Mid-South cotton in 2014: A state of equilibrium, economist says


There may be increased interest in cotton by Mid-South growers in 2014 because of price pressures on a big corn supply from the 2013 crop, but says John Anderson, huge cotton stocks held by China will likely “keep the market relatively subdued.”

Anderson, deputy chief economist for the American Farm Bureau Federation, Washington, presented commodity market outlooks at the annual meeting of the Mississippi Farm Bureau Federation.

“Cotton is in kind of an interesting equilibrium,” he says. “I don’t think any of the analysts I follow see significant changes in usage coming along. We’ve seen use drop because of lower exports, and that’s mainly a function of availability.

“In the Mid-South I’d be surprised if we don’t see some interest return in 2014, because corn’s going to be under pressure from the huge crop in 2013. But how many farmers have held on to their cotton equipment?

“I know farmers who grew cotton for decades, but sold off all their equipment when they switched to grains, and they’re not likely to go out and buy equipment again. I don’t see any dramatic changes coming in cotton acreage numbers, so I think we’ll just roll along in the equilibrium situation we’re in.”

One factor contributing to the relatively stable cotton situation, Anderson says, is “a market in which we’re carrying big stocks, with pretty unexciting prices and not very volatile prices.

“We don’t have huge stocks in the U.S. , but China has enormous stocks of cotton as far as we can tell. There are many questions about the quality of those stocks — do the mills really want to use that cotton, what is it going to be worth, etc.? As best I can tell, we don’t have answers to these questions. But we do know there are big stocks numbers out, and I think that’s going to keep the market relatively subdued.

“Fairly stable energy prices will also contribute to that, because that  means synthetic fiber prices will remain fairly stable as well. What’s going to move the cotton market will be outside forces — what’s going on with crops like corn and beans that compete for acres and resources, as well as what’s going on with the general economy.”

The economy “seems to be getting better in a lot of respects,” Anderson says. “We’ve got real issues with long term unemployment — all sorts of issues in the labor market — but in terms of gross economic performance, things are starting to get better, and that should be a positive factor for all these markets.

“It’s going to be a tougher environment on the row crop side, in terms of marketing decisions, land rent decisions, capital investment decisions, than we’ve had for the last four or five years.”

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