High cotton yield hurt by low pricesPublished 10:25am Wednesday, October 3, 2012
BY STEPHEN H. COWLES/CONTRIBUTING WRITER
COURTLAND—Although the yields are promising for this year, the profit for cotton is expected to disappoint regional farmers.
A leftover abundance of the 2011 crop combined with sluggish world markets are the chief factors. The price has been hovering around 70 cents per pound, a marked contrast from last year’s range of 90 cents to $1.30. That is a 54 percent drop since early 2011.
Capron area farmer M.L. Everett acknowledged the price is certainly a concern.
“You know the prices have dropped significantly from last year,” Everett said. “I’m looking for something that may turn the world economy around and turn the price around.”
Prices are off from last year, said Johnny Parker, cotton agronomist for Commonwealth Gin in Windsor.
“There was a strong pullback on cotton prices back in the spring after some disappointing supply-and-demand figures. They had been in the 90s and then down to 70 cents, where they’ve been all summer.”
Parker cited several reasons.
“A build-up of stocks and the overall demand is not as good as it was,” he said. “Two-thirds of cotton is exported. We meet a lot of demand in the international market, which is the third leg to the stool. That’s related to the strength of the dollar versus the euro.”
He described the price range as “a zigzag pattern of up and down.”
Parker also said many cotton farmers will have a portion of the crop locked into the market price.
While it’s certainly possible to see an increase via a harvest rally, “I don’t have the insight to speculate that it might,” he said.
Parker is more optimistic about next year.
“The brighter spot is that next year’s cotton will compete with grain. It will have to,” said Parker, and added that this could allow for a higher cotton price in 2013.
Everett noted that weather conditions haven’t been ideal for cotton production for the past two weeks.
“We’ve had a little bit of boll rot and grade discount, lessening our yield. The conditions aren’t perfect. They never are, but you always pray for that,” he said.
Westley Drake at Sandy Ridge Farms doesn’t expect cotton prices to drop any lower.
“I expect corn, soybeans and wheat have had their highs,” Drake said. “It’s a difficult year planning-wise, but I expect a year from today that corn will be at its lowest, and cotton can only go up.”
Drake plans to grow something of everything to spread his risk.
Mark Hodges, president and general manager of Mid-Atlantic Gin outside Emporia, also acknowledges that prices are substantially down from last year.
“Carry-over stock from last year to this is weighing heavily on the price right now,” said Hodges.
Other factors include what he called uncertainty world wide, specifically debt problems in Europe and slowdowns in China and India.
“In the U.S., 75 to 80 percent of what we produce is exported,” which is a shift from 10 to 12 years ago owing to the loss of most domestic and spinning plants, he said.
“There are 75 to 76 million bales in the world market of the existing stock of inventory from last year,” Hodges said. “Predicted for this year is 109 million to 110 million worldwide. Whatever we produce will be added on.”
Southampton County’s Extension Agent Chris Drake says cotton prices are definitely not where they were last year at this time.
“They are about 25 cents per pound less than where they were last year at harvest time,” Drake said. The current price of cotton for harvest delivery is around 70 cents per pound, whereas in 2011 they were about 92 cents to slightly over one dollar.
“This definitely affects profitability and will very likely cause acreage shifts in 2013 to more grain crops like wheat, soybeans, and corn if the attractive prices of those commodities stay in place heading into the planting season,” he said.
When cotton is sold for 70 cents, it takes an above average crop to realize any substantial profits, he said.
“That being said, cotton has been our most consistent performer over the last 20 years and some will be planted regardless of price,” Drake said. “Corn acreage may increase some as well, but not to any extreme levels due to its high susceptibility to drought damage during the critical pollination period.”