All eyes and ears wait USDA's March 31st "Prospective Plantings" report. Cotton acreage is expected to be less than last year. After this report we may get our first signal of what direction new crop futures prices intend to take. I must caution you, however, that December futures have already increased about 3 ½ cents over the last 30 days. Also, reduced plantings alone may not be sufficient to get you what you want. Further, with the weather we're receiving across the Southeast and Mid-South, one must question how a March 1 survey of farmer's intentions could possibly be anywhere near accurate.

At the end of January the National Cotton Council (NCC) released it's '98 estimate of 12.1 million acres of cotton to be planted (almost 12 ½ percent less than last year). The market gave us a couple of cents for a day or so but then retreated. Since the NCC report and up until a week or so ago, there had started to creep into the market a notion that cotton plantings may end up being more than most people think. This was further fueled by reports and estimates by a few industry observers including USDA economists.

In recent days and weeks, however, the market (December futures) has improved to the 73 to 74 cent area. We can only speculate on the reasons for the improvement. Any number of factors may be coming into play including the wet and or cool weather, acreage uncertainty, demand (which continues to be very strong), or just plain fundamental buying and selling-- prices in the 70 cent seem to spark increased buying interest which pushes the market up. Likewise, prices in the 73-74 cent area may erode buying interest and cause downward pressure again. In it's latest report, USDA increased expected '97 crop exports and lowered ending stocks to a relatively tight 4 million bales. Stocks could get a bit tighter unless we experience a rash of export cancellations. This should add support to both old a new crop futures for a while.

So it appears that we may be mostly in the 72-74 cent price range until after the USDA report if not longer. So that leads us to consider several approaches to pricing the '98 cotton crop. Specifically, let's discuss the possibility of you getting 75 cents or better for your cotton--- because I know that's what you want.

In my opinion, the market anticipates a '98 cotton acreage of 12.5 to 12.7 million acres. Maybe as high as 12.9 million. The USDA estimate of March 31 should fall within this range-- but if it isn't, I'm not sure what difference it makes given the weather and the fact that the market has already picked up some steam recently. Wet field conditions here in the Southeast could cause some corn intentions to go to cotton but in the Mid-South corn acreage will more likely switch to soybeans.

Bottom line: If the market does not move up after the USDA report, you have a very important decision to make. Do you then contract a few bales for about 72 cents to you or do you take a chance and hope the market will improve later? You could buy protection with Puts that would leave you the opportunity to price at a higher level if the market moves up later. You must decide how much risk you can afford to take and realize that it could be June or later before the market moves higher.

If cotton plantings are reduced (even to the 12.5 to 12.7 area) I think the market still has a chance to reach the 76 cent area or better December futures. However, several things need to happen. An acreage reduction alone may not sufficient to get us there. Other keys include continued strong demand and crop concerns this spring or summer.

There are, however, several things working against us including increasing world stocks, lower A-Index (world price), and increasing foreign production. The strategy or philosophy I would consider taking would be to price carefully but don't overdo it too early. Take profits when offered but keep flexible.

Don Shurley

Professor and Extension Economist- Cotton and Peanuts

Department of Agricultural and Applied Economics

Phone: 912-386-3512

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