Drop in intended plantings of all US cotton

17 Apr '07

4 min read

Favorable soybean economics are supported by fewer problems (relative to corn) in hauling, drying, storing, or marketing soybeans. However, there are some forces that favor cotton over soybeans. One would be growers with very high cotton yield expectations. Another exception would be growers wary of poor soybean yields with potential dry weather from the potential La Nina pattern. We may already be seeing the effects of this in the continued dry areas from Arkansas to Virginia.

How much recent rains rains across this region will help remains to be seen. The point is, it is a long, long way from now until June 30 (the next USDA acreage report). To get sustained cotton futures above 60 cents probably requires ending 2007/08 ending stocks-to-use below 20%, which in turn requires either U.S. plantings below 12 million acres or average U.S. yields below 800 lbs/acre.

The flip side of the dry weather question is the effect on cotton yields, and that depends on where you're located. While the Deep South is dry, the major cotton growing regions in northwestern and southeastern Texas have excellent soil moisture, as still evident by the April 12 Keetch-Byram Drought Index map for Texas.

More rainfall across much of Texas over the April 13-15 weekend will likely maintain the good moisture conditions. The subsoil moisture means that large expanses of dryland acreage will likely make some sort of crop on the water that is already "in the bank". A few timely rains could then produce cotton yields at least as good as last year.

In terms of the World new crop supply/demand picture, I think that a likely decrease in 2007/08 below 40% suggests that the A-Index could rise enough to significantly erode loan deficiency payments. The underlying forecast for this is supported by the April report of the International Cotton Advisory Commission which forecasted an expected decline of 2007/08 world ending stocks to 47 million bales, based on expected stable production and greater demand.

Texas A&M University

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