Hurricane Harvey left cotton crops along the Texas Upper Coast and Lower Blacklands either in ruins or with an uncertain future.
On his recent Cotton Marketing Planner webpage, Dr. John Robinson, Texas A&M AgriLife economist, points out that some of the affected areas may be only 30-40% harvested, with estimates of another 300,000-400,000 bales worth of cotton still on the stalk. If these estimates are correct, he says, growers face several possible outcomes.
“First, some of the exposed cotton fields were obliterated by high winds,” he states. “Those growers will face a 100% loss, and likely have an insurance claim on that basis. Second, some fields will have a lot of wind and rain damage, giving growers the uneconomical task of drying out, harvesting, and selling degraded cotton lint that is heavily discounted in price.
“Either one of these outcomes will be a disaster at the farm level.”
Robinson believes the market effect of this storm damage will be more subtle, and that the market will likely settle down once the uncertainty fades. The loss of 300,000 bales, he notes, does not translate to more than a penny or so impact on the futures price. More likely, the main aggregate market effect will be figured into the cash market, with higher premiums offered for a tighter supply of good quality cotton.
“In short, this hurricane is a more acute and concentrated and dramatic example of the extended weather uncertainty that the market has faced all summer,” says Robinson.
You can find the full text of Robinson’s remarks – including suggestions for managing risk in an uncertain weather market – by following this link.
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