year, the market added roughly a dime to the price of cotton, from Oct. 1 to Dec. 1, says Shurley.

“Why did we do that? No. 1, we expected it to happen because there are several things going on,” he says. “We trimmed about 1 million bales of this crop. A crop we thought would be more than 13.5 million bales ended up at 12.5 million. We knew the crop was going to get smaller. We had problems in Texas pretty much throughout the season, and the Mid-South and the Southeast also got wet. By the time we got to November, pretty much all of Georgia was wet.”

The weather losses, says Shurley, added support to the price.

The other thing that happened, he says, is the demand side began to turn around. “I’ve talked to some merchants who still are not pleased with the pace at which things are moving and would like to see exports move a little better, especially at these prices.”

While one million acres were trimmed from the crop, “the demand side is equally if not more important, in my opinion,” says Shurley.

Even though cotton prices have been down recently, growers shouldn’t be too pessimistic, he says. “These things happen. Whenever the market makes a move, especially quickly, it’s not uncommon for there to be an adjustment. Don’t get too down when the price is off five or six cents. That was to be expected to some degree. I don’t think it is cause for concern, but I think it needs to get our attention. It needs to be a factor in what you choose to do over the next several months if not already,” he says. For another preview of the cotton market outlook please visit http://southeastfarmpress.com/cotton/cotton-markets-0219/index.html.

Look at each region of the Cotton Belt over the past five to six years, Shurley says. The Mid-South is almost a shell of what it once was in terms of cotton acreage. “Soybeans have really taken the acreage there. Will it come back this year? To some extent, yes. I think acreage will come back across the country. But, if you talk to growers, particularly in the Mid-South, they’re leaning towards cotton prices having to be better than they are now to make a switch,” he says.

Western acreage, particularly California, has been impacted by water issues. “If you look at the Southeast and the Southwest, you see a decline, but you see pretty much a leveling off. In these regions and nationwide, cotton has found increased competition from corn and soybeans. And in Georgia, it has found competition from peanuts as well.

“Because of the agronomics and cost-of-production differences, it takes more to switch us back and forth, away from cotton or away from peanuts, than it does in other parts of the country.”

Even though Georgia producers see competition from other crops, just like growers in other parts of the country, the drop in cotton acreage hasn’t been as dramatic, he adds, and the decrease appears to have leveled off.

The 2009 Georgia crop was estimated at 907 pounds per acre this past December, says Shurley. Then, the January estimate bumped it back to below 900 pounds. “That’s still more than 30 pounds above our previous state record yield set back in 2005. I’m amazed we did it. I don’t see how given the growing season we experienced. Almost 40 percent of the crop wasn’t planted until June. We had a cold snap in October which basically shut us down.

“The last four or five branches on the top of that crop basically never had a chance to make. This was a late-planted crop that was going to need more time to fully mature. Those last four or five fruiting branches never had a chance. Cold weather got us in October, and the rain that missed most of us in October and early November finally hit us and we had trouble getting the crop out of the field.”

Fiber quality for Georgia’s most recent cotton crop has been off somewhat, says Shurley, but it still compares favorably with last year, particularly staple length. Color has dropped and uniformity continues to be a challenge for Georgia cotton, he says.

“I’m not sure if it has something to do with our long growing season and how we mature up and down the plant, but we continue to struggle with uniformity. Staple hasn’t been that bad — about on par with the 2008 crop. As the last of the crop has come in, micronaire has creeped up.”

Turning to cotton supply and demand, Shurley says USDA estimates from January have exports at 10.5 to 11 million bales. “With 1 million bales trimmed from the crop, if we can manage to export at that level, we can trim 1 million bales or so from the size of our stocks compared to last year. This means something to us because as long as we can hold exports at a reasonable pace, with the reduction in the crop, it should look pretty good as we look ahead further in the year.”

Looking at the foreign situation, Shurley says this time last year, we would have been talking about a 10-percent reduction in foreign textile mill business. This year, according to USDA, this number will be up by about 3 or 4 percent. This, he says, offers hope that maybe the market has turned the corner.

For the 2010 U.S. crop, Shurley expects Georgia acres to be up by as much as 15 percent, at about 1 to 1,5 million acres. “The key for us is peanuts. Our peanut acres were down by about 30 percent last year. Our guys like to grow peanuts — it works well in rotation for them. We’re looking for a reason to grow more peanuts. Our cotton acreage will depend on when and if peanut contracts come out, and depending on how they’re accepted by growers. Either way, I think we’re taking acres out of soybeans.”

There’s a lot of talk, he says, about the possibility of 80-cent cotton. “If I’m a grower, I’m not going to stare 70 cents in the face and hope for 80 cents. Our stocks are down and demand has turned around some, so any production problems as we get into spring and summer could get us there, but I don’t see it now at all.”

Optimistically, cotton prices will stay at 70 cents or better, says Shurley. Pessimistically, weak demand will knock the price back into the 60s. “Take some protection while you can on at least a part of your crop.”

e-mail: phollis@farmpress.com