Cotton acreage in North Carolina has been on a wild ride the past few years, jumping to over a million acres in the early 2000s to less than 500,000 acres last year. Whether cotton makes a dramatic comeback or not is in large part dependent on grain prices, according to Keith Lucas, marketing manager for Carolina Cotton Growers Cooperative, with headquarters in Raleigh, N.C.
“We lost a lot of cotton acres last year to corn. So many growers got burned planting corn that we expected to get some of those acres back. However, continued high prices for wheat and soybeans probably mean we won't see any increase in cotton acreage.
“We represent cotton growers from Virginia to Alabama, and we don't see much, if any, increase in acres for 2008,” Lucas says.
Growers in the southern part of North Carolina and the adjoining counties in South Carolina had a horrible time last year with the drought and heat. When the final numbers come in, that part of the region may not top 250 pounds per acre, Lucas says.
He notes the five-year average in North Carolina is slightly less than 700 pounds per acre.
In addition to low yields in some parts of the region, Lucas says quality was likewise a problem. In particular high micronaire, or fineness of the cotton fiber, was a problem in 2007. Though it will sell on the world market, high micronaire cotton will take some discount hits.
Lucas points out that corn at $4 per bushel was not the savior many growers in the Carolinas and Virginia thought it would be. In North Carolina, he says, growers averaged less than 100 bushels per acre, compared to 159 nationwide. Even at 100 bushels per acre, high input costs make corn questionable from an economic standpoint, he adds.
The meteoric rise in interest in soybeans may provide similar shortcomings for growers quick to jump into production to take advantage of current high prices. In North Carolina, growers average a little over 21 bushels of beans per acre, or slightly over half the national average. Planting on land that is not well suited for soybeans may create even more yield challenges, he contends.
Wheat on the other hand is a crop that traditionally has yields that are competitive with national production. Wheat in North Carolina averaged almost 40 bushels per acre, compared to 42 bushels per acre for the national average.
“Wheat and soybean double-crop opportunity is the primary reason we don't expect a rise in cotton acreage,” according to Lucas. “In many cases cotton is a better choice on some of the marginal land on which many growers planted corn and soybeans,” he adds.
“The favorable outlook for cotton comes from a continued high demand for fiber. World cotton mill use continues to rise. Up to a few years ago, the world had never used 100 million bales of cotton. In 2008, we are expecting to use nearly 130 million bales.
“Domestic consumption has gone the other way as U.S. cotton mills now use less than five million bales and usage continues to decline. The drop in U.S. consumption and similar drops in other industrially developed countries makes the worldwide growth in cotton use even more dramatic,” Lucas points out.
By far the driver of the cotton market is China. Chinese mills currently use over 45 percent of the world cotton production. India, Pakistan and Turkey have also had large increases in cotton use, but the real driving force remains China, he stresses.
Cotton had a 15 cent rise from old crop to new crop and another10 cent a pound or so is expected for the 2008 crop. These increases make cotton comparable to corn and soybeans in terms of profitability. Wheat remains above the other crops, Lucas says.
The weakness of the U.S. dollar is another reason for cotton growers to be optimistic about the future. Even though cotton had a 15 cents per pound increase from 2006 to 2007, world buyers could buy that cotton for nearly 40 cents a pound cheaper, because of the drop in value of the U.S. dollar.
With corn, soybeans and wheat at their current prices cotton must sell for about 80 cents per pound to be competitive, Lucas contends. All signs point to U.S. growers getting 80 cents a pound for their crop, he adds. “The demand is there, and barring some kind of economic meltdown in China, Pakistan, India or Turkey, we see that demand remaining constant and pushing prices up,” Lucas says.