NEW YORK: US cotton farmers are expected to grow a historically small crop next year, the U.S Department of Agriculture said on Thursday, reinforcing expectations that fiber will continue to lose acreage to higher-priced grain crops.
In the first real indication of the 2013/14 crop, the USDA said US growers will plant about 10.026 million acres (4.06 million hectares) of cotton for next year's crop, the smallest acreage in four years. That is down 19 percent from this year and historically low, as a price slump and demand erosion has pushed growers to abandon cotton in favor of more lucrative grain crops.
The USDA's estimate is above an initial industry forecast in February of 9.02 million acres, but was broadly in line with industry expectations in recent weeks.
The report showed that the recent price rally has been largely benign for cotton. Thursday's plantings projection was in line with industry estimates in January before a rally to prices above 90 cents sparked expectations growers would send more acres back to cotton.
Cotton plantings have only been under 10 million acres five times in the past century, in 1967, 1975, 1983, 2008 and 2009, according to USDA records.
Thursday's report is the first concrete indication of the size of next year's crop, as planting gets underway.
Annual changes in crop sizes are common, but cotton growers have dialed back cotton crops notably after fiber proved to be one of the worst performing commodities over the past two years and grain prices surged last year.
"If realized, planted area in Arkansas, Louisiana, Mississippi, New Mexico, and Oklahoma will all be record lows," the USDA said on Thursday.
In contrast to cotton, the rally in grains has prompted farmers to grow their biggest corn crop since 1936 and the fourth largest soybean crop on record in 2013, Thursday's forecast said.
Price volatility has encouraged mills to utilize lower-priced, synthetic fibers, particularly after cotton climbed to historical highs above $2 a lb in early 2011.
Amid the erosion of demand, cotton prices have fallen steeply, and global stockpiles have grown.
"The recent price rally did help some. But we're still at a low, we just thought it would be more of a low," said Knight Capital's cotton specialist Sharon Johnson.
The most-active May cotton contract on ICE Futures US slid 0.07 cent, or 0.08 percent, to settle at 88.46 cents a lb on Thursday, after jumping as high as 90.24 cents shortly after the report was released.
Prices fell back after meeting strong psychological resistance at the 90-cent level, traders said.
<Center><b><i>Copyright Reuters, 2013</b></i><br></center>
Comments
Comments are closed.