Acreage Takes Another Hit

While discussing potential 2009 cotton acreage a while back, someone remarked that they would be happy with an acreage figure that started with an 8.

What You Told Us

The 2009 Cotton Grower Acreage Survey asked growers to comment on conditions driving acreage.

From Louisiana: There will be a few diehards with cotton pickers and gins that will continue to plant cotton. Banks are going to be hesitant to finance a cotton crop.

From Mississippi: The low price for cotton with its high inputs and technologies will force people to lower acreage.

From Texas: Except where we have had bad weather, Texas is making the yields and quality it takes for us to continue to grow cotton. Cotton is what has made us money. Some of the grains are just not viable out here. We produce for the world market and our cotton is some of the best.

From Georgia: Acreage will be down, but peanuts are an important crop for us and they fit in better in a rotation with cotton. It’s hard for us to grow corn without irrigation and soybeans are not a good rotation with peanuts.

From California: The water supply that we have for irrigation is very short, which affects cotton more than other crops.

Also from Texas: Our input costs are going down, and I think Texas growers still like cotton. Prices at planting time will affect everything.

But in the Annual Cotton Grower Acreage Survey, you told us that’s not going to happen. The prediction for 2009 is that 7.91 million acres will be planted. That’s down 13% from 2008, and down 25% from 2007.

Just a couple of months ago, it appeared that the bulls were about to take off as U.S. cotton stocks were set to be cut in half from 9 million bales. We were on the verge of consuming more cotton than we produced. As mill demand started to drop, USDA revised carryover stocks upward to 6 million bales, but that’s still a reduction of 33%. Then the world economy tanked, kicking mill consumption in the teeth, and you know the rest of the story. Consumer confidence has gone down the toilet and with it demand for textiles.

As we go to press, December of ’09 futures on the New York Board of Trade were about 48 cents per pound with a life-of-contract high of $1.02. Other commodities were not exempt. Corn, soybeans and wheat are 30% to 40% under their highs this year. The basis at the local elevators has knocked corn down to less than $4 and soybeans to a little over $7.50. Even with that, soybeans relative to cotton have an economic advantage, but cotton could be poised to begin closing the gap.

As the world begins the serious food vs. fiber fight for acreage that we all know is coming, the U.S. is positioned to become the world’s most reliable supplier of cotton. Just as an example, with its commitment to biodiesel and ethanol, Brazil could possibly cut its cotton acreage in half this year. Brazil is in its planting season now, and it will be interesting to see how that turns out.

Growers tend to think of price in terms of the value of lint only. But cotton is much more than just lint – it’s cottonseed oil and cottonseed meal. The value of cottonseed has climbed from less than $200 per ton two years ago to over $400 in some areas. There is serious concern that the U.S. will not crush enough cottonseed to meet dairy cattle feed requirements. As more and more cities go trans-fat-free, the demand for cottonseed oil will grow exponentially.

As acreage drops, so does production, and that means we’re cleaning out the cotton stocks pipeline little by little. At some point, the world economy will correct itself and foreign mills will come to the U.S. if for no other reason than we have cotton to sell.

But none of this makes less than 8 million acres of cotton planted in 2009 any easier to take.

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Below 8 million acres in '09