# A Reason To Hope

Author: Jim.Robinson
Published: 2009-02-23
Canonical URL: https://www.cottongrower.com/cotton-news/a-reason-to-hope/

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The theme of this issue is “Cotton is Still King.” We as a company believe that. I as an individual believe that, too.

Cotton acreage has dropped dramatically over the past two years, and indications are that it may drop below 10 million acres in 2008. No secret there. That would be the lowest since the 10.045 million acres in 1986.

But there is hope, and there will be opportunities for cotton growers. December ’08 futures, as I write this, had been trading in a range of between around 75.75 cents as a high, and 74.25 cents as a low, for the past couple of weeks. But it broke out of that to 76.00 on November 7. That’s only 40 points off the life-of-contact high of 76.40, and nearly 17 cents above the life-of-contract low. As an Extension cotton specialist told me when I asked about cotton acreage in his state: “We will be down again in 2008. But if cotton gets to 85 cents, all bets are off.”

What I think should push cotton futures prices higher — maybe even in the short term — is world demand. Take a look at the chart to the left and you will see that world carryover will drop by nearly 10 million bales between 2006/07 and the projection for 2008/09.

At the Mid-South Farm and Gin show in early March, Allenberg Cotton Co. CEO Joe Nicosia said, “There is no way in the world we can take production and chase this demand, unless we find millions of acres around the world. … The projections are that the world is going to be massively deficit in cotton.”

Unless there is a massive corn crop failure next year, I don’t think corn prices can go much higher. Ethanol futures are down 25% for this year, and there is no way— at least in my mind — ethanol-producing companies can take $4 corn much longer.

I believe corn acres will also be down in 2008, replaced by soybeans. That will be especially true where growers have the flexibility to double-crop soybeans behind wheat. It’s hard to turn down $6 wheat, followed by $10 soybeans. (Let me say with emphasis that I don’t begrudge growers who switched to grains. In the end, if growers in the South don’t make money one way or another, there will be no growers in the South to plant cotton.)

And then there is the synthetic fibers market. With crude oil approaching $100 a barrel, how much longer can polyester remain competitive with cotton? Frankly, I don’t think it can.

Patience is a virtue. If we are patient, King Cotton will remain just that.

Chart:

World Cotton Supply and Demand (in millions of bales)
 (\*) Projected Source: International Cotton Advisory Committee