USDA released its crop production and supply/demand estimates for January on Jan. 10. The 2013 U.S. crop was increased 120,000 bales to 13.19 million bales. Exports were increased by 100,000 bales to 10.5 million.
World production for the 2013 crop year was increased and demand (Use) was decreased slightly. As a result, projected Ending Stocks increased to 97.61 million bales—up 800,000 bales from the December estimate. Most of these changes are accounted for by China. The Chinese crop was increased by 1 million bales and resulted to increased Chinese stocks by 1 million bales.
Ginnings vs. the January Numbers
The U.S. crop is now estimated at 13.19 million “statistical bales” or 480-pound bale equivalents. Through Jan. 9, there have been 11.72 million “running bales” ginned. Assuming these actual bales weigh an average of close to 500 pounds, this equates to only 12.21 million “statistical” bales. Are there another approximately 1 million bales still left to be ginned?
For the week ended Jan. 9, there were approximately 413,000 bales ginned—153,000 were in Texas and 140,000 in Georgia. Texas and Georgia accounted for over 70 percent of the week’s total. If we’re going to find another 1 million bales, it will have to come mostly from Texas and Georgia. We’ll see. I think it’s possible that the February and/or March USDA estimates could adjust the U.S. crop a bit lower.
Looking Ahead to the 2014 Crop
U.S. growers planted 10.41 million acres in 2013. Two months ago, prices (Dec14 futures) were in the 76 to 77 cent area. There was talk that 2014 acres would likely be down. That thinking now seems to have changed. Prices have more recently been in the 78 to 79 cent area.
Over the past few years, cotton below 80 cents would not get much attention and it still may not in some situations. But prices for corn and soybeans are also down considerably from the past. Some analysts believe that even at less than 80 cents, relative prices and net returns will favor cotton and acreage will increase this year. In peanut-producing states, if contract offers are high enough, peanuts may take acreage away from corn and cotton.
I think it’s going to be important to protect against downside price risk for 2014. If U.S. acreage and production increases; given the large level of World/Chinese stocks; and if China should use its own cotton and curtail its imports significantly—all that in tandem could push prices lower.