Prepared by: Economic Services - National Cotton Council
February 2010
(The text below corresponds to the slides above. A detailed table of the planting intentions is below.)
Exhibit 1 – Thank you, Mr. Chairman, for the opportunity to address the members of the American Cotton Producers regarding NCC’s 2010 planting intentions survey.
Exhibit 2 – In mid-December 2009, NCC mailed out its annual planting intentions survey. Respondents were asked to give their plantings of cotton, corn, soybeans, wheat, and other crops for 2009 and their intended acreage for 2010.
Exhibit 3 – Before looking at the survey results, let’s review a few influencing planting decision factors. We know that relative market prices will be a significant determinant as growers compare cotton prices to competing crops in their region. During the survey period, December 2010 cotton futures averaged slightly above 75 cents, approximately 20 cents above year-ago levels. During this same period, the Chicago Board of Trade December 2010 corn contract averaged $4.35 per bushel – roughly the same, down only 15 cents to the comparable contract in 09. Similarly, the November 2010 soybean contract averaged near $10.00 per bushel, unchanged from the prior year’s contract.
Growers will be persuaded by their relative operating cost, particularly fuel and fertilizer that increased this year. While final acreage decisions will consider expected returns of cotton and competing crops, farmers must also take into account agronomic considerations such as crop rotation and new seed varieties. Another influencing factor is the ratio of oil at $80 per barrel to corn at around $4 per bushel and its effects on profitability of ethanol production which has improved from 2009, but well below the level of 2007 and 08. Finally, weather and soil moisture levels around planting always dramatically effects growers’ decisions.
Exhibit 4 – Attitudes toward cotton price this year were more optimistic as we saw the Dec10 contract rise from 65 cents in August to over 77 cents around the first of the year. This is in stark contrast to last year where growers watched prices drop from about 85 cents to a low of 45 before settling around 55.
Exhibit 5 - Weather, ground level moisture and water availability is always closely monitored during the critical planting decision time. This has especially been the case in the prior two years. As you can see the Southeast in 2008 went into plantings with a severe drought in place.
Exhibit 6 – In 2009, it was Texas that had to deal with drought conditions, specifically the Coastal bend and South Texas.
Exhibit 7 – Now looking at 2010 the major growing areas are entering the spring in better shape then they have in several years. This could alleviate some of the drag on harvested acres and yields across the belt.
Without further delay, let’s look at the survey results, starting with the Southeast.
Exhibit 8 – Survey respondents indicated a 12% increase in the region’s upland area to 2.1 million acres. All states except Florida indicate a recovery in cotton acreage. Growers in Florida plan a 2.7% decrease with area shifting to peanuts and soybeans. Respondents in North Carolina and Alabama indicated the largest percentage increase in cotton acreage at 19.9% and 19.5%, respectively. The shifts in these two states were mixed coming from reduction in corn and soybeans. The expansion in South Carolina at 12.7% and Virginia at 10.3% were largely at the expense of soybeans, while Georgia’s additional acres of 8.9% was from corn.
Total 2010 acreage for each of the states is as follows: Alabama at 306 thousand acres, Florida at 80 thousand, Georgia at 1.09 million, North Carolina at 448 thousand, South Carolina at 130 thousand and Virginia at 71 thousand.
Exhibit 9 – Across the Mid-South, growers intend to plant just less than 1.8 million acres, an increase of 8.4% from last season. While all states indicate more acres to cotton, the magnitudes varies from a modest 0.4% in Arkansas to 18.7% in Mississippi, followed closely by Tennessee at 18.0%, with Missouri at 7.7% and Louisiana adding only 1.1%.
Missouri growers indicated expansion in cotton acres will mainly be at the expense of corn, where producers in Louisiana and Mississippi noted both corn and soybeans. In Arkansas and Tennessee cotton is following acres that were devoted to wheat and soybean double cropping in 2009.
Total 2010 acreage for each of the states is as follows: Arkansas at 522 thousand acres, Louisiana at 233 thousand, Mississippi at 362 thousand, Missouri at 293 thousand, and Tennessee at 354 thousand.
Exhibit 10 – Survey results indicate the largest increase in acres will occur in the Southwest region with intentions up 475 thousand acres or 9.1% from 2009, bringing planted area to over 5.7 million acres. A large part of the expansion in the Southwest is the result of the drought in Texas subsiding with cotton acres up 400 thousand.An additional 61 thousand acres combined across Oklahoma, up 26% and Kansas up 19% as farmers shift away from wheat.
Total 2010 acreage for each of the states is as follows: Kansas at 45 thousand acres, Oklahoma at 259 thousand and Texas at 5.41 million.
Exhibit 11 – All states in the West region show increases in upland plantings, with the region as a whole up 26.6%. In Arizona, intended area of 175 thousand acres represents a 20.4% increase from the previous year. The expected increase in acreage is coming in response to better price signals and less competition from feed crops and specialty crops. California’s actual plantings could ultimately be dictated by water costs and availability. At the time of the survey, California farmers intend to plant 97 thousand acres, a rise of 37.1%, with the increase coming at the expense of corn, wheat and specialty crops. New Mexico is reporting intentions of 40 thousand acres, up 31.9% from 2009.
Exhibit 12 – With the recent demand for ELS and the run up of its prices has sparked survey respondents’ to indicate that U.S. ELS intended cotton area plantings will rise by over 24% to 176,000 acres in 2010. Each of the 4 producing states indicated more acres compared to 2009, with California planting 152 thousand acres, or 27.9%. In addition to improving market prices, growers in California are encouraged by the availability of a new Roundup Flex Pima variety. In Texas, a 6.5% increase brings acreage to 19 thousand acres. Producers in Arizona at 18 hundred acres and New Mexico at 31 hundred indicate increases of 5.0% and 3.6%, respectively.
Exhibit 13 – Summing across the 4 regions gives intended 2010 upland cotton area of 9.916 million acres, 10.1% higher than the 2009 season. Coupled with the rising ELS acreage, survey results indicate that total U.S. cotton plantings sums to 10.093 million acres, 10.3% higher than the previous season’s final planted figures.
Exhibit 14 – Assuming an average abandonment across the Cotton Belt of 11.5%, harvested area would be approximately 8.9 million acres. For all states, expected yields are aligned with recent trends. Weighing each state’s yield by the 2010 area generates a U.S. average yield of 832 pounds. This compares to a 2009 yield of 774 pounds and a 05-09 average of 822, but well below the 879 record for the 2007/08 season.
Exhibit 15 – Applying each state’s yield to its 2010 projected harvested acres generates a cotton crop of 15.5 million bales, with 15.0 million of upland and 473 thousand of ELS. Obviously, weather will have a dramatic impact on the final crop size, particularly in light of the fact that Texas is expected to account for 54% of U.S. cotton area. Under ideal conditions, 17 to 18 million bales would not be out of the question, while weather problems could pull the crop down to 12 million.
Exhibit 16 – For cottonseed, multiplying the point estimate of lint production by an average lint-seed ratio of 1.43 generates expected production of 5.2 million tons. With 425 thousand tons in beginning stocks, 2010 cottonseed supply would total 5.7 million.
Exhibit 17 – As always, survey results should be viewed as a measure of growers’ intentions prevailing at the time when the survey was conducted. Similar to what we’ve seen in past years, changing climate and market conditions can cause actual plantings to be different from growers’ stated intentions. Analyzing the change in prices since January 4, roughly the mid-point of the peak response period, clearly shows that cotton prices relative to corn and soybeans have fallen at a slower rate. It must be pointed out that some growers’ decisions for acres will be completed in February while the bulk of the U.S. acres still have one to three months before planting decisions are finalized.
Exhibit 18 – Mr. Chairman, this concludes my report on the 2010 planting intentions of U.S. cotton growers.