The market outlook for cotton is similar to other commodities in that it is influenced by expectations of supply and demand. Cotton’s “new crop” outlook specifically refers to the 2027/28 marketing year, when the 2027 crop will be produced, processed, stored, and sold. A major supply-related question is how much 2027 acreage will be planted to cotton. The price of competing crops, relative to cotton prices, is an important consideration to the level of planted cotton acreage. Figure 1 shows a fairly strong relationship between the level of U.S. upland and pima cotton planted (as measured on June 30) and the ratio of December CBOT corn futures and ICE cotton futures during the first quarter of the year. The higher the ratio, the less cotton is planted.
Of course, there are other important competing crops as well, e.g., sorghum, soybeans, and peanuts. There are various other influences, including how dry it is in Texas, the insurance base price, fixed cost influences, and the psychological influence of the preceding growing season. But the price ratio of corn to cotton appears to capture a lot of these other influences in explaining variations in cotton plantings.
What does Figure 1 imply for 2027? As of September 21, the Dec’27 CBOT corn/Dec’27 ICE cotton price ratio was 6.77 (i.e., $5.37 corn divided by 79-cent cotton). Assuming this ratio prevails during Q1 of 2027, it is historically associated with between 10.0 and 11.0 million acres of all cotton. A simple univariate regression, based on the data underlying Figure 1 and the prices as of September 21, projects a point estimate of 10.3 million acres planted.
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