"Differences between what cotton growers say they're going to plant in January and what actually ends up being planted in May isn't rocket science. It can be attributable to weather or changes in relative prices in competing crops, such as corn and soybeans."
Early guesstimates of U.S. cotton acreage point to producers planting about 10 million acres in 2010, which would be an 11 percent increase over 2009. The bump in acres is due to rising cotton prices, declining corn prices and other factors.
But when cotton planting is complete sometime in May (we hope), how close will actual acreage track these early projections? According to John Robinson, Extension economist at Texas A&M University and a featured speaker at the Ag Market Network’s January teleconference, reliability of projections can differ significantly by region and by year.
The first scientific report on cotton acres is the National Cotton Council’s Early Season Planting Intentions Survey, which is conducted in December and released at the NCC’s Annual Meeting during the first week of February.
USDA conducts a March survey for all crops, which results in the Prospective Plantings report, released at the end of March. A few months later, USDA will conduct a survey of actual planted acres, and release a report at the end of June.
Differences between what cotton growers say they’re going to plant in January and what actually ends up being planted in May “isn’t rocket science,” Robinson says. “It can be attributable to weather or changes in relative prices in competing crops, such as corn and soybeans.”
Robinson noted that over the last three months of 2009, cotton futures climbed from below 72 cents to the mid-70-cent range by early November and peaked at 78 cents in late November.
“Prices began to come down a little and go sideways and in December, we saw a trend downward, and a recovery just below 75 cents. Here recently, we’ve seen another drop, and it seems to be holding around 74.5 cents. Over this time, producers began to do some forward pricing of cotton, so these higher prices were attracting acres.”
Meanwhile December corn and beans had their respective rallies in October and November,” Robinson said. “They peaked and recently have come down hard. Cotton has probably gained some ground on those crops.”
All this has contributed to the optimism for cotton, notes Robinson. “But what could change in the coming months? What needs to happen from a price standpoint that would either encourage additional plantings or reverse those intentions?”
For a historical perspective, Robinson compared projected acres from the NCC’s January survey to what was actually planted for the first decade of the 2000s. “In some years, there appear to be some strong weather influences, which can cause as much as a 15 percent change between intentions and actual plantings. For some years, prices can contribute to variations from early intentions.
“In 2007 in the Southeast, planted acres dropped 14 percent from what was intended, while in the Mid-South and Southwest, planted acres dropped nearly 20 percent from intentions. That year, during the Beltwide Cotton Conferences, corn futures rallied a dollar a bushel and soybean futures followed them up. The change in that relative profitability led to huge adjustments.”
Robinson said that historically, the average percent change from intentions to actual planted acreage “is about 6 percent one way or another. The Mid-South and the Far West regions tend to change more, with an average change of about 9 percent. I believe this is due to a combination of weather influences in the Mid-South, and more cropping alternatives in the Mid-South and Far West.
“Some years the NCC’s survey and actual planted acreage can be very close. A third of the time, the change varies by only about 1 percent. On the other extreme, about a third of the time, the change can be as much as 15 percent.”
