Uptick in Demand, Prices Driving Increase in Cotton Acres

By Casey Wooten

Stronger cotton prices and the continued slump in other crops such as corn are driving farmers to plant more of the popular textile crop.

The Agriculture Department’s crop planting forecast for 2017, released March 31, projects a 21 percent jump in U.S. cotton acreage for the year to about 12.2 million acres. The biggest jumps were in major cotton producing states in the South such as Texas, Georgia, Mississippi and Arkansas.

Improving prices are driving some farmers to increase their cotton acres, sometimes swapping cotton for crops harder hit by narrowing profit margins, analysts said.

“The main driver that is pushing that shift right now is definitely price,” said Shawn Wade, director of policy analysis and research as Plains Cotton Growers, Inc., a Texas-based cotton trade group.

Generic cotton futures have been on a steady uptick for over a year, increasing from 58.75 cents per pound in April 2016 to 74.76 cents per pound in April of 2017. Those numbers remain off from their 2014 highs of more than 90 cents per pound, however.

But compare that with other crops competing in many places for the same farm acreage, like corn, which at $3.61 per bushel is far off its 2013 highs of $8 per bushel.

Still, cotton occupies a much smaller footprint in the U.S. compared to other major crops. The USDA said 2017 planting expectations for corn were down 4 percent to 90 million acres, while soybean acreage was a record high of 89.5 million acres.

Prices may be the main force driving the upturn in cotton acreage, but there are others as well, Ronnie Lee, chairman of the National Cotton Council, said during an April 4 hearing in the House Agriculture Committee.

“This increase reflects several factors, including the availability of seeds with new herbicide tolerant traits, increased water supplies in some regions, and declines in the expected returns of competing crops,” Lee said.

For the most part, the new acreage is coming from farmers who had decreased cotton acres to plant another crop and are returning, Wade said.

“When they compared it against cotton, the projected returns for cotton are better,” Wade said.

International Demand.

Global cotton trade is expected to rise for 2017 by 2 percent over the previous year, with increased demand coming from India and Vietnam, according to a March USDA report.

The U.S., China and India provide about two thirds of the world’s cotton, with the U.S. ranking third among them, according to the USDA. They send that cotton to clothing makers in the world’s top two cotton importing countries, Bangladesh and Vietnam, with China rounding out the top three.

Supplies of cotton are expected to tighten in 2017 and 2018, driven largely by heavy consumption from China, according to separate March report from the Agriculture Department.

The USDA expects China to use nearly 36.3 million bales of raw cotton in the 2016-2017 year, up from 35 million in the 2015-2016 year and the highest in five years.

Globally, cotton production for the 2016-2017 year is expected to be 105.7 million bales, with consumption outpacing that, reaching 112.4 million bales over the same period, according to the USDA.

Jody Campiche, vice president of economic and policy analysis for the National Cotton Council, told Bloomberg BNA that currency issues in India, a major cotton exporter, may drive more buyers to U.S. cotton suppliers as well.

India recently launched a demonetization program in which the country recalled 500 and 1,000 rupee notes in an effort boost participation in the banking system and increase tax revenue.

“It’s really affecting their currency exchange and they are not just getting cotton out,” Campiche said.

Moreover, India’s 2016-2017 cotton crop is projected to remain below its five-year average, USDA said.

That’s helped drive increased demand for U.S. Cotton from textile producing countries such as Pakistan and China, she said.

“We don’t know if next year India will have all these problems worked out,” she said.

To contact the reporter on this story: Casey Wooten in Washington at cwooten@bna.com

To contact the editor responsible for this story: Paul Hendrie at pHendrie@bna.com

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