In the National Cotton Council's Early Season Planting Intentions Survey, U.S. producers said they would seed 8.11 million acres of cotton in 2009. Analysts speaking at the Ag Market Network's February teleconference and at Cotton Incorporated's Options and Futures Seminar in Memphis say several factors could impact those intentions between now and planting time.
Gary Adams, vice-president of economic and policy analysis at the National Cotton Council, told teleconference listeners that during the time the NCC surveys were being filled out and returned, November soybeans were averaging around $10 a bushel, “and they have weakened since then. You can look at the Southeast and the Mid-South as areas where there could be adjustments. If there is upside, I would think it wouldn't be any more than 400,000 to 500,000 acres.
“The other thing is whether peanuts have become less attractive in the Southeast because of (recalls involving peanut butter). Those are caveats that we need to keep in mind.”
Over half of intended U.S. cotton acreage, 4.7 million acres, is expected to be planted in Texas, which is experiencing an exceptional drought this winter, notes Carl Anderson, Texas A&M professor and Extension specialist emeritus. “Moisture at planting could be marginal, but producers will likely proceed with planting cotton because they don't have other alternatives.”
Anderson says Texas growers rarely produce above-average yields when they start the season with low subsoil moisture. “If the dry weather continues, there is a chance that 1.5 million to 2 million acres of cotton in Texas might not be harvested.”
Planting in the Coastal Bend area of Texas is set to begin shortly, noted Anderson. “There are a lot of things going on that can affect acreage one way or another. The dryness early in the season could bring on more cotton acreage because of insurance programs and low grain sorghum prices. But that could change with a 2-inch to 4-inch rain.”
Anderson says a million acres intended for cotton is in central Texas, “which is still too dry to get started.”
Worldwide, some observers say Chinese cotton producers could reduce acreage considerably, “but we don't believe the cut will be as much as 20 percent,” Adams said. “We're more inclined to think it will be around 12 percent, from 36.5 million bales down to about 32.5 million bales. Their internal seedcotton prices have certainly weakened relative to a week ago. So we think they're trying to make a move toward food crops.”
The bigger cotton fundamental to worry about is lack of demand, Anderson says. “Mills are not buying cotton because people are not buying a lot of cotton goods. Because of the (worsening) economy, we have seen a 10-million bale decline in world cotton demand.”
Lower world production and consumption “does put us on track to work off some of our surplus cotton,” Anderson said. “As of today, we have a tremendous surplus on hand and the market is trading at 51 to 53 cents, December 2009. It's a down market. I don't think speculators have been very interested in this market. Exports have been very slow.
“In the short-term, the supply could pull us down below 50 cents for December 2009. In the longer run, a lot will depend on weather.”
Mike Stevens with Swiss Financial Services says the world economic crisis “is like a millstone hanging around the bull's neck. Supply side bullishness is good only if it tips the supply/demand ratio.”
O.A. Cleveland, professor emeritus, Mississippi State University, noted that while the NCC acreage report has historically been very accurate, “the price ratios (between crops) have changed since then and could change more. We could still have 300,000 to 400,000 more acres of cotton. Nonetheless, the world and U.S. carryovers have been huge. It comes down to demand. I thought December 2009 would be a 60-cent market. I still think it's going to push it before everything is said and done, but I wouldn't hold out hope for anything higher than that.”
According to the NCC survey, cotton acreage is expected to decrease significantly (25 percent) in the Mid-South.