The End of U.S. Cotton?
March 9, 2009 With dwindling acreage reports, strong foreign markets, rising energy costs and the promise of big returns on competing crops, some are asking, “Is this the end of cotton in the United States?” As agricultural priorities continue to shift towards higher-profit crops in the face of increased ethanol and food stock requirements, the United States is poised to be overtaken as one of the world’s cotton superpowers.
Anyone involved in commodities knows that the markets have seen huge price-level surges in response to new players entering the market and demand for “priority crops” like corn, wheat and soybeans. The resulting profit potential for crops such as these is now great enough to sway many U.S. farmers into leaving the spindle-pickers in the barn in hopes of better conditions. Since 2004 the harvested cotton area in the U.S. has dropped from 12.943 million acres to an expected 8.192 million this season. Even though yield levels are at record highs, this still represents the smallest harvested acreage since 1983, according to the USDA.
Who could blame the farmers for abandoning cotton? The average profit gain per acre for farms that have switched to corn production is just over $235 USD. Corn, soybeans, and wheat are finding themselves ubiquitous in areas of the country accustomed to the endless white seas.
The United States government has as much to do with the loss of cotton acreage as any other factor, and the continued importance given to the use of ethanol based bio-fuels as set forth by the Energy Independence and Security Act of 2007 will ensure that any increases in corn or grain acreage could be permanent. The forecast for the 2008 planting puts acreage totals for corn, soybeans, and wheat at 225 million acres, a number that represents an increase of 7.2 million acres on the previous year’s planting. This phenomenon is not without explanation, however. Over the course of the past 12 years, corn has seen subsidies of $56 billion, making it the most subsidized crop in the U.S. Wheat has also seen huge subsidy payments, with 2006 amounts totaling over $21 billion (USD).
As an agriculturally export-based country, our actions have much to do with the high prices paid – both economically and socially – for crops in short supply. As long as the market is willing to offer inflated sums for competing crops, this is a trend that could continue well into the future. The prices of corn and wheat have tripled in three years time. Soybeans have increased two-fold in as many years. Even prices for crops not related to ethanol production, such as rice, have been climbing steadily alongside. At times cotton prices have managed to surge with the others, but it is clear that farmers will not be able to capture nearly as great a profit as with these “priority” crops.
What can save cotton in the United States? As more and more farmers continue to abandon the crop, what will it take to convince them to return? The answer is clear: profitability. As the world’s population continues to grow at a rapid pace, an increased demand for cotton products will most surely parallel. Large cotton producing countries are also faced with staggering food requirements – a priority when considering the season’s plantings. India, because of rising demand, has had to focus on maximizing yields on existing land in order to meet requirements for both food and fiber. These gains are only short term however, and cannot be expected to keep up with rising demand. With arable land in competition with grazing lands for cattle and dependent on the monsoon season for maximum productivity, there is ample room for foreign suppliers, such as the U.S. to step in and provide Asian mills with the necessary fiber stocks. China has also found itself matching demand with production, and will thusly be unable to supply this need.
Even though the numbers suggest the overall favorability of “priority” crop plantings, the majority of acreage losses in the U.S. are currently taking place in the Eastern and Delta regions of the country – areas responsible for less than half of the country’s production. Cotton farmers in West Texas – the country’s most productive cotton region – have not had to face crop competition on the same level as their eastern counterparts. However, decreased emphasis in the east would mean a greater dependence on areas like Texas and Oklahoma, with weather known as much for its favorable conditions as its unpredictable flare-ups.
Even with a decreased presence in certain growing areas, the country is rife with potential. With a system of harvesting based on solely machine-picked cotton, the United States is unique in its ability to recover lost acreage much faster than producing areas in the rest of the world. Unlike many other growing countries, it does not find itself in a constant struggle to satisfy gin requirements or provide adequate roadways for transport.
The quality of cotton grown in the U.S. is also a factor in maintaining demand. Because of the preference for HVI classed cotton worldwide and its prevalence in the United States, mills requiring quality guarantees will continue to purchase from 100 percent HVI classed U.S. stocks.
In the end, the future of U.S. cotton is not as uncertain as one could expect. With promising yields in the country’s most productive areas and rising global demand, the United States will continue to define itself as a fiber superpower for years to come.
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