MAKE OR BREAK: Silver Linings for U.S. Cotton Acres
From Cotton Grower Magazine – April 2015
In his boldest and proudest voice, O.A. Cleveland proclaimed, “I like cotton!” to a room of growers and consultants who, admittedly, were having a tough time seeing past low market prices and falling acreage for the coming season.
Cleveland, professor emeritus of agricultural economics at Mississippi State University, has often been accused of being a blue sky economist – the one who always finds the silver lining in the gray clouds while holding a glass that’s always half full. And, at a time when most of the news surrounding the cotton industry can be depressing and disheartening, a glimpse at the positives may be just the incentive needed to take some of the edge off of the season and get a few more seeds in the ground.
Speaking during the Cotton Grower Common Thread Luncheon, held during the 2015 Mid-South Farm and Gin Show in Memphis, Cleveland reviewed several reasons why growers should be planting cotton this year.
Two of the primary reasons start with the advantages that today’s cotton varieties offer to growers and to the world market.
“The seed companies have come forth with some outstanding varieties that will give you a yield,” stated Cleveland. “It’s not uncommon, especially on good cotton ground, to expect at least three bales per acre. And most growers are planning on a little bit more than that. We’re seeing a little more four bale per acre cotton in the Mississippi River Delta states than we’ve ever seen. That’s a lot of cotton off of one acre.
“I can’t help but believe that if you were at three bales per acre, you’d have to think hard and long not to continue to grow cotton,” he added. “But not only are the seed companies giving growers yield, they’re also providing quality.”
Cleveland pointed out that the “perfect cow” in the cotton business for years and years has been Strict Low Middling 1 1/16. “That’s trash today,” he stated.
“You can sell it all day long at the loan price. Lower quality yarns will take it. But if you want to get cotton into a yarn that the consumer wants, you need a minimum of 36 staple.”
Last year, some cotton grown in Oklahoma measured a 40 staple – enough, pointed out Cleveland, to catch the market’s interest. Because of its strong staple length, that crop was marketed by the Pima and Acala organizations rather than through the standard Upland channels. And it came from Upland varieties that growers know and recognize.
“Quality is making a huge difference, more so than it ever has before,” said Cleveland. “Three places in the world have quality cotton – the United States, Australia and Brazil. The market is paying for yield and quality, and it has to come from these countries.”
This could be a big plus for U.S. growers. Cleveland noted that Australia’s crop for this year will be down 50 percent due to water issues. Their growers are already selling their 2016 crop for $550 per bale, as well as their 2017 crop for nearly $535 per bale.
“By the time we see all of the significant acreage reductions for cotton around the world this year – including in our three quality locations – the amount of quality cotton available is going to decline,” he stated. “Mills and buyers are scrambling, because they know the amount of quality cotton needed is not available, and they’re trying to get it. There’s not but about 20 million bales of high quality cotton left in the world market. And that’s not enough.
“For growers who have some quality cotton left in this past crop, there may be another nickel yet in the market.”
As usual, price remains a factor. The market has been disappointing for much of the past year, but it’s been in worse shape. Cleveland believes the drive for quality will pay off sooner rather than later.
“I look for 73 to 75 cents in December,” he predicted. “The bottom, in my opinion, is in. We could run back down a bit, but I think we’re past all of the things that usually run price back down for a while.”
Cleveland also noted a few other reasons for growers to keep cotton in their fields. The U.S. has the infrastructure and equipment in place for efficient cotton production, more so than other cotton-producing countries. Most of that equipment, he said, is paid for and needs to be used.
And the other reason?
“The best reason to grow cotton is as a contrarian,” he said.
“We’re increasing oilseed acres around the globe, not just in the U.S. And we’re cutting cotton acres as drastically as I’ve ever seen over a one or two year period. So consequently, the contrarian view is to plant cotton, baby!
“And just wait until 2016,” he hinted. “Be sure to keep your equipment, because you’re really going to wish you had it then.”