2003 US Acreage Will Be Key To Early Cotton Market Direction

Don Shurley
Professor/Economist- Cotton
Department of Agricultural and Applied Economics
University of Georgia

In recent weeks, December cotton futures prices have traded mostly around the 60-cent area-- occasionally hitting almost 61 cents and occasionally retracing back to near 59 cents. December futures prices have not been at this high a level in over 2 years. As planting season approaches, there is optimism these cotton prices can hold or perhaps even move higher. While the supply/demand numbers are encouraging and are supportive of price, there is also a growing sense of caution and uncertainty.

Without question, a key to the direction that cotton prices might take as we move into planting season will be acres planted. US cotton plantings were down 11% in 2002 in response to low cotton prices, improved price outlook for competing crops, weather, and farm bill uncertainties. As we gear up for the 2003 planting season, however, cotton prices are much improved from a year ago.

Cotton prices have increased approximately 10 cents per pound over the past 4 to 5 months. The reasons have been sharply reduced US and foreign production in 2002, strong foreign mill demand for cotton, and strong US exports including sales to China. The outlook for 2003 will hinge on continued strong US exports to meet, hopefully, continued robust foreign mill demand.

US farmers planted 13.96 million acres of cotton in 2002. USDA's Prospective Plantings report will be released March 31. This report is results of a survey of what farmers intend to plant. If good cotton prices hold through April and May, actual plantings will very likely be above last year and could be 14.2 to 14.5 million acres. An acreage of this size, if weather cooperates, could produce a crop of about 18 million bales- about 1 million bales higher than last year.

An 18 million bale crop could place some downward pressure on price-- but not enough to send us into the doldrums of a year or 2 ago. So, returning to prices in the 40's should not be a worry. But being able to hold at 60 cents or better could be more difficult if plantings increase and yield looks promising. For that reason, the 60-cent area may be a good opportunity to take price protection on a portion of the expected 2003 crop.

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