Cotton futures nudged higher, despite a much-watched survey on US sowings showing a seven-year high, as the estimate came in in-line with existing forecasts, and worries over dryness curtailing plantings.

Cotton futures for March nudged 0.6% higher to 77.16 cents a pound in New York, where the new crop December lot added 0.4% to 75.80 cents a pound.

The gains came even as the National Cotton Council, in results of its annual survey of US farmers’ cotton sowings intentions, showed that growers expect to plant 13.08m acres with the fibre.

A figure at that level would be up 3.7% year on year, and the highest since 2011, reflecting the relatively strong prices of the fibre, which on New York’s futures market rallied above 80 cents a pound last month for only the second time since 2014.

Cotton price strength

“History has shown that US farmers respond to relative prices when making planting decisions,” said Dr Jody Campiche, the council’s vice-president, economics & policy analysis.

“During the survey period, cotton futures prices were stronger relative to competing crops,” she said, adding that “the price ratios of cotton to corn and soybeans are more favourable than in 2017”.

However, the area forecast was “slightly” below other estimates the market has been working on, Commerzbank noted on Monday, with Informa Economics having pegged seedings at 13.46m acres, comprising 13.2m acres of upland cotton and 258,000 acres of pima.

Rabobank last week restated a forecast of 13.1m acres, but highlighted that “plantings will require suitable ground conditions in southern US states”, where the majority of the crop is grown.

Sowings “will hence be subject to the fading La Nina and some much-needed pre-planting precipitation”, Rabobank added.

Texas drought

In fact, 64.5% of Texas is in drought, according to the latest US Department of Agriculture report, up 8.4 points week on week, and the highest figure since June 2014.

And further dry weather lies ahead, with Radiant Solutions saying showers forecast this week for the southern US Plains “will be too light to improve moisture”.

The National Cotton Council survey showed Texas farmers expecting to seed 6.91m acres of cotton this year – 55% of the total US area intended for the fibre.

Soybeans vs cotton

Ms Campiche also said that “soybeans are expected to provide competition for available acres in 2018” despite their, relatively, weak price compared with cotton.

This forecast was “due in part to the lower production costs relative to cotton”, she said.

“While cotton prices have improved relative to other crops, cottonseed prices are at the lowest level since the 2006 marketing year, thus increasing the net costs of ginning.”