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Lower cotton price likely to limit season’s seeded acres

 

By TIM THORNBERRY

Kentucky Correspondent

 

BROWNSVILLE, Tenn. — As is the case with most row crops, cotton is experiencing a drop in market price, which will likely play into this season’s planting intentions.

Early speculation is that planted acres will take a downward turn all across the Cotton Belt. Walter Battle, University of Tennessee extension agent in Haywood County, certainly expects planted cotton acres to drop in that area.

"It’s because of the prices, and the only reason it’s hanging in there is because as grain prices have fallen; it’s not like there’s an alternative," he said.

Battle said last year’s crop was relatively good, with about 52,000 planted acres. He expects that to be 50,000 or fewer this year. In addition to low prices being a reason for decreased production, he said changes in the farm bill connected with cotton and over-supplies could also influence growers.

"I don’t know what the future holds," he said. "But I think the big thing now will be to focus on growing premium cotton. I think that will play a little bit more of role than in years past."

As with so many agricultural commodities, domestic issues figure into planting decisions as do concerns from around the world. Jim Nunn, who has operated the Nunn Cotton Co. since 1984, buys and sells cotton in Tennessee, Missouri and Arkansas. He also brokers cotton exports to Asian markets. In doing so, he has seen the cotton market in good and not-so-good times.

He would like to see cotton prices rebound, but surplus stocks in places like China may cause problems.

"I certainly hope cotton prices will recover, but the 800-pound gorilla in the room is the huge carryover stocks in China – 63 million bales," he said. "They are going to produce 30 million bales this year and import 7 million and use 36.5 million, so it is going to take a while to chew up their surplus."

Nunn noted cotton is a commodity which has a good shelf life, if properly handled. "Over time the fiber will yellow, but that is really the only downfall of stored cotton fiber if it has been properly ginned, handled and stored."

Despite those large surpluses, China is still the No. 1 importer of U.S. cotton. Other big markets include Mexico, Indonesia, Pakistan and Bangladesh, according to Nunn.

"We are seeing textile growth in Vietnam because Chinese mills are relocating, because of their high internal raw cotton costs to produce yarn and cloth," he said. "They can move into neighboring Vietnam and be able to buy cheaper international growths and then ship the yarn back into China."

During the upcoming annual meeting of the National Cotton Council, the results of planting intention surveys will be revealed – but for the most part, the writing is on the wall.

"It’s going to be down quite a bit. One of the things we’re hearing comments about from the growers is that the banks are going to loan them just so much money," Nunn said. "If they couldn’t pay completely out last year, they’re going to have to take a second look at what they’re going to plant this year."

For some growers, they may turn to other crops like soybeans … and, as Nunn put it, hope. "I think the only thing that can help us on this cotton is if we do see grain prices go down, people may stick with cotton in a rotation," he explained.

He added that five years ago, many in the industry thought prices were at a new norm: $1 cotton. According to information from the data portal Index Mundi, the cotton daily price as of June of last year was nearly 91 cents per pound. By December the price had fallen to just over 68 cents. The average spot price of U.S. Upland cotton as of Jan. 23 was 58.36 cents.

"The old saying is very true: High prices take care of high prices and low prices take care of low prices," said Nunn.

1/28/2015