Help On The Way?
June 3, 2009 We would probably be a little remiss to go this entire issue — an issue that focuses on reasons to plant cotton in 2009 — without mentioning the elephant in the room. Barack Obama’s election to the White House in November will play no small role in the cotton industry.
Of course, that role is yet to be seen. While it’s probably safe to say that most of America’s growers are worried that Obama will be no friend to the farmer, it could be argued that George Bush wasn’t much help either. Bush twice vetoed the U.S. Farm Bill, and made some unpopular cabinet selections when it came to his Secretary of Agriculture.
But of all the ag-specific policy shifts Obama may make — from appointing an Ag Secretary to revisiting the Farm Bill in a few years — the biggest impact he can have on the nation’s cotton growers will come from an unlikely source — the housing market. With prices plummeting, the most helpful thing a cotton producer could wish for would be to see a rise in demand. And in the world’s largest cotton consuming market, the impact the housing crisis has on cotton demand and prices cannot be overstated.
It’s no secret that household linens account for a large portion of cotton consumption in the U.S. With every new home comes new towels, new curtains, new bed-linens. And while Obama’s proposal with regards to curing the ills of the American housing crisis is no silver bullet, it would be a start.
In April, the president-elect laid out a three-pronged approach aimed at fixing the nation’s housing crisis. In short, Obama proposed modernizing the financial regulatory system, helping homeowners facing foreclosure by easing the credit crunch, and releasing a second, much smaller economic stimulus package aimed specifically at the housing crisis.
Of course, this plan is still at least a year away from being implemented, and increasing demand is only half of the equation. Supply must also fall.
The adage that lower prices tend to cure lower prices is as true as ever. As more producers around the world switch to alternative crops, world stocks will drop, but again, this won’t happen overnight.
It won’t be too long before cotton is in high demand again, but we’ll have to be patient for at least a little while. Michael Whitehead of Rabobank Food and Agribusiness Research probably put it best: “The reason for farmers to be optimistic in ’09 is that 2010 will follow it.”
Mr. Whitehead is absolutely right, and probably a little more optimistic than he realizes. Hopefully, some of the optimism we’ve heard from growers across the belt will be extended to Obama’s presidency. Whatever your views on his policies, he should at least be afforded an opportunity to prove himself in the court of public opinion.
Keeping in mind where prices are now, and the condition the housing market is in, growers should look back in 2012 and ask themselves the same question Ronald Reagan posed in 1980: “Am I better off now than I was four years ago?”
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