By Yiannis Papadogiannis
Following four consecutive seasons of declining cotton acreage, Greece’s new crop is showing strong signs of recovery. Many farmers are coming back to cotton after disappointing returns from their alternative crops, primarily wheat and corn. For the first time in the last five years, there is optimism in the market. Growers have noticed the price rally of New York cotton futures and anticipate high seed cotton prices for the new crop. Ginners had a profitable season in 2009-10 and are ready to reward farmers who commit to cotton cultivation.
Greek crop 2010/11 estimates
Like many other countries, high production costs and low lint prices prompted Greek growers to turn to alternative crops. In 2009-10, total cotton acreage was about 200,000 hectares—the lowest of the decade—although the number announced by the Ministry of Agriculture was higher by 35,000 hectares.
There is always a difference between the acreage announced by the Ministry and the “real” cotton acreage cultivated professionally by farmers. Because of the new E.U. Common Agriculture Policy (CAP), some growers are more interested in the subsidy (65 percent de-coupled and 35 percent coupled) than taking care of their fields or picking their cotton. There are also farmers who, to get the cotton subsidy, produce two different crops in the same year. In those cases, the cotton yield is very poor (if it’s harvested at all) and is often referred to as “dry fields” because it is not irrigated effectively. As a result, it should not be counted toward the overall acreage.
The Ministry of Agriculture has not yet announced any figures about the new crop, but several trustworthy sources have estimated that cotton acreage will approach 230,000 hectares—an increase of 15 percent to 20 percent over last year’s figure.
The areas with the biggest increase are expected to be Macedonia (22 percent) and Thessaly (15 percent to 18 percent), largely due to a shift from corn to cotton. South Greece (Levadia) and Thrace likely will see a smaller increase of about 5 percent. With lint prices on the high side, seed cotton prices likely will be too, so cotton growers will be looking for high yields.
In addition, the government has already announced that a new set of controls will be applied next season in order to minimize “subsidy hunting” by farmers. The Greek Ministry of Agriculture, together with the department of cotton subsidies (OPEKEPE), will force growers to reach a minimum yield and plant a certain percentage of certified seed on their fields in order to get the 35 percent coupled subsidy.
These developments make it likely that next season’s lint production will increase even more than the acreage will. The more optimistic experts believe production might even approach 300,000 tons! Even with a more conservative outlook, it is very likely that lint production will range between 260,000 and 270,000 tons, an increase of 30 percent to 35 percent over last season (assuming weather conditions are favorable).
Ginner’s selling strategy and balance sheet for July
For the first time in many years, we will enter the new crop with no beginning stocks. Last season’s limited production of 200,000 tons was not enough to cover our domestic and export needs, therefore ginners sold all of their stocks to take advantage of the market’s high prices.
As a result, some spinners and ginners imported cotton from Africa and Brazil. Ginners acted as traders and bought cotton to sell to their usual channels until the new crop comes to market. It is possible that in the coming seasons, some financially strong ginners will continue to trade other crops as part of a diversification strategy.
Regarding future sales, most ginners have already committed a considerable part (about 40,000 tons) of their new production—a historically high number. A part of this volume is not yet sold to clients abroad, with some ginners buying from cooperatives or smaller ginning firms. Ginners are not in a hurry to sell more, even though New York futures market is correcting and physical prices remain strong. With new crop seed cotton prices still unknown, ginners are reluctant to take on more risk.
