The good news is 2006 was a good year for cotton production in the U.S., and despite prolonged drought, it was a good year for the Southeast. The bad news is there will likely be the highest carryover of cotton since 2001.
Nationwide, cotton farmers harvested 12.9 million acres, averaging 819 pounds per acre in 2006. The total production of 21.7 million bales was more than a million higher than forecast during the growing season.
With interest in corn soaring, as much as 200,000 acres of land planted to cotton in 2006, may be planted to corn in 2007. Reduced cotton acreage may or may not be a blessing for 2008 and beyond, depending on international production levels.
The domestic use picture is bleak at best for cotton in 2007. U.S. mills will likely use less than 5 million bales from the 2006 crop, down from 5.9 million bales from the preceding crop. In the Southeast, there is a continuing trend for mills to close, threatening even further drops in domestic use.
As of February 2007 sales to foreign cotton buyers hovered around 6 million bales. In February 2006, sales topped 9 million bales to foreign buyers. To meet USDA estimates of 15.7 million bales to be sold in the export market by August 2007 would require sales of 415,000 bales per week.
“It's not unusual to see sales in the second half of the year in the 300,000-350,000 bales per week range, but we have never topped 400,000 a week,” says Gary Adams, vice-president for economics and policy analysis at the National Cotton Council. Speaking at the recent Southern Cotton Growers and Southeastern Cotton Ginners annual meeting, Adams says the result of lagging sales may be a surplus of 7 million bales, the highest since 2001.
The big reason for reduced export sales, Adams says is China. The top three international buyers of U.S. grown cotton are China, Mexico and Turkey. Mexico has increased purchases slightly to approximately 1.5 million bales and Turkey has increased slightly to near 1 million bales as of February 2007. China is nearly 4 million bales behind purchases made by this time last year.
Adams says part of the lag in Chinese purchases is due to a larger than usual cotton crop in China, over 31 million bales in 2006. Though they are growing more cotton, the Chinese textile industry is also growing. The increased cotton production can cover the new growth of the textile industry, but still leaves a huge market for cotton from other countries.
India, which will likely produce more cotton in 2007 than the U.S., is rapidly becoming a player in the international market. Indian cotton is grown primarily for domestic use, but some of their cotton reached foreign markets at prices better than U.S. cotton in 2006 and on into 2007.
Adams says input costs will continue to be high for the 2007 crop. Some early 2007 lessening of oil prices has proven to be temporary, so growers will continue to deal with high fuel prices.
The continued spread of herbicide resistance, especially glyphosate resistant pigweed, will force many growers in the Southeast to re-think both tillage and weed management strategies, both of which will likely drive production costs up for the 2007 crop.
The high cost of cotton production, and prices around 60 cents per pound, will likely cause many cotton growers to plant more acres of other crops. In the long-run this may affect international prices, but experts contend the U.S. production no longer greatly affects world price.
Across the Cotton Belt, winter wheat plantings are projected to increase as much as 2 million acres, indicating growers will likely take advantage of high soybean and wheat prices and follow wheat with beans. There is expected to be a dramatic increase in corn acreage in the Southeast, with much of that increase coming from cotton.
Worldwide cotton usage continues to exceed production. Total consumption in 2006 will likely exceed 121 million bales. As long as the demand worldwide for cotton continues to climb, the long-term outlook for cotton looks good, according to Adams.
Though King Cotton's crown may be slightly tarnished in 2007, the outlook is favorable for a comeback later in the decade.