Want to know how good this year's U.S. cotton crop could be? Consider this: The Mid-South crop is rated as the worst of all four production regions, and it's still regarded as outstanding. Meanwhile, the Texas crop could break production records, the Southeast is hoping for good weather to finish out a good start, and the Far West crop is just about home-free.
A panel of cotton experts discussed the condition of the U.S. cotton crop and price prospects during the fifth annual Cotton Roundtable, held at the New York Board of Trade in New York City July 16. The Ag Market Network, NYBOT, Certified FiberMax, Cotton Incorporated and Farm Press Publications sponsored the event.
Here's how the 2004 season is shaping up, according to the panel:
“The Southeast crop is as good as it's ever been in mid-July,” said O.A. Cleveland, economics professor emeritus, Mississippi State University. “Plugging in a 673-pound yield on 3 million acres would give us a 4 million-bale crop. The major concern on the horizon is the beginning of the hurricane season in the Atlantic.”
The Mid-South crop is the worst crop in the United States in terms of condition, but that's only because the other regions are so good, according to Cleveland. “About 70 percent of the Mid-South is rated good to excellent.”
A 771-pound yield projected in the Mid-South on 3.6 million acres would produce a 5.3 million-bale crop, noted Cleveland. “A problem area is Louisiana, where the crop is a bit waterlogged. Still some 45 percent of the Louisiana crop is rated good to excellent.
“The late-July, early-August weather is going to be extremely important for the fruiting patterns in the Mid-South and Southeast,” Cleveland added.
Texas is on track to produce its largest crop in 23 years, perhaps ever, according to Carl Anderson, recently retired professor and cotton marketing specialist, Texas A&M University.
“We have a tremendous amount of acreage (6 million acres) and the least amount of abandoned acreage in many years, and we're looking at harvesting approximately 1.2 million acres more than last year. We have the chance of producing the largest crop since 1981, when we produced 5.6 million bales. It could, with ideal weather and harvesting conditions, approach the 1949 record production in Texas of 6 million bales.”
Anderson noted that the crop is a young one, with only a fourth setting bolls as of mid-July. “A lot of things could happen to it between now and harvest. But we've had a good start and good subsoil moisture.”
Most of the crop is in good to excellent condition, with only 6 percent rated poor. Abandonment was a mere 7 percent in the southwest, while the 10-year average for abandonment for Texas is 20 percent.
Cotton in south and central Texas is rapidly maturing, noted Anderson. “Harvest is under way in the lower region of the Rio Grande Valley. Corpus Christi and the Blacklands have an above average crop.
“The Rolling Plains has about 900,000 acres of dryland cotton that typically produces a half-bale to the acre,” Anderson said. “We're expecting at least two-thirds of a bale this year and it could be better.”
The Southern Plains' 3.7 million-acre cotton crop has had its best start in many years, according to Anderson. “They have good subsoil moisture and could produce 3.5 million bales this year.”
Oklahoma and Kansas cotton producers also have good crops going “and are expecting better-than-average yields,” according to Anderson. “In total, the Southwest has the potential to harvest between 5.9 million and 6.3 million bales, compared to 4.7 million bales last year.
About one-third of the Texas crop is irrigated, while two-thirds is dryland, noted Anderson. “We have new technology, drip irrigation, growing by leaps and bounds in the western part of the state. We think there are about 100,000 acres under drip, and with the new varieties and the boll weevil eradication program, the yields are 3 bales to 4 bales per acre.”
Meanwhile the Far West crop “is very mature. It's coming along very well,” said Mike Stevens, Swiss Financial Services, Mandeville, La. “Problems are few and far between. The crop is just about home-free.
“About 70 percent of the Arizona crop is in good to excellent condition, with only a small percentage of the crop not doing well. It's hard to find any complaints in the San Joaquin Valley. The plants are heavily fruited, but are subject to some heat stress that might be coming up.”
The potential for good crops in the United States and around the world will continue to impact prices and increase volatility, according to the experts.
“If crop conditions carry on around the world as they have today, I see prices going as low as the 30s,” said Ed Jernigan, with Globecot, Inc. “But if crops around the world begin to deteriorate, the price could easily go back to 65 cents.”
Jernigan added that the “small” carryover of cotton in the United States should be examined in terms of stocks-to-use ratio rather than a specific number, especially with a dwindling domestic market.
For example, if domestic consumption is 10 million bales (as it was a few years ago), a 3 million-bale carryover was considered tight because it represented a 30 percent stocks-to-use ratio. But today, that same 3-million bale carryover represents a much more bearish 50 percent stocks-to-use ratio because domestic use is down to around 5 million bales.
Stevens sees a price range upside, short-term, to 50 to 52 cents, if fundamentals change from their current bearish tone. “If there are no changes in statistics from today, we could go to 37 to 43 cents,” said Stevens.
“If we stay on track with a good world crop, we are very bearish,” Anderson added. “Stocks are tight in the world as we end the old crop. Everyone is counting on a good world crop this year. The best bounce I would see would be to about 52 cents in the short run. If the market moves to 46 cents, it could move to 42 cents. If we make a 19 million-bale crop and foreign countries produce within 6 million bales of their use, I could see 36 cents for December futures.”
Cleveland noted, “When we traded 84 cents on July in October, the market was as bullish as it could be. If you had told me then that we were going to have a 40-cent move, I would have bet you real money that we would have gone over a dollar. But we went the other way.
“We do have the potential to go lower,” Cleveland said. “I think 35 cents is a bottom, no matter how big this crop gets. But we can get back to the high 60s if we have crop problems.”
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