By Dr. Don Shurley
USDA Prospective Plantings report estimates that U.S. farmers intend to plant 9.55 million acres of cotton this year – down 13.5 percent from last year. This (9.55 million acres) is within the range of most pre-report expectations, but on the higher end of that range.
The National Cotton Council’s survey estimate back in early February called for a 14.6 percent decline in acres. At the USDA Outlook Forum in February, their estimate was down 12 percent. Most pre-report expectations were for a drop of 12 to 15 percent.
Some of the numbers in today’s report are a bit puzzling, but it is what it is. The Georgia estimate (down 20 percent) is a bit much. The increase in peanut and soybean acres don’t nearly fully account for the drop in cotton and corn acres – unless acreage is going to be left idle, and that’s a distinct possibility.
The market must now turn its attention to other matters. Today, new crop Dec15 futures are bumping 65 cents. We’ve visited this neighborhood before. Are prices going to trek even higher, and if so, when? If not, what’s the downside risk?
Reports are that corn planting is delayed in the Mid-South, and the planting window may be closing. Corn planting may also be delayed in some areas here in the Southeast. Will this acreage get planted to corn or switch to other crops such as cotton or soybeans? Could actual acreage planted to cotton be more than today’s number? As we move forward, market direction will focus on actual plantings and crop conditions.
Price direction will also focus on China acreage and production and their purchase of imports from the U.S. and elsewhere. Chinese acreage and production is widely expected to be down significantly. U.S. exports have been good, and China continues to buy.
Downside risk appears to be limited – not non-existent, but limited. A larger number in U.S. cotton acreage could provoke some downward pressure on price. But depending on China and other foreign production, it could provide larger export supplies and exports – especially of higher quality fiber.
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