By Jeff Thompson, Manager, Autauga Quality Cotton Association, Prattville, Alabama
The dawning of a new year brings with it the excitement for what lies ahead. These feelings are being tempered somewhat in the Ag community coming off a year where crop incomes declined despite improved yields. 2016 is shaping up to be very similar with profit margins, once again, pinched as commodity prices remain depressed and input costs fail to follow.
When making planting decisions this spring a lot of pencil lead will be spent estimating and analyzing crop budgets. This trying decision is further compounded by the uncertainty that now exists in the political arena and world economies.
Not to be the purveyor of total gloom and doom, I think 2016 does hold promise, especially for cotton. When compared with all other crops at current prices, cottonΆs potential stands out. As a result of genetic advancements, we now have the ability to produce greater yields and better fiber quality than ever before. Despite the curves thrown by Mother Nature, cotton is resilient and best fits the growing conditions of our region.
Finally, if Secretary Vilsack will approve cottonseed as “another oilseed” there will be additional monetary reasons favoring cotton. In my 40 plus years of working closely with Ag producers, the trait I find most admirable among those that have been successful is their uncanny ability to make an opportunity out of what appears to be a serious challenge. Rather than sit idly by, they seek ways to make the cards theyΆre dealt work in their favor.
Yes, this takes courage, diligence, effort and a dash of faith. ItΆs always been said, “Necessity is the mother of invention.” We at AQCA, with the aid of Choice Cotton, want to assist you in this endeavor. We will be introducing some new and innovative opportunities designed to enhance your marketing efforts. We are taking steps to bring you, the producer, one step closer to the end user to help widen these profit margins.
Along with offering a wide array of marketing choices, we will continue our emphasis on production education with the goal of maximizing yields and overall returns. Over the next few weeks we will be sharing our 2016 cotton variety handbook along with a host of articles on things we have learned from last yearΆs production experiences.
The U.S. ag producer has always been the most productive and efficient of any other in the world. Never before have we had such sophisticated scientific and technological tools at our disposal. Given this, I have the utmost confidence we will overcome the challenges of today as we have time and again.
Market Report
It has been a few weeks since our last market report, but current prices have changed very little in this time while still mired in a very narrow three to four cent trading range. Week after week, prices and LDP have moved conversely within this range. Over the last month, the combination of the two has created a price range from 66.78 cents to 69.28 cents.
This is rather remarkable in that the DOW has dropped 1,000 points over the same period and crude oil (closely associated with the production of synthetic fiber) has fallen to a 13 year low below $30 a barrel. Such is a testament to cottonΆs strong fundamentals. Further improvement in these numbers is expected with lower world production and an aging China reserve working to better balance supply and demand.
This alone could take cotton prices back to the high end of the trading range over the next several weeks, but beyond that itΆs going to take signs of a sizeable increase in consumption.
Last weekΆs USDA report reflected these fundamentals. World ending stocks were reduced by 1.5 million bales from production estimates lowered in China, India and Pakistan. These countries
represent our major export competition, which if true could open the door for greater U.S exports this spring and summer furthering reducing our domestic ending stocks.
New crop futures have done very little with DEC currently trading 10 points higher than Mar at 62.10. If new crop futures start to advance to buy acres, mills may forego their current “hand to mouth purchasing” and begin aggressively buying Mar and May. This could present us with some pricing opportunities off our near month futures contracts. Good news for those with 2015 cotton still to price.
