What is future of cotton in Georgia?

In 1995, Georgia farmers planted a modern-day record 1.5 million acres of cotton. This record acreage would again be reached in 2000 and then just 10,000 acres shy of the record again in 2001. After 2001, Georgia cotton acreage trended downward, about 18 percent, until rebounding to 1.4 million acres last season.

On June 29, USDA released its estimate of acreage planted for 2007. It is estimated that Georgia farmers planted 1.05 million acres of cotton this year — down 350,000 acres or 25 percent less than last year. Some acres intended for cotton and peanuts were prevented from being planting due to drought. Otherwise, cotton acres from 2006 were switched to corn and soybeans due to attractive prices for those crops.

Total U.S. cotton acres for 2007 are down 28 percent from 2006. Over the past 10 years or so, Georgia cotton acreage has tended to follow the national trend but has been more stable — not declining as much compared to other states when prices are low.

The final numbers may differ from USDA’s estimate. Regardless, Georgia being able to hold above 1 million acres in the face of stiff competition from $4 corn and $8 soybeans has to be regarded as testament to the stability of cotton as the top crop in the state… but, it does make us wonder about the future of the state’s top crop and U.S. cotton in a broader sense.

The recent run in cotton prices (December futures have made a nice run recently and are currently above 63 cents) has somewhat restored faith in both the market and the near-term future of U.S. cotton. The United States is the world’s largest supplier of cotton for the export market and apparently it does make a difference when what happens in this country results in an adjustment on the supply side in the face of strong demand.

For a while, many were wondering if the market was asleep at the wheel and oblivious to common-sense economics. It is very important to note that the shift in acres which occurred in 2007 was the result of improvement in other crop prices, not cotton. The cotton market did not respond with improved prices until after the planting season.

Further, even when cotton prices are low, producers do not base decisions solely on price… potential LDP’s are also taken into consideration.

Corn and soybeans are not consistently profitable crops for most Georgia farmers. If they were, we would have been growing more acres of them long before 2007. But the reduction in cotton acres and increase in corn and soybean acres is good for crop rotation and good for crop diversity and risk management on Georgia farms.

It is good to see more Georgia farmers have an opportunity to profit at crops other than the top two — cotton and peanuts (corn acreage is actually more than peanut acreage this year).

Crop acreage decisions are a function of expected prices, expected yields, cost of production, risk management (contracts, crop insurance, etc.), government programs (payments received on actual production like LDP’s), and weather. In this respect, Georgia farmers and the state’s agriculture have much at stake in the next farm bill.

Agronomically and economically, cotton and peanuts have an advantage on many Georgia farms. Policy decisions that would impact that are as vital as markets and costs.

Cotton faces its own challenges, including increasing cost of production, unstable markets dependent on exports, and policy concerns such as WTO and the 2007 farm bill.

Unless corn and soybeans can remain at relatively high/attractive prices, cotton and peanuts will remain the mainstay of row crop agriculture in the state. The state’s cotton acreage has not declined significantly until this year, and it took $4 corn and $8 soybeans to do it.

Is agriculture in a “transition” due to energy-driven markets and prices? Is the decline in Georgia and U.S. cotton acreage this year just the beginning of a possible, more permanent adjustment? If changes in the next farm bill result in lower net returns (through lower LDP) and the safety net for cotton and peanuts, concerns will grow.

This year, strong corn and soybean prices gave Georgia farmers an attractive and beneficial alternative. The recent improvement in cotton price is good to see. Low cotton prices in the future, however, without adequate program benefits and without profitable choices (if corn and soybeans prices should decline to pre-2007 levels, for example) would leave many Georgia farmers with few or no agronomically feasible and profitable alternatives.

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