New crop cotton (Dec14) prices have moved past the 80-cent mark and now approach 83 cents. Dec14 peaked at 82.77 on Thursday last week and closed the week at 82.71. Dec14 closed April 29 at 82.74.
The forecast for Dec14 futures has been 75 to 85 cents. We have certainly moved to the upper half of that range quicker than expected. This represents a good pricing opportunity on a portion of expected 2014 production. Prices should, for now at least, have a rather solid floor of support at the 80 to 81-cent area.
Old crop prices have soared, in part, due to good export sales. Old crop May and July are both over 92 cents. This run-up in old crop has fueled optimism and pulled new crop prices up with it. It is also worth noting that new crop deferred months (March, May and July) are at a discount to December. This likely reflects the short old crop carry-in expected as we begin the 2014 crop year on August 1.
Weather is also becoming a factor. The long-term drought in Texas continues. Elsewhere, in some areas of the Cotton Belt, wet and/or cool conditions have hampered planting and crop progress. Above-normal rainfall (in some areas much above normal) has been common in cotton areas from Virginia and the Carolinas through Georgia, Alabama, and Mississippi.
Crop progress and acreage
Planting continues behind normal pace. For the week ending April 27, Georgia was only 4 percent planted compared to 11 percent normal for that date. Planting is also behind by double-digits in Mississippi, Louisiana, and Arkansas. Texas was 15 percent planted compared to 18 percent normal.
USDA’s Prospective Plantings report at the end of March estimated farmers intend to plant 11.1 million acres of cotton—up 6.7 percent. This number could be impacted by weather and crop prices. It could also be impacted by the farm bill and by crop insurance.
In areas where corn is typically the earlier crop to be planted, wet field conditions could have resulted in some acreage intended for corn being shifted to cotton or soybeans. Delay in cotton planting due to being too wet to plant, could result in shifting cotton acreage to another crop or delay development, harvest, and yield potential.
In peanut-producing states, there will be an incentive/temptation to plant peanuts due to the high Reference Price under the new farm bill PLC program. Cotton acreage in Georgia, for example, is a big unknown due to the uncertainty of peanut acreage. Crop insurance Projected Prices may also impact acreage decisions.