March 19, 2007

 

Potential Record Drop in Cotton Acreage this year...

 

"We are seeing the largest acreage shift in our lifetimes." That's a quote from a seed dealer covering the Southeastern United States, referring to farmers in the USA (and maybe worldwide) intending to abandon other crops and plant more corn this spring. That same individual also cited a 62% decrease in cotton seed sales and a 72% increase in seed corn sales.

 

Why is this happening...?

 

It costs about the same to raise an acre of corn as to raise an acre of cotton...But with corn currently at $4.00 a bushel and cotton at 55 cents a pound, PLANTING CORN THIS YEAR SHOULD PAY THE FARMER ANYWHERE FROM $180-$200 MORE PER ACRE, for every acre planted, than he'd get for planting the same land in cotton...Take just a smallish 500 acre farm and you are therefore talking an extra $90,000 to $100,000 in revenues (with the same costs) for planting corn as opposed to cotton...not to mention that corn is a lot easier and less labor intensive to grow than cotton. With corn at historical highs and cotton at historical lows, it makes sense to expect some switching from cotton to corn...But I had no idea how big the shift might actually be...

 

The quote above prompted me to spend last Thursday and Friday (March 15 & 16) calling cotton people all over the country. Using a USDA map of where cotton is grown, and a list of cotton gins throughout the USA, I specifically targeted the heaviest cotton growing areas in each cotton producing state. Talking primarily to ginners, I asked them all the same question: "Are you seeing much change in cotton acreage around you this year as we head into planting season?"...And over and over I was astounded at the STUNNING percentage decreases people were citing. It appears we are going to see a MASSIVE cutback in cotton acreage in the coming year. The results of my totally non-professional (but I think highly representative) survey can be seen on the map following...

 

 

 

Everybody I talked to was able to give me percentage estimates and those are the numbers you see on this map.

 

No, I did not talk to 1000 households and I am not a professional crop estimator. All I know is, when a ginner tells me, "Last year we had 22,000 acres ginned here and we're just hoping se can get 9,000 right now", he probably knows exactly what he's talking about...Or that being told more than once, "Some of our biggest cotton producers last year aren't planting any cotton at all this year" is highly significant....As well as "Everybody who can plant corn (or grain sorghum) is doing just that" or "Anybody who has irrigation is going to corn or grain sorghum." The bottom line is that ANYWHERE they can switch, they are doing so, with water availability/irrigation and soil type being the deciding factors (which is why south Georgia and south Alabama are not down much)...In the end, it's the extra dollars they can get for corn and they are all understandably saying, "Thank you. I'll take the extra $200 an acre."

 

On Friday, March 30th, the USDA will announce its planting intention numbers for all US crops...and the estimates I have seen so far for cotton are calling for about a 15% decrease in acreage....However, when I took last year's state-by-state planted acreage numbers, and, using the percentages given to me by those ginners (in the process actually adding 10% to the figures I'd been given in each area) I came up with something like 10.7 million acres to be planted in cotton this year, down about 30% from last year's 15.3 million acres. I have no idea what the report's numbers will show, but I would guess, if the USDA number is down anything approaching 30%, we could easily see cotton trading limit up (3 cents) for any number of days...

 

It scares the hell out of me to even be attempting to estimate this report on my own, and I know my survey could be called anything but scientific, but I do know I was talking with real people who know what's happening in their own little areas (usually 3 to 4 counties) of the country, as I said, in the heart of our biggest producing areas, and I did so from coast to coast.