Joe Nicosia: Cotton’s Six Biggest Challenges for 2023
Joe Nicosia: Cotton’s Six Biggest Challenges for 2023

Joe Nicosia: Cotton’s Six Biggest Challenges for 2023

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In his annual cotton outlook presentation at the Mid-South Farm Gin Show, Joe Nicosia of Louis Dreyfus Commodities pointed out six key issues that could impact U.S. cotton this year. 

“There are going to be winners, and there are going to be losers,” he says. 

Economic Challenges 

Last year, Nicosia notes, the Federal Reserve said not to worry about inflation.   

“It’s a little more persistent now,” he says. “We went from slightly below 2% inflation up to 9%.” 

That type of jump impacts the cost of production and the value of the dollar versus other currencies, especially in Pakistan, Bangladesh, Turkey, and China. As Nicosia points out, when their currency weakens against the dollar, it makes U.S. products more expensive for them. And since those countries also grow cotton, it’s more valuable for them to grow cotton for their mills.  

Reviving Consumption 

In 2013, world consumption was 123 million bales. Consumption now sits at 110 million bales.  

“We’ve lost almost the size of the entire U.S. crop on an annual consumption basis,” he explains.  

Consumption was lost mainly in China, India, and Pakistan  three of the biggest market engines. That impacts prices, demand, and growers. 

Economic problems in Pakistan and Bangladesh don’t help the situation. And in Turkey a very good customer for U.S. cotton  roughly 80% of the country’s domestic consumption of cotton was located in the area devastated by recent earthquakes. However, prospects in China are improving after the country lifted its zero COVID policy in January.  

Nicosia says there’s an important trend to keep in mind: every time in the world that consumption has been down for two years, it rebounds strongly.  

“I’m optimistic that we’re on the rebound.” 

Battle for Fiber Share 

Nicosia reports that cotton’s percentage of the global fiber market now sits at 21.3%.  

“This is a battle we continue to fight, and it’s a fight that we’re not winning,” he says. “We have to get our message forward and change consumer preferences.” 

Competition from Australia and Brazil 

The competition for export markets from Australia and Brazil is real.  

In 2015, both countries combined produced 8.8 million bales versus 18 million bales today. Water in Australia means big crops. And Brazil can easily increase production by adding more cotton as a safrinha (or second) crop behind soybeans. 

“We’re going to need more foreign country marketplaces to help us fight for our market share,” he says. 

Weather 

West Texas is better off now than it was last year, and the transition from the La Niña weather pattern to the more favorable El Niño appears to be happening.  

“We may be right on the edge of a recurrence of moisture into West Texas,” says Nicosia says. “The question is will it come in time for planting?” 

Battle for Acreage 

“Cotton lost one third of our profitability versus a year ago,” Nicosia reminds us. “At least we’ve moved back into the mix so that we can be respectable on the pricing side with corn and soybeans.” 

He anticipates cotton acreage to be in the 11 million range, but it comes with a caveat.  

“What happens in West Texas is the trump card for what happens to prices and the size of the U.S. crop.” 


Πηγή: Cotton Grower

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