Prices Creep Upwards as Acreage Survey Begins
November 3, 2009 The Annual Cotton Grower Acreage Survey is in the mail and some completed forms are starting to drift in. Our survey is random, which means you may not receive one every year, or you may not have received one at all. If you don’t receive one and would like to participate, please contact me at hgantz@meistermedia.com.
Our survey is the first of the year, followed by the National Cotton Council and USDA. Even with the randomness, our survey was nearly identical to the NCC’s, last year. We both projected 7.9 million Upland acres, and I’m happy to say Cotton Grower was low by over 1 million acres. But that’s what makes having the first survey fun.
Based on very early returns, it appears the Mid-South – where acreage has taken the biggest whipping – could be in for gains. The total acreage may not be enough to get excited about yet, but the percentage increase is still pretty good – up to 35 percent more cotton. But it’s all relative to just how far Mid-South acreage has fallen. 35 percent more of not very much is still not very much. It appears Mid-South cotton will take acreage from corn, with soybean acreage remaining flat to slightly up.
I’ll go out on a limb and say acreage will be up again in Texas and Georgia.
Obviously everything will be based on prices as planting time approaches.
Speaking of prices, cotton has had a significant increase since planting time last spring. On the New York Cotton Exchange, the December 2009 contract was at less than 50 cents per pound then. At the close yesterday, December of 2010 was at 75.33. It touched 76.25 before falling back. That’s the highest it’s been since March of 2008.
Using the spot month, this graph shows the percent changes in prices since January 1.
Of course, what will drive a significant rebound in Mid-South acreage will again be the price of soybeans. The cash price for next fall has been flat since the first of the year, but is still enticing. When I checked yesterday, you could book new crop beans for just over $8.80 per bushel.
Based on some projections we’ve been hearing for the past couple of months, economists are looking for at least 1 million more acres of soybeans and maybe 2 million more. At this point, I’d split the difference.
Just last week in Cotton Grower eNews, Bloomberg quoted a hedge fund manager saying cotton could reach $1 per pound within the next 18 months. Hedge funds took it there in March of 2008, so who’s to say they won’t again? Who’s to say fundamentals won’t do it by themselves?
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