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.
Jackson County cotton field with harvested cotton averaging 1800 pounds/acre on the right verses defoliated cotton blown to the ground and destroyed by wind from Hurricane Michael on the left. Credit: Doug Mayo UF/IFAS
Dr. Michael J. Mulvaney and Dr. David L. Wright, Cropping Systems Specialists, UF/IFAS
In response to requests for information about post-hurricane mitigation for producers in the Florida Panhandle, this statement is meant to serve as a starting point for farmers and Extension professionals seeking information about immediate steps to take after hurricane damage to farm operations.
- Document the damage. Timely, good documentation of damage is the first thing needed. Timely photos with timestamps (as soon as it’s safe to do so, before clean-up) of damage to fences, conservation structures, trees/windbreaks, irrigation systems, farm machinery, and equipment, along with estimates of yield loss (compared with historical yields), etc. will be critical for insurance and assistance claims. Yield loss can be documented if any harvest was done prior to the damage, and also attempting to harvest after the damage occurred. An affidavit may be necessary.
- Contact your crop insurance agent. Many cotton fields may be zeroed out while other fields may have enough cotton left to make harvest
- Contact the FSA. Your county Farm Service Agency is your first point of contact for assistance. Since available assistance and programs will vary
by county, your county FSA will have the most up-to-date information available to you in your area. Visit them as soon as possible so that you
know the documentation that will be required for your claims.
- Attend a Disaster Assistance Information Meeting. These are scheduled by the FSA for the following counties:
- Washington County – November 6, 2018, 9-11 a.m.
First Baptist Church Sanctuary
1300 South Blvd, Chipley, FL 32428
- Jackson County – November 6, 2018, 2-4 p.m.
Jackson County Extension Office
2741 Penn Ave., Marianna, FL 32448
- Calhoun County – November 7, 2018, 9-11 a.m.
Rivertown Community Church Sanctuary
19359 SR 71 North, Blountstown, Florida 32424
- Gadsden County – November 7, 2018, 2-4 p.m.
FAMU Research and Extension Center
4259 Bainbridge Highway, Quincy, Florida 32352
Disaster assistance programs can be found here:
A simple tool to find which programs apply to you can be found here:
Cotton laid down in the field by Tropical Storm Gordon.
For most row crop growers in Florida, Tropical Storm Gordon had minimal impact. However, in the westernmost part of the state, much of the cotton suffered significant damage. Though the winds were not extremely strong, the combination of saturated soils and winds wreaked havoc on what had looked like a stellar cotton crop.
The western Panhandle had been blessed with ample rains throughout the summer. Prior to T.S. Gordon making landfall on September 3, many farmers were excited about the prospective yields for their 2018 cotton crop. In northern Escambia County, farmers reported rainfall ranging from 7-11 inches. Though the area did not receive a long period of high winds, the combination of waterlogged soils and wind caused a great deal of lodging in cotton that was nearing full maturity almost ready to be defoliated. Canopies heavy with loaded bolls and wet leaves laid down on damp soil and have not since righted their position. The bolls touching wet ground have rotted off the plant. The plants are matted throughout the field. Many farmers have shared their concerns with the difficulty of defoliating a field that has cotton laying across the row middles.
Though the winds from T.S. Gordon died down within 24 hours, the rains continued. It has continued to rain regularly since September 3rd. Not only is the cotton worse for wear, but peanut harvest has been steadily delayed by the rains. Greg Phillips, manager of Birdsong Peanuts-McCullough, said “Peanut harvest in the area has been greatly slowed by the rain.” He estimates that around 7% of the entire crop has been harvested, whereas if the weather conditions had been favorable, 15% of the year’s crop would been harvested by this time. He does report good grades so far, but he is concerned that further delays might cause a decline in both yield and grades.
The Agroclimate image below shows the total rainfall in inches from August 13th to September 25th. It is evident that the western Panhandle and Lower Alabama have received ample amounts of rain, but the story that it doesn’t tell is that all of this rainfall is coming at a time of year when conditions are generally starting to dry out for harvesting.
The image below from Agroclimate provides a good comparison of rainfall totals from the past 45 days to September 25. The map of the southeast on the left shows the historical average rainfall for this time of year The more colorful map of the southeast on the right shows the deviation from “normal” rainfall amounts. In the case of late summer 2018, T.S. Gordon brought in much higher than average rainfall in the areas shaded in blue and purple.
It will take some time to know the full extent of the impact from T.S. Gordon. Crop damage appears significant, but the full effects will not be known until after the completion of the 2018 crop harvest.
On September 7, 2018, courtesy of Clover Leaf and Sowega Cotton Gins, the Jackson County Extension Office hosted a two-hour meeting for cotton growers. Don Shurley Professor Emeritus of the University of Georgia and John VanSickle with the University of Florida shared pertinent information regarding risk management program decisions, and the upcoming deadlines for cotton growers. This meeting was also web broadcast via Zoom to participating Extension Offices across Florida’s Panhandle in order to increase the number of producers reached. The meeting was recorded live and the labelled presentations are available below for viewing along with their PDF versions.
The first hour consisted of Don Shurley giving an overview of the seed cotton program (specifically in terms of how it works and how prices and payments will be calculated) and then discussing the generic base conversion options. The following was the recorded presentation explaining the Seed Cotton Program provided at this training.
Important date regarding the seed cotton program:
1. December 7, 2018 -enrollment deadline for seed cotton program and make base elections.
Seed Cotton Program Overview Handout used at the meeting
Printer friendly Seed Cotton Presentation
Seed Cotton Program Decision Aid spreadsheet mentioned in the presentation
Dr. Shurely also wrote an article on the Seed Cotton Program: Understanding Your Generic Base Conversion Options with the New Seed Cotton Program
After the farm bill update, Dr. Shurely also briefly covered the Market Facilitation Program (MFP) and what it entails.
Market Facilitation Program (MFP) Handout
During the second hour, John VanSickle discussed the Wildfires and Hurricanes Indemnity Program (WHIP). This program enables the USDA’s Farm Service Agency to make disaster payments to offset losses from hurricanes and wildfires during 2017. WHIP covers both the loss of the crop, tree, bush or vine as well as the loss in production.
Important dates regarding the WHIP program:
1. November 16, 2018- enrollment deadline.
WHIP Program Factsheet
Printer friendly WHIP Presentation
Don Shurley, Professor Emeritus of Cotton Economics
Our thoughts and prayers go out to everyone, but especially for our fellow farmers and cotton producers in North Carolina, South Carolina, and Virginia.
The very latest projected path of the storm (as of this morning), takes it along the North Carolina coast then inland across virtually all of South Carolina. This storm is slow moving—meaning that it will dump a lot of rain, and there will be high winds for several days.
Accumulated rainfall from this storm is expected to total 12-18 inches or much more in some areas and accompanied by high winds. Most areas, even if not in the most heavily impacted area, are expected to receive totals of 5-12 inches of rainfall.
It looks like Georgia may be fortunate to escape the brunt of any major impact on crop production:
“I am relieved to say that with the current path of the storm, impacts on most of Georgia are now expected to be minimal. Eastern counties will still experience some wind gusts from the storm, which could cause isolated power outages, but they are expected to be less than 40 mph. Rainfall will be confined to the northeastern part of the state and should amount to less than two inches in all. The rest of the state should see no rain at all from the storm, which is not good for areas that are currently suffering from dry conditions. The southern half of Georgia should not experience any significant impacts from the storm, and northern Georgia’s impacts will be small and limited in space and time.” Pam Knox, UGA Agricultural Climatologist. September 14, 2018
North Carolina, South Carolina, and Virginia were forecasted to produce a total of 1.58 million bales of cotton this year. Recognizing the location of most cotton production in these states (based on 2017 county production), it appears that South Carolina cotton will be subject to heavy rainfall as well as North Carolina. Virginia will receive less and east Georgia mostly 1-2 inches or less.
As we experienced with Irma here in Georgia last year, the damage from sustained high wind can be significant—resulting not only in lost lint from open bolls, but also twisted and lodged plants difficult to harvest. As of Sept 9, the NC crop was 43% open, SC 28%, and VA 37%.
The visions of a return to 90-cent cotton appear to be fading. The good news is that the market is clearly showing signs of good support at roughly 82 cents. Support is a good thing; but prices (Dec futures) have struggled to clear a hurdle at 85 cents—we’ll first have to clear 85, if we hope to reach 90. Producers looking for an opportunity to add on to earlier sales, support is good but a rally is even better.
USDA’s September estimates raised the US crop to 19.68 million bales—440,000 bales higher than the August estimate. The 2018 forecast yield was lowered just a bit, but acres planted was raised 520,000 acres.
The US crop is still a big unknown. This is one thing giving us support. Texas, as of Sept 9, is 62% poor to very poor condition. The September USDA numbers lowered the Texas state average yield to a projected 694 lbs/acre—down from 726, but added roughly 200,00 more acres to be harvested.
US exports projected for the 2018 crop year were raised 200,000 bales from 15.5 million bales to 15.7 million. World demand is strong but there is some skepticism within industry about whether or not USDA is over-reaching a bit on its export number. 2017 crop year exports were 15.85 million bales.
Compared to the August estimates, China’s production for this season was raised 1 million bales; India production was unchanged; Australia production was cut 550,000 bales and Brazil raised ½ million bales; Chinese imports and use were unchanged; Bangladesh and Vietnam imports were unchanged.
Although prices appear to have good support, producers should be 50% sold or better at this point. The current level of prices (in the 82 cent neighborhood) is disappointing compared to where we have been. But if you’re not already at the 50% level, you also need to think about guarding against this market going to less than 80 cents and you being at-risk with most of your crop.
On the other hand, if you are already 50% or more priced, rallies to the 85 cent area could be a good opportunity to add further to sales—unless you want to take the risk of holding out for 85 to 90—but then realizing you’re also taking the risk that the current level of support will hold.