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Can Better Prices Increase Cotton Acres?

By Tommy Horton
Editor
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It’s been the topic of conversation in coffee shops and farm offices for at least a couple of months. And, as cotton producers across the Belt prepare to plant this year’s crop, those same conversations continue. Will higher prices translate to additional planted cotton acreage in 2013?

Most of the experts say “yes.” Industry leaders and farmers were certainly talking about this possibility at last month’s Mid-South Farm & Gin Show in Memphis, Tenn. The talk continues even now as producers in many regions are just weeks away from final planting decisions.

Nobody is saying that the additional cotton acres will drastically cut into corn and soybean acreage, but any increases in cotton will be welcomed in many circles.

By late March, cotton prices had inched into the 87-cent range. Most marketing analysts say that price level should be enough to increase cotton acres. But others say the price levels need to move into the 90- to 95-cent range for large acreage switches.

“Anytime we can see an increase in cotton acres it is a plus,” says Darrin Dodds, Mississippi Extension cotton specialist. “I have talked to some local dealers in our state, and they say they are seeing some cotton acres coming back because of the price increase.”

Agreement With NCC Report

Dodds agrees with the National Cotton Council’s planting intentions report issued in February. That report projected 199,000 planted acres for Mississippi in 2013. He says it’s relatively easy to understand the potential acreage shifts.

When a producer can receive an attractive rebate from a gin ($50 per bale) and then couple it with 86- or 87-cent cotton, “at least it puts it into your thought process,” says Dodds.

Although cotton acreage reductions are projected for all regions of the Belt, the most significant dropoff is predicted for the Mid-South. While it might seem difficult for an outsider to understand, Dodds says this decrease in cotton acreage is due to the region’s flexibility in what it plants.

In the Mid-South, there is more access to irrigation, and producers know how to take advantage of market prices by switching acres among cotton, corn and soybeans.

Dodds doesn’t claim to be an economist, but he says the feedback he is receiving from some producers is that it will take a price between 95 cents and a dollar for producers to become significantly committed to cotton.

“The 86- to 90-cent range is enough to keep a few more acres,” he says. “To really have an impact, I am hearing that we need to get between 95 cents and a dollar.”

However, other factors must be weighed in the final equation, according to Dodds. Better cotton prices and attractive gin rebates are positive signals for planting more cotton. But, as he points out, additional scenarios affect the cost of planting cotton.

Expensive To Grow Cotton

In the Mississippi Delta, for example, it costs about $650 to $750 per acre to grow cotton, according to Dodds. This includes spraying for plant bugs, troublesome resistant weeds, as well as applying defoliants and other inputs. While corn can also be an expensive crop, its higher prices can more than offset many of its input costs. Cotton’s biggest competition for acres might be soybeans.

“You can grow an entire soybean crop in the Delta for $300 an acre if you have good access to water,” says Dodds. “When you go to a lender in a tight economy, that’s definitelya consideration.”

Another factor that could impact how much cotton acreage can be regained in any region might pertain to availability of equipment. Many producers have already sold their planters and harvesters when they switched to grain crops and may not deem it wise to reverse their decisions.

Dodds believes every production region has a distinctive and unique way of growing cotton. That is brought about because of different environments such as soil types, water availability, grain competition and other factors. So, the motivation to produce cotton can be very different in the Southeast, Mid-South, Southwest and the West.

“My advice to producers is to keep cotton in the mix,” says Dodds. “There is still a potential for profit in this price range.

“Also keep in mind that cotton can hang on in tougher environmental conditions when compared to many other crops.”

Contact Tommy Horton at (901) 767-4020 or thorton@onegrower.com.


Different Environment In Northeast Arkansas

Cotton producers in northeast Arkansas have a slightly different approach to the 2013 season as compared to their neighbors to the south in Mississippi.

Even though Arkansas is projected to have close to a 50 percent decrease in planted cotton acreage, the situation could change if cotton prices get closer to the 90-cent range in the next few weeks.

Veteran cotton consultant Dale Wells of Monette, Ark., says many of his farmer customers will stay with cotton. He and his consultant partner Les Goodson will check about 32,000 acres this year, and it appears that more than 22,000 of those acres will be cotton.

“Even though Arkansas is projected to have a big drop in cotton acreage this year, it won’t be that way up here in northeast Arkan-sas,” says Wells. “It’s a case of a lot of our land being tied up with landowners.”

However, in other parts of Arkansas, he envisions producers waiting until the last minute before making a decision on whether to plant cotton.

He predicts that the 90-cent mark is the magic number.

“If the price hits 90 cents, it will trigger a lot of activity,” says Wells. “You’ve got quite a few producers who already own the round module pickers. They are set up for cotton, and they can’t let those machines just sit in the shed.”

An Easy Transition?

Wells says the burndown agronomics are similar for corn and cotton, but many other consultants in the area use different approaches that may cause problems when changing crops. Wells and Goodson like to keep their burndown programs flexible in case there is a change in plans for a specific field.

Wells says if a producer owns his land, the market will dictate what he does. If he leases the land, it will be up to his landlord.

“You simply have to look at your budgets and fixed costs,” says Wells. “If you’ve decided to be in the grain business and you need to buy a lot of equipment, you might want to hold off. You can’t wait until June to make a decision on this. On the other hand, we’ll be planting cotton by mid-April, so it’s time to decide what to do.”

If a producer has already booked his soybeans, corn or cotton, his decision has already been made for 2013. The farmers who haven’t already forward contracted their crops are the ones with a decision to make.

Impact On Arkansas Ginners

How do ginners in the region feel about the prospects for cotton in 2013? Maleisa Finch, business manager for the Kiech-Shauver-Miller Gin in Monette, Ark., is cautiously hopeful that more cotton acres will be planted in her area because of the recent spike in cotton prices.

But she is already looking ahead to 2014 as the year when those cotton acres will return.

“We understand that many producers feel the necessity to plant grain crops in 2013,” says Finch. “I want them in business next year, and I don’t really think they are abandoning cotton. They have too much invested in equipment to do that.

“I think we are going to continue to see crop rotation strategies, and, in my opinion, it may be a good thing for all of us in the long run. In my heart, I know that these folks are cotton farmers.”

Should A Producer
Plant Cotton This Year?

• Look at your budget.
• Look at fixed costs.
• Can you be flexible in crop mix?
• Are you ready to book your cotton?
• Do you have necessary equipment?

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