Bottom Line Says Cotton
February 9, 2009 Using a simplistic analogy, growers start figuring bottom lines with pencil and eraser. But at some point something has to be put on the lines of the ledger with pen and ink. When it’s time to fill the planter and start the tractor, it doesn’t matter what the grains versus cotton markets might do even one day later.
When the trigger was pulled this spring, JBH Farms’ bottom line showed that at that day’s prices – using its historic soybean yields versus its historic cotton yields – the pen and ink favored cotton. Just as it has for the past seven years.
“Cotton has always been what has made us a profit,” says Jeremy Ogle, a partner in JBH Farms near Vanntown, TN. He farms with brother Jason, his dad Harold, and brother-in-law Jim Bob Sandlin. “We traded our combine for a tractor a while back and we updated our pickers before last year’s crop. Cotton has carried us.”
This year, JBH Farms will have 2,000 acres of cotton in Lincoln County, TN, and 1,000 in Madison County, AL.
“When we compare what it costs to put in a cotton crop with what it costs to put in a soybean crop, it would cost us $175 per acre more to put in cotton,” Ogle continues. “That’s the figure I have. Our 10-year average on soybeans was just under 30 bushels. Even with a 35-bushel crop – and you can book beans for about $13.75 to $14 – that’s about $490 per acre. If you add the $175 it costs us to grow a cotton crop to what we can net on soybeans, that’s $665. Along with the $14 soybean price, cotton can be booked for 88 cents. All we have to do to make the exact same money is make 756-pound cotton.”
“They have done better than that,” says their consultant, Larry Walker, of Flintville, TN. “And 35 bushels is a stretch up here for anybody. Thirty would probably be closer. We’ve grown corn and we’ve grown soybeans, but cotton is our money crop – it’s the one that ensures we’ll have money in our pockets.”
Ogle adds, “With the growing conditions we have year-in and year-out, if someone asked me if I thought I had a better chance of growing 35-bushel soybeans or 800-pound cotton, I’d take the 800-pound cotton crop. I’d do it every time.”
They Are What They Are
Without a doubt, endless variables will throw these figures off one way or another – how much would be the obvious unknown – but they are what they are for the moment. And that does not take into consideration any premium for lint quality or cottonseed prices, which have tripled since the 2006/07 marketing year ended. “We would call that left-pocket money,” Walker laughs. “They can go on vacation in Florida with that.”
“The soybean market has been good, but when we compare inputs to inputs, and with our storage situation – which is not real good – we decided we were just set up better for cotton,” Ogle says.
“You hear the forecasters say in ’09 we may be able to get around $1,” he continues. “Maybe ’09 will be proportionally higher than ’08. If the grain markets stay where they are – if wheat stays over $10 – I would not say we wouldn’t plant any. But right now, we’re rolling on with cotton in ’09.”
Not to discount record grain prices, but a decision to remain 100% cotton for the foreseeable future may be well worth it because the out months for cotton on the New York Cotton Exchange – particularly the December contracts for 2009 and 2010 – were near $1 at the time they were gearing up to plant. On the Chicago Board of Trade on the day this was written, November ’09 soybeans were 10.7 cents lower than ’08, and November 2010 was 10 cents less than that. For corn on the CBOT, December ’09 was 27 cents lower than ’08; December 2010 was just a penny more.
Walker says one of the reasons cotton pencils out better for this area is that it does not have the soil types that offer the crop-flexibility characteristics of, say, the Mississippi Delta. “In this niche, we have two gins that are about 12 miles apart – Elora Gin, in Elora (TN), and Cotton Growers Coop Gin in New Market (AL) – that historically gin 40,000 bales each, which would be equal to two good-sized gins in the Delta,” he says. “That shows this area does make good cotton.”
JBH Farms uses Elora Gin.
Short Season
Over the past few seasons, varieties of choice for JBH Farms have been Delta and Pine Land’s DP 444 BG/RR, Stoneville’s ST 5242 BG/RR and PhytoGen 370 WS/RR, a variety double-stacked with the WideStrike and Roundup Ready traits.
This season, they will have a total of 600 acres of Bollgard II/Roundup Ready Flex varieties – ST 4498 B2/RF, ST 4554 B2RF, and DP 141 B2RF. Also in the mix will be Deltapine 445 BG/RR, and FiberMax FM 960 BG/RR. They will use PhytoGen 310RR as a refuge.
All of these are shorter-season varieties than the Mid-South’s gold standard DP 555 BG/RR. “There will be years in this area when the mid- to full-season varieties will kick in and do well, but we’d rather take our chances with a short season variety.”
Adds Walker, “The only mid-season variety that has had much success here has been Stoneville (ST) 5599 (BG/RR).”
Caption:
(From left) Jim Bob Sandlin, Jason Ogle, Jeremy Ogle and Harold Ogle.
Caption:
Larry Walker (standing) and Jeremy Ogle.
Sidebar Caption/Photo:
Harold Ogle
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