A sizzling rally that rocketed wheat and soybean futures to multi-year highs will further depress US cotton plantings in 2008 as the surge took place just when farmers were deciding what to plant this spring.
This means the annual potential plantings survey by the US National Cotton Council, an industry group, which showed American farmers sowing 9.5 million acres to cotton, is out of date and too high. The 9.5 million acres would have been the lowest in a quarter century and down from 10.8 million last year and more than 15 million acres in 2006.
"I would give it (US cotton plantings) a high probability of being lower," Carl Anderson, an influential economist with Texas A&M University, told Reuters in a telephone interview.
He believes actual US cotton plantings will be closer to 9.3 million acres and added there are others in the industry who would peg it near 9.0 million acres. Since the beginning of the month, soybean futures on the Chicago Board of Trade have rallied relentlessly and are now fetching more than $13 a bushel, while wheat futures sprang up above $10 a bushel.
In contrast, the December cotton contract against which the new crop will be priced has traded between 75 and 77 cents per lb, and analysts feel that is simply not enough for many farmers to even consider planting cotton this year.
"The NCC acreage survey probably puts cotton acres too high," said a daily commentary by John Flanagan of brokers Flanagan Trading Corp, adding this was the case because soybean prices "gained so much after the survey dates." The only crimp in the equation, say industry analysts, is the weather in the growing season.
Sharon Johnson, cotton expert for First Capitol Group in Atlanta, Georgia, said the current La Nina weather phenomenon could "keep conditions more dry than not this sprinrediction Center said last week La Nina, which results in cooler-than-normal waters in the equatorial Pacific, could last into the Northern Hemisphere summer and lead to below-average rainfall in the south and south-eastern United States, which are prime cotton-growing areas. Johnson said, if this happens, "planting corn in the South-eastern US will be difficult and keeping the wheat crop into harvest may be tough."
"Soybeans is an option, but only if seed is available, which is supposed to be in short supply," she added. An official of life sciences company Monsanto said recently seed companies were scrambling to churn out soybean seed to meet surging demand from farmers.
US soybean plantings last year stood at 63.7 million acres and they could rise by 4 million to 5 million acres this season, given where prices now stand. The American Farm Bureau Federation has pegged 2008/09 soybean acreage at 69.5 million acres.
Some analysts believe US cotton plantings this year will drop below 9.0 million acres, which means US cotton production in 2008/09 may be much lower than the NCC forecast of 15.4 million (480-lb) bales.
"It is very difficult to imagine (an) economic justification for cotton in the US Delta or Mid-South," Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana, said in a separate interview. He said, if the NCC held its survey at this time, American cotton planting intentions for 2008 would lie between 9.1 and 9.3 million acres. "Should cotton sell off 2 to 3 cents from here, plantings could fall well below 9.0 (million acres)," he concluded. The market will now be looking to the end of March, when the US Agriculture Department's annual planting intentions report is released.
"We expect the USDA report to show cotton acres at 8.6 (million) to 8.9 million acres, and half of those acres will be in Texas, where dry conditions will likely severely limit production," Flanagan said.