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Some Perspective on This Dwindling Cotton Acreage

Some Perspective on This Dwindling Cotton Acreage

From Cotton Grower Magazine – April 2015

 

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I won’t lie to you, it feels good when we get it right. More accurately, I should say, it feels good when we get it the same way everybody else gets it.

In January, we released the results from our annual Cotton Grower Acreage Survey. We pegged U.S. acreage at 9.7 million acres for the coming year. We take pride in our acreage projections, but there is, without a doubt, a degree of anxiety that comes with being the first out of the gate. Traditionally, the National Cotton Council releases their survey results about a month after ours. Then others weigh in.

I tend to get nervous just before the other acreage projections start showing up. What if we’re way too optimistic in our projections? What if our number is so far below the others that it makes us look foolish? What if we’re way off-base in Texas, and the whole state raises an eyebrow at our prediction?

Luckily, we’re almost always very close to the actual number that gets planted the following spring. And this year, we’re right in line with what everyone else is saying. In January, we predicted 9.7 million acres. In February, the Council announced their projection of 9.4 million acres. At the Mid-South Farm and Gin Show, Joe Nicosia mentioned his company’s projection of 9.4 million acres. And at the end of March, USDA stated their cotton planting intentions at 9.55 million acres.

I remember target shooting in the Boy Scouts as a child. When all three of your shots could fit in the circumference of a quarter, man, that was pretty good. Similarly, we feel pretty good about our acreage survey and projection this year.

What doesn’t feel good, however, is the reason these numbers are so low. The last time U.S. acreage dipped below 10 million acres was in 2009, after speculators had wreaked havoc in the cotton market, sending prices spiraling. This year, Chinese policy is the force driving prices downward.

I know 60 cent cotton is a tough pill to swallow for American growers. But one difference between the 2009 bear market and the current one is that this one arrived as a consequence of supply and demand. As a result, it could correct itself naturally.

As Nicosia mentioned that morning in Memphis, low prices lead to corrective measures. Growers around the world, especially those in China and the U.S., are bound to produce fewer bales this coming season. And less cotton in the world in 2015 can only help prices in the years to come.

So while 2015 prices may be a tough pill to swallow for many growers, it may also be just the medicine that global cotton needs in the long term.