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O.A. Cleveland admits he is gaining a reputation of being pollyannish when it comes to cotton markets and cotton prices.
“I’m often accused of being absurd with respect to predicting cotton prices, and I probably am because they’re always going to a dollar,” Dr. Cleveland said in a presentation to the 7th Annual Southern Consultant Meeting held by ADAMA in Memphis, Tenn.
“It may be next year rather than this year before we see prices get there, and you may have to commit a little fraud by selling it to two merchants to get a whole dollar,” he added, drawing a laugh from a group of about 50 consultants from the Mid-South and Southeast.
Dr. Cleveland, emeritus professor at Mississippi State University and a contributor to the monthly http://www.agmarketnetwork.net/ broadcast, said he believes growers could receive 72 cents to 73 cents a pound for their cotton “when it’s all said in done” at the conclusion of the 2015-16 marketing year.
Asking his audience what they thought their growers would plant in 2015, Dr. Cleveland seemed to confirm his suspicion that producers would plant less corn and cotton and more soybeans when the 2015 growing season arrives.
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Lower cotton acres would be true not only for the Southeast and Delta states, but for the Southwest and the Far West, he noted, with drought continuing to take a toll on the cotton plantings in the latter.
35,000 California acres
“California, believe it or not, is going to plant only 35,000 acres of upland, not pima, cotton in 2015, based on the National Cotton Council’s Planting Intentions Survey,” he said. “California used to plant, 25 years ago, a million acres. Ten years ago, they had 600,000 acres. As I tell my California friends, all they’re doing is increasing the fruits and nuts.”
Arizona will not have as many acres of cotton (declining from 150,000 to 59,000 acres of upland cotton, according to the NCC survey), “but it will be high quality cotton,” said Cleveland, who has been observing and speaking about the cotton market for more than 30 years.
Texas could plant a million less acres of cotton in 2015 (down from 6.2 million to 5.2 million) because of the drought and because some growers are switching to more grain sorghum, particularly in the Coastal Bend region of south Texas.
Cotton yields and quality are changing for the better across much of the U.S. Cotton Belt. “Cotton seed producers have given us a three-bale to three-and-a-half-bale per acre crop,” said Cleveland. “Some of you are aware this season of four-bale crops in the Mississippi River Delta states.”
Some four-bale cotton may also have been grown in southwest Georgia. “I’m not aware of any four-bale cotton in southwest Georgia this past season. I wouldn’t be surprised if there was. Some of my friends in Georgia have land that could certainly do that.
“That’s just amazing to me,” he noted. “I can remember when I started my career we were trying to increase from a bale to a bale and a half. A bale and a half was big. Then we got up to that, and we’ve just kept on going.”
Rowing upstream
Dr. Cleveland said the U.S. crop is looking at a high of 14 million bales this year (2015 calendar year). “It could be pushing 15 million this year, but the U.S. crop is going to be down; the Brazilian crop is going to be down; Australia is facing a major catastrophe with respect to water. The crop they’re picking now is off 50 percent from last year.
“They are already booking fixed price cotton for 2016 at $545 a bale, already booking, and they essentially have bought the 2016 crop. Of course, some people are selling only what they know they’re going to be able to put water on because their water is in such short supply.”
“Everyone” knows that China has cotton reserves of somewhere between 50 million and 60 million bales and those supplies must be figured in to the current cotton market equation. Or do they?
Answering questions following his presentation, Dr. Cleveland said much of the cotton in China’s reserves, purchased when it raised its support price to the equivalent of $1.40 to $1.45 a pound, is of poor quality.
“Some of it has been in some form of storage for three or four years,” he noted. “The good quality cotton has been picked over, and their textile mills, by and large, don’t want to cotton that’s left. About all the cotton that’s left is suitable for is a really cheap T-shirt.”
Dr. Cleveland said someone asked him why he should continue to grow cotton? “I told him that when everyone else is rowing downstream, it’s time for you to row upstream. Everyone is dropping cotton, here and around the globe. And the result will be that supplies of quality cotton will begin to draw a premium.”
Any cotton that is graded a 31 35 will draw a premium, he said. “Believe it or not, Oklahoma had some middling 40s this past season – about 300 bales – and they had a 14-cent premium. The Mid-South has finally got on the bandwagon, and we had our best quality we’ve ever had. That’s a big plus.
“I know weather has a lot to do with it, but it’s not unusual anymore to get a middling cotton in the Mid-South. A strict-low-middling inch and three-quarter grade is the perfect cow, according to the New York Cotton Exchange, but it doesn’t even draw a yawn in the international market.”
Fore more on cotton marketing, visit www.agmarketnetwork.com.
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