U.S. Cotton is Back in Play
April 19, 2010 “If you think we’ll get back to $15 soybeans and $7.50 corn like we had in ’08, you’re smoking dope.”
What a great quote. Not that I have anything against $15 soybeans or $7.50 corn. Or $1 cotton, for that matter. It’s just a great quote. Who, you might ask, would be willing to go out on a limb like that?
That would be Richard Brock of Brock and Associates, who gives the annual grains update at the Mid-South Farm & Gin Show. You can read more on page 23.
He and Allenberg Cotton Co. CEO Joe Nicosia, who gives the annual cotton update (see page 18), agree that this could be the beginning of a boom time for cotton. Both say cotton acreage could rise to as much as 10.5 million this year.
At the very end of his remarks, Nicosia said something I thought was interesting: “Don’t be surprised if traders start to watch 6-to-10 day weather forecasts again and react to things that have not even happened.”
It’s pretty telling when weather forecasts had become so insignificant to cotton traders that they hadn’t even been paying attention. There was so much cotton in the world, who cared if we had a crop failure? Was this how insignificant the U.S. cotton crop had become?
From a personal perspective, I get it. How many times have I said I grew up around a grain elevator in the Mississippi Delta? Here goes again. Comparing cotton in the U.S. to cotton in the world is like comparing soybeans in Mississippi to soybeans in the Mid-West. As far as the markets go, we didn’t matter.
Let me give you an example: I’ve been told that last year Mississippi received six times the 30-year average September-October rainfall, and that over 100,000 acres of soybeans were abandoned. Well, there were 77.5 million acres of soybeans planted in the U.S. last year, and under the most bearish of extremes, carryover could reach 500 million bushels, according to Brock’s estimates. Sadly, Mississippi is not in play in soybeans.
But the U.S. is in play again in cotton. Nicosia says the world needs another 5 million acres of cotton this year and the U.S. needs to plant one-third of it. China and India, once sitting on mountains of reserves, have cut inventories substantially. The U.S. had slightly over 10 million bales of carryover in 2007/08 and now has 3.4 million.
Basically the pipeline is empty, and even before we plant, we’re in a weather market. Imagine what even the threat of hail on the High Plains (a normal happenstance), heavy rain in the Delta (a normal happenstance) or tropical storms in the Southeast (a normal happenstance) are going to do to an already highly volatile market.
Farming has never been for those faint of heart. I get it.
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