The cotton market is currently in a decline. Old crop (2018) prices have dropped 20 cents/lb since the highs back in June, and most recently fallen 6 cents over just the past month. Low prices are never good, but this is particularly bad given that many growers around Georgia have lost half or more of their crop due to weather. Fiber quality has been an issue and price discounts contribute to more financial loss.
The situation at present is a mix of both positive and negative forces. Looking strictly at the numbers, in my humble opinion, the fundamentals are not that bad. The US crop is still uncertain (the GA crop could get smaller); the US, China, India, and Pakistan crops are all less than last year; World and China stocks have declined significantly over the past few years; World cotton use is trending up; and growth continues in the Bangladesh and Vietnam markets.
The major factor influencing the market right now is fear and uncertainty in those numbers. When uncertainty rules the market, prices get discounted. Yes, world use is currently projected at a record level—but it seems very unstable and uncertain (Will the decline in oil prices start another cotton vs. man-made fibers trade-off?) Also, note that USDA has lowered projected use for three consecutive months. The tariff situation with China is still unresolved. US exports are currently projected at a very respectable 15 million bales for the 2018 crop marketing year—but is this achievable? Export potential to both China and Turkey is highly questionable.
Export sales are on the pace of USDA’s current projection of 15 million bales but sales have slowed. Actual shipments, at present, lag well behind the pace needed to meet the projection.
Other negatives include uncertain US stock market (commodities do get impacted by the direction of the stock market and the US economy) and, in the face of uncertain demand/use and exports, the strong likelihood of a larger US cotton crop for 2019.
Prices (Mar19 futures) are currently in the neighborhood of 73 cents. New crop Dec19 is around 74. For both remaining 2018 crop and upcoming 2019 crop, there is a chance that prices will move lower. But, we all know that anything is possible. For both old crop and new crop, given the uncertainties out there, it seems that a grower should consider opportunities to protect from the event of lower prices on at least a portion of the crop.
For remaining 2018 crop, pricing on a move back to 75 to 77 cents should be considered. But this means waiting, and waiting is risky. For expected 2019 production, growers could start pricing at 75 to 76 cents on December 19 futures. Add to sales if prices move higher. Are we happy at 75 cents? No. But growers need to consider protecting at least some portion of the crop from a below 70 scenario.
At current relative futures prices, cotton acreage is likely to be about the same this year. Corn may gain some ground from cotton, soybeans may give up some acres. Peanuts could gain acres especially, if cotton moves too much lower.
Those famous Kansas farm boys, the Peterson Bothers, have created another parody video called Farmers Rock Anthem, which is a parody of the popular song ” Party Rock Anthem.” The Peterson Brothers have published a number of these videos to tell the positive story of farming to people who really don’t understand anything about the industry. They may seem a little silly, but their strategy is working. This video was released back on December 1 and already has revived 371 thousand views in a little more than one month. Check out their latest video, and share it through your social media account to your friends. These young guys are working hard to tell the good story of modern farming in a way that people from their generation will enjoy.
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If you enjoyed this video, you might want to check out the featured videos from previous weeks: Friday Features
If you come across an interesting or humorous video, or a new product innovation related to agriculture, please send in a link, so we can share it with our readers. Send video links to: Doug Mayo
Join us on February 21st at the John F. Rhodes Civic Center (301 D’Olive Street, Bay Minette Alabama) for the 2019 Southwest Alabama-Northwest Florida Row Crops Expo. The free event starts at 8 am with this educational line up of topics and presenters:
The 2019 Carinata Summit will be held March 5 and 6 at the UF/IFAS North Florida Research & Education Center in Quincy, Florida (155 Research Road, Quincy, FL). Topics for discussion at the event will include: the public-private partnership for carinata supply chain development, focus groups related to feedstock development and best management practices, adoption and outreach, fuel and bioproduct development, enhancing carinata meal value, system sustainability, and carinata field tours. This two-day event provides a great venue for networking, and identifying opportunities to collaborate.
6th Carinata Biomaterial Summit & 2nd SPARC Annual Meeting
Tentative Agenda (All times listed in Eastern Time Zone) March 5, 2019 (Industry Focus)
8:00-8:30 AM: Check-in
8:30-8:45 AM: Welcome Address
8:45-10:00 AM: 1st slot of talks (Speaker 1: Agrisoma; Speaker 2: TBC; Speaker 3: TBC)
10:00-10:30 AM: Break and Poster Session
10:30-Noon-2nd slot of talks (high level-Speaker 1: ARA; Speaker 2: TBC; Speaker 3: CAAFI)
Noon to 1:30 PM-Lunch and Networking
1:30-3:00 PM-Presentations-agronomy & breeding, best management practices, meal and coproducts, fuel (15 minutes limit)
3:00-3:30 PM-Break and Poster Session
3:30-5:00 PM-Presentations-system metrics, supply chain, social science, extension, education and workforce development (15 minutes limit)
Dinner and Adjourn
March 6, 2019 (Producer Focus)
8:00-8:30 AM: Check-in
8:30-9:30 AM: Welcome address & talks (carinata supply chain, crop insurance, whole farm economics)
9:30 to 11:00 AM: Field day-tours of select carinata studies in Quincy with in-field talks
11:15 AM-12:30 PM: Panel or fishbowl conversation with producers, researchers, extension agents, industry partners-Social Science Team facilitates
12:30-1:30 PM: Lunch
Larger summit group adjourns – SPARC convenes for 2nd SPARC Annual Meeting
To register call or email:
Sheeja George at sheejageorge@ufl.edu
850-284-1334 / 850-875-7136
Don Shurley, Professor Emeritus of Cotton Economics
Nearby March futures seems to be working its way into a corner. There still seems to be solid support around 77 cents but then a hurdle to negotiate (or ceiling to break through) at around 82. March is currently around 79 cents.
Last month, I suggested that 80 cents or better would be a good target at which to do some additional pricing on a portion of remaining uncommitted production. That still holds. Prices have shown some willingness recently to move to 80 cents or better but have not been able to sustain it.
One would think with all the production and quality issues and uncertainties continuing to plaque the US crop, that the market would/could make a concerted move higher and stay there, but such has not yet been the case.
While the “floor” at 76 to 77 cents seems secure, at 79 to 80 cents (about where the market is now) there’s roughly 3 cents risk to the downside vs. also about 3 cents potential to the upside. Ideally, and I know this is what growers are hoping for, a little more push to the 84-85 cent area would sure be nice. I would consider that target #2 should we get there.
USDA’s December crop production and supply and demand estimates (released on Tuesday this week, December 11) did not provide positive news for the market. A brief summary:
The US crop was raised 180,000 bales from the November estimate. Yield was lowered further in Georgia, Alabama, and South Carolina but raised in Texas. The overall US yield was raised from the November estimate.
Projected US exports for the 2018 crop marketing year were unchanged from the November estimate.
The India, China, Turkey, and Pakistan crops were lowered.
Projected imports were unchanged for China, Bangladesh, and Vietnam.
World use for the 2018 crop marketing year was revised lower for the third consecutive month.
US exports for the 2018 crop year are projected at 15 million bales compared to 15.85 last season. Given a 2.3 million bale smaller crop this year and given the tariff situation uncertainties, 15 million bales in exports would seem to be a great achievement. Going forward, the market will certainly keep an eye on exports, because the bar has been set rather high it seems.
World use is currently pegged at 125.63 million bales. While this would still be a record use, it is 2% lower than the almost 128 million bale estimate made back in September. Yes, the latest estimate is still a record, but some of the air has been let out of the balloon and this undoubtedly impacts the market. This possible erosion in demand is concerning, as with exports, the market will keep an eye on this going forward.
Fiber quality is also an issue. Whether it manifest itself into an industry-wide marketability issue remains to be seen, but fiber quality is wreaking havoc with a significant portion of growers in the Southeast. On top of yield losses due to hurricanes Florence and Michael, continuous rains and more recently, cold weather are delaying harvest and causing deterioration in fiber quality and subsequent financial losses.
31% of the Georgia crop was planted “late” (in June). This compares to 20% typically. As of November 25th, 72% had been harvested compared to 81% average and 83% last season. Delay has worsened since then due to continued rain and wet field conditions. As of Nov 25th, South Carolina was 16 percentage points behind normal harvest.
Lodged and twisted plants due to wind damage, delayed harvest and cold temperatures, and lack of sunshine have caused increased bark content, lower Color grades, and high Leaf grades.
In Georgia, 47% is lower than 31 in Color and Color grade has worsened weekly. 25% of the crop has a Leaf grade higher than the corresponding Color grade. For the season thus far, 9½% of the Georgia crop has graded with bark but for the most recent week, 19%.
Southeast discounts for bark (level 1) are 400 points; mostly 100 to 300 points for Color; mostly 50 to 150 points for Leaf grade.
It’s not too late to register for the 2018 Alabama Row Crops Short Course that will be held in Auburn next Thursday, December 13th and Friday December 14th. An event agenda and program updates are available by visiting www.AlabamaCrops.com. Continuing education units and pesticide points will also be available for all attendees. Register online at https://bit.ly/2ObJhYC. There is no registration fee, however, advanced registration is required. Additionally, interested producers may find updates via the Alabama Crops Facebook page or the Alabama Cooperative Extension Facebook page.
It’s not too late to register for the 2018 Alabama Row Crops Short Course that will be held in Auburn next Thursday, December 13th and Friday December 14th. An event agenda and program updates are available by visiting 