By JORDAN STRICKLER

Kentucky Correspondent

CLEMSON, S.C. — Planted cotton acres, as well as hopes for the industry, should be up in the coming year. Despite some reasons for caution, producers are mostly optimistic about the future.

The release of the 37th annual Early Season Planting Intentions Survey by the National Cotton Council (NCC) shows that planted area should increase by 3.7 percent and that U.S. cotton producers intend to plant 13.1 million cotton acres this spring.

“Heading in to 2018, the cotton outlook for both South Carolina and the entire United States is looking better than (2017),” says Nathan Smith, an economist and professor at the Clemson Sandhill Research and Education Center at Clemson University. “We’re coming off a record year for cotton yield – an average of about 900 pounds per acre – across all cotton states.”

Upland cotton intentions are 12.8 million acres, up 3.8 percent from 2017, while extra-long staple (ELS) intentions of 254,000 acres represent a 1 percent increase. NCC economists point to a few key factors that will shape the U.S. cotton industry’s 2018 economic outlook.

In recent months, cotton prices have maintained a stronger appearance despite the increase in world production. Although the current supply and demand fundamentals appear somewhat bearish, strong U.S. export sales, a weaker U.S. dollar, heavy speculative buying and large mill fixations have supported prices. Projections of record ending stocks outside of China are also expected to pressure cotton values.

Almost 24 million bales of cotton were produced in the United States last year, and while higher production generally means lower prices, Smith said this hasn’t been the case so far. “Prices have been strong so far. The price for cotton right now is above 80 cents per pound for the 2017 crop.

“Prices for the 2018 cotton crop have reached 75 cents per pound. The outlook is better for the cotton crop in 2018, but we’ll have to wait and see how growers respond and what their planting intentions are,” he explained.

Planted acreage, however, is just one of the factors that will determine supplies of cotton and cottonseed, said Dr. Jody Campiche, NCC vice president of Economics & Policy Analysis: “Ultimately, weather, insect pressures and agronomic conditions play a significant role in determining crop size.”

Campiche said that with abandonment assumed at approximately 15 percent for the United States, Cotton Belt harvested area totals 11.1 million acres. Using an average U.S. yield per harvested acre of 842 pounds, this generates a cotton crop of 19.4 million bales, with 18.7 million upland and 744,000 ELS.

She said world production is projected to be 119.3 million bales in 2018, while world mill use is projected to increase by approximately 3 percent to 124.8 million bales – with most of the growth from China, Vietnam and Bangladesh.

While projections of global consumption exceeding production normally would be supportive of prices, the implications for the coming year may not be as clear-cut, as stocks outside of China are projected to increase by 8.6 million bales in 2017 and 4.6 million bales this year.

Regarding domestic cotton mill use, Campiche said 2017 use is estimated at 3.4 million bales, up 100,000 from 2016. For 2018, the NCC is projecting a modest increase of 60,000 bales. She also noted that export markets continue to be U.S. raw fiber’s primary outlet. The U.S. will remain the largest cotton exporter, with a market share of 39 percent in 2017, as compared to 40 percent in 2016.

China is currently the top export market for the 2017 crop year, followed by Vietnam and Pakistan. World trade is projected to be higher in the 2017 marketing year, but increased competition from other major exporting countries has led to a decline in the U.S. market share.

The outlook for 2018 is also buoyed by a disaster plan passed by Congress on Feb. 9 and included in the bipartisan budget act. Among the highlights for the agriculture community include providing assistance to farmers and livestock ranchers in regions devastated by last year’s hurricanes, additional support to dairy producers and, for the cotton industry specifically, policy that makes the crop eligible for Title I Agriculture Risk Coverage and Price Loss Coverage programs of the farm bill.

“This measure will provide cotton producers and lenders some certainty as they prepare for the 2018 growing season,” said NCC Chair Ronnie Lee, a Georgia cotton producer. “The new policy will help ease the financial burden as producers struggle to cover total costs.”

Plains Cotton Growers, Inc. (PCG) President Johnie Reed of Kress, Texas, echoed this statement. “PCG and the National Cotton Council have worked toward a long-term solution for growers for many years now, and we appreciate our friends in Congress who have been steadfast in their support and understanding of our needs.

“This is significant for cotton growers who for years have operated without a viable safety net, and this will allow many growers to stay in business.”

Despite its jubilation for the new bill, the NCC said there are some concerns for 2018. While cotton prices have improved slightly compared to other crops, cottonseed prices have dropped significantly, thus leading to an increase in net ginning costs.

This could cause producers a continuation of difficult economic conditions for the coming year. Production costs remain high and, unless growers have good yields, current prices may not be enough to cover all expenses.