What is in this article?:
- Big switch out of cotton predicted for Southeast, Delta regions
- In the hands of bureaucrats
- There is already anecdotal evidence of aggressive forward contracting of grains and oilseeds in the Mid-South.
- The big wildcards in the world cotton market include Chinese cotton stocks, polyester over-capacity, and cotton demand.
While certainties are few and far between as far as the world cotton market is concerned, there’s one thing you can bank on for 2013 — fewer acres will be planted.
“Certainly there will be more acreage reduction in 2013,” says John Robinson, Texas A&M University Extension cotton economist.
“I fully expect a big switch in the Southeast and the Delta regions out of cotton and into other crops, based on prices. In Texas, we’ll also see it, based on prices and the fact that we might have decent wheat stands that’ll carry all the way through to harvest.”
There is already anecdotal evidence of aggressive forward contracting of grains and oilseeds in the Mid-South, said Robinson at the 2012 Southern Region Agricultural Outlook Conference held in Atlanta.
“Feed grain forward cash prices seem very attractive, and the wheat insurance price is also strong and likely influential.
“If it’s a wet winter and soil moisture looks good, it might encourage stronger stands of Texas wheat, or it might tempt growers to forward-contract grain, or tempt growers to plant more corn in some places.
“I could see 2013 being one of those rare years with a year-on-year decline of greater than 20 percent in Texas cotton acreage.
“For a reference year, we might compare 2013 to 2007, when the 4.9 million planted acres of Texas cotton was 23 percent less than in 2006, and pretty much for the same reasons,” he says.
Robinson says the U.S. could see planted cotton acreage decline to 9 million in 2013, which would represent the low point of U.S. acreage in 2008 and 2009.
“With average abandonment and decent yields, we still could see 14 million bales of production. Adding in the 2012/13 carryover gives us a 20-million bale supply. If we export 11 million and use 3.4 million, that gives a similar ending stocks outcome for 2013/14 that we'll see in 2012/13.
“In other words, even with a big decline in planted acreage, we still could wind up with little fundamental rationale for significantly higher cotton prices than what we’ll see for the December ‘12 contract. I would project the likely range of December ‘13 at 65 to 85 cents per pound,” he says.
The 11 million export bales is a big “if,” says Robinson.
“Our biggest export customer is China, and China has 30-something million bales in government reserves right now. They already have their ‘use’ sitting on a shelf.