Prepared by: Economic Services - National Cotton Council
February 2008
(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 2008 planting intentions survey.
In mid-December 2007, the NCC mailed out its annual early season planting intentions survey. Respondents are asked to give their plantings of cotton, corn, soybeans, wheat, and other crops for 2007 and intended acreage for 2008. The response rate on the latest survey was about 10%, comparable to the typical return rate.
As always, survey results should be viewed as a measure of grower intentions prevailing at the time 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.
Exhibit 2 – Before looking at the survey results, let’s review a few of the factors influencing planting decisions. We know that relative market prices will be a significant determinant of acreage decisions. As growers consider their 2008 planting decisions, they are comparing prices for cotton, corn, soybeans and other regional crops. During the survey period, December 2008 cotton futures averaged 75.6 cents – approximately 15 cents above year-ago levels. During this same period, the Chicago Board of Trade December 2008 corn contract averaged $4.79 per bushel – about $1.10 higher than the comparable contract in 2007. This contract traded as high as $5.25 per bushel during this period. Moving forward, it appears that the corn market is edging higher in order to compete for acres with a surging soybean market. The November 2008 contract averaged trading near $11.45 per bushel, approximately $4.15 above the 2007 contract. Soybean futures prices have continued to gain strength since the survey period closed. Coupled with USDA’s recent wheat acreage report, it is widely expected that a wheat-soybean double-cropping rotation will attract acres from both cotton and corn.
Growers will also be influenced by the significant increase in input costs, particularly fuel and fertilizer. 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. The lack of final farm bill specifics is expected to have little impact on early-season acreage intentions. Without further delay, let’s look at the survey results, starting with the Southeast.
Exhibit 3 – Survey respondents indicated an 11.5% decrease in the region’s upland area to 2.00 million acres. All states indicate declining cotton acreage, with Georgia and Virginia reporting the smallest percentage declines of 5 and 6%, respectively. Respondents in Alabama indicated an 11% reduction in cotton acreage while Florida growers are planning a 17% cutback. The Carolinas reported similar declines between 20 and 22%. Total 2008 acreage for each of the states is as follows: Alabama at 355 thousand acres, Florida at 70 thousand acres, Georgia reporting 981 thousand acres, North Carolina at 390 thousand acres, South Carolina acreage at 143 thousand acres, and Virginia at 56 thousand acres. In all states, the survey indicates that growers are shifting to a double-crop of winter wheat and soybeans. In many cases, respondents indicated an increase in the ‘Other Crops’ category, which is most likely peanuts.
Exhibit 4 – In the Mid-South, survey results show that all states intend to reduce cotton area for 2008. Growers in the region intend to plant 2.05 million acres, a decline of 26% from the previous year. All states in the region indicate a shift out of cotton and into wheat and soybeans. Coming on the heels of a sharp decline in 2007, the 2008 intentions put Mid-South cotton area at less than half of the 2006 level. The largest decrease is in Mississippi (-31%) with plantings of 454 thousand acres. Arkansas (-30%) and Tennessee (-29%) also show sizable declines with plantings of 605 thousand and 366 thousand acres, respectively. Smaller declines are expected in Louisiana (-18%) and Missouri (-8%).
Exhibit 5 – Survey results indicate the smallest drop will occur in the Southwest with intentions off 2% from 2007, bringing planted area for the region down to 5.02 million acres. The decline in the Southwest is the result of Texas indicating a 2% decline to 4.79 million acres. Within Texas, respondents from South Texas and the Blacklands region indicate a reduction in 2008 cotton acres, while growers in West Texas plan to increase cotton area. The results for West Texas are consistent with Oklahoma and Kansas, who plan to increase cotton area by 3 and 16%, respectively. In Oklahoma, the 3% increase puts cotton area at 180 thousand acres. Kansas growers indicate that they will plant 54 thousand acres. While up from 2007, their acreage is still less than half of the 2006 total.
Exhibit 6 – All states in the West region show declines in upland plantings, with the region as a whole down 39% to 252 thousand acres. In California, intended area of 91 thousand acres represents a 53% decrease from the previous year. The expected decline in acreage is the result of concerns over water availability and competition from specialty crops. Growers in New Mexico intend to decrease upland area by 27% to 34 thousand acres. Arizona growers indicate a drop of 25% to 127 thousand acres.
Exhibit 7 – Survey results indicate that U.S. cotton growers intend to decrease ELS plantings 21% to 231 thousand acres in 2008. All states indicate declines ranging between 5 and 21%. In California, a 21% reduction brings acreage down to 204 thousand acres. A decrease of 21% is indicated by Texas growers, bringing acreage to 20 thousand acres. Growers in New Mexico intend to reduce ELS plantings by 5% to about 4,000 acres while a 20% reduction to 2,000 acres is indicated for Arizona.
Exhibit 8 – Summing across the 4 regions gives intended 2008 upland cotton area of 9.32 million acres, 12% lower than 2007. Together with the larger ELS acreage, survey results indicate that total U.S. cotton plantings will be 9.55 million acres in 2008, 12% lower than the previous year.
Exhibit 9 – Assuming an average abandonment across the Cotton Belt of 8.3%, harvested area would be approximately 8.76 million acres. For all states, expected yields are aligned with recent trends. Applying each state’s yield to its 2008 projected harvested acres generates a crop size of 15.38 million bales, with 14.75 million bales of upland cotton and 628 thousand bales of ELS cotton. Weighting each state’s yield by 2008 area generates a U.S. average yield of 843 pounds. This compares to a 2007 yield of 871 pounds and a 2002-06 average of yield of 820 pounds.
Obviously, weather can have a dramatic impact on the final crop size. Under ideal conditions, 18 million bales would not be out of the question, while weather problems could also push the crop to between 12 and 13 million bales.
Exhibit 10 – For cottonseed, multiplying the point estimate of lint production by an average lint-seed ratio (1.43) generates expected production of 5.28 million tons. With 400 thousand tons in beginning stocks, 2008 cottonseed supply would total 5.68 million tons.
Exhibit 11 – Mr. Chairman, this concludes my report on the 2008 planting intentions of U.S. cotton growers.
