US cotton plantings are expected to fall sharply this year as farmers switch to corn, where values have spiked to a 10-year high, analysts said on Wednesday. A survey by Reuters of industry analysts and brokers showed they expect US 2007 cotton plantings to reach an average of 12.217 million acres, down 20.02 percent from cotton sowings in 2006 of 15.276 million acres.
The sizzling rally in corn futures at the Chicago Board of Trade is the catalyst for farmers turning away from cotton. The US Agriculture Department will release its annual potential plantings report at 8:30 am EDT (1230 GMT) on Friday. "It takes less capital to plant corn," Carl Anderzon, an influential economist with Texas A&M University, said in a phone interview. "It's less hassle."
"Since the rally in corn began last fall, and soybeans quickly caught up shortly thereafter, there has been plenty of time for producers to make significant changes to intended crop preferences," said a report by Sharon Johnson, cotton expert for First Capitol Group in Atlanta, Georgia.
Keith Brown, president of commodity firm Keith Brown and Co in Moultrie, Georgia, said most farmers tilling irrigated land would make the switch quickly and the only question would be if dryland farmers would follow suit.
Analysts said a fall in US cotton plantings could take a bite out of production because cotton will be sown in what they call marginal land. Ron Lawson, an analyst for logicadvisors.com in Sonoma, California, said the normal practice for farmers would be to sow their best land to the more profitable crop. "Corn will replace (soy) beans and beans will replace cotton," he said. "(Cotton) yield is going to be down."
"We feel strongly that the 2007 cotton crop will not yield well, as producers will plant the 2007 crop on marginal ground, and they will not spend much money on the crop as far as irrigation, labour, and chemicals are concerned," said Alan Feild, an analyst for iamhedged.com in Memphis, Tennessee.
The analysts said a USDA estimate between 12 million and 12.5 million acres would probably be neutral for the market. Lawson said any figure below 12 million would be bullish and a figure over 12.5 million bearish for cotton futures.
"For my personal number, I'm between 12 and 12.5," Anderson said, adding, though, that he doubted "the USDA will pull it down that low." The new-crop December cotton contract at the New York Board of Trade closed Tuesday at 59.08 cents per lb and was trading down 0.01 cent at 59.07 cents at 10:35 am EDT (1435 GMT).
Jobe Moss, an analyst for brokers and merchants MCM Inc in Lubbock, Texas, said cotton prices would get "jetted up" only if the figures come in sharply below expectations.