Another Acreage Drop Coming
February 10, 2009 Cotton acreage will continue its freefall, according to the National Cotton Council’s 25th Annual Early Season Planting Intentions Survey that was released on Feb. 8 at the Council’s annual meeting in Memphis.
As you will note from the charts accompanying this story, the drop is indeed graphic.
Upland acreage will fall by 11.6% from the USDA’s actual 2007 figure of 10.538 million to the NCC’s projection of 9.318 million. ELS acreage will drop 21% from the USDA’s actual 2007 number of 292,000 acres to the NCC’s figure of 231,000.
As for upland acreage, the Mid-South will take the hardest hit again, dropping by 25.5%. All states were down across the region. Mississippi lost the highest percentage (31.2%), followed by Arkansas (29.7%), Tennessee (28.9%), Louisiana (17.9%) and Missouri (8.3%).
The reasons for the plummet in Mid-South acreage is the same as it was in 2007 – the Mid-South has the flexibility to switch acreage out of cotton and into higher-priced grains. In particular, 2007 wheat planted acreage rose to unprecedented levels. At the time this story was written, July wheat on the Chicago Board of Trade was close to $8.50 per bushel, soybeans nearly $12.50 and corn above $5.
Georgia continues to dominate cotton acreage in the Southeast, dropping only slightly – 4.8% — from just over one million acres in 2007 to a projected 981,000 this spring. North Carolina will drop 22%, followed by South Carolina (20.4%) and Alabama (11.1%).
Texas is the Beast
And then there is the cotton beast that is Texas. In 2007, Texas had 4.9 million acres that accounted for 46% of the total U.S. upland acreage. In 2008, according to the survey, Texas will have a simple – or should that be significant? – majority of U.S. acreage at 4.788 million, or 51%.
Dr. Stephen Slinsky, assistant director of NCC’s Economic Services, said of the intentions report, “Despite cotton prices being approximately 15 cents above year-ago levels, the strength of futures prices for competing crops continues to draw acreage away from cotton. Coupled with USDA’s recent wheat acreage report, it is evident that a wheat-soybean double-cropping rotation will attract acres from cotton, and possibly corn.
“This means that 2008 Mid-South cotton area intentions would be less than half of that region’s 2006 level,” Slinsky said.
Stocks to Drop
Meanwhile, Dr. Gary Adams, the National Cotton Council’s vice president, economics and policy analysis, said U.S. cotton growers are projected to produce 15.4 million bales in 2008 – the smallest since the 1998 crop of 13.9 million bales.
But the silver lining, if there is one, is that the large surplus of U.S. cotton available for export could vanish in a year. “Acreage normally planted to cotton is shifting rapidly to wheat, corn and soybeans,” said Dr. Carl Anderson, an economist at Texas A&M. “A very real possibility exists for a much smaller U.S. crop this year than needed to fill export shipments alone. In addition, world production is again not expected to equal mill use for the coming season.”
Prevailing indications suggest that by the end of the 2008/09 season, U.S. carryover stocks will fall to around 4 million bales, the lowest in four years.
“With the U.S. being the world’s residual supplier, the sudden two-year drop in acreage will reduce world stocks,” he continued. “Consequently, price will likely increase to discourage use and to encourage production. Already stocks are the lowest in four years and price the highest.”
Adams’ numbers agree with that and he said that by July of 2009, U.S. cotton stocks are expected to fall sharply as total offtake exceeds the 15.4 million bale crop. “(World) demand is expected to grow, but at a slower pace due to overall economic performance and strength in cotton prices relative to competing fibers,” he said. “However, total use is expected to exceed production, which will further tighten stocks.”
Adams said declining global stocks should continue to be supportive of world prices in 2008, but “one concern will be the ability to maintain demand growth at higher price levels, particularly in light of concerns about the general economy.”
Add 4 charts w/graphics
caption:
USDA’s final acreage report said Texas had 4.9 million acres of cotton in 2007, or 46% of the total upland acres. For 2008, the National Cotton Council projects that Texas will have 4.788 million acres, or 51% of total upland acreage.
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