Cotton prices likely haven't hit bottom yet, rice futures could continue on a downward slide and soybean prices may level off at least temporarily before dropping once again. That gloomy picture is what two marketing gurus painted for Delta Council members attending recent committee meetings in Stoneville, Miss.
“I think all of us thought we had seen a low for cotton at 48 cents, but we hadn't,” says Mark Lange, vice president of economic services for National Cotton Council. “Most people are convinced New York is headed to 35 cents sometime in the next four months.”
In all likelihood, he says, cotton growers in Mississippi and the Southeast will have bigger crops than are being projected, which will more than offset any decrease in cotton production in Texas and the Southwest.
Lange says U.S. production will likely pass the 20-million-bale projection made by USDA. “If the predictions are right about the 2001 crop, and they could well be, we will build stocks,” he says.
Cotton growers in the United States aren't the only farmers anticipating a bountiful harvest, and USDA is projecting the 2001 world cotton crop will reach 96 million bales. “No one in the Northern Hemisphere has had a bad growing season,” Lange says.
In addition, mill use is not rising sufficiently to deal with the increased production, resulting in an increase of carryover stocks. “We'll be one of the ones accounting for a good bit of the stocks being carried,” he says. “I expect domestic mill use will fall some more and we will see more mill closings, but exports are continuing to grow.”
According to Lange, the U.S. retail market for cotton is equal to about 21 million bales of cotton. Imported cotton products take up much of that total, or about 16 million bales. “What is produced, milled, manufactured, packaged and sold in the United States is declining,” he says. “We're seeing a huge surge in imports, and that figure will only be about a 3-million-bale equivalent this year. The rest will be imports sold on the retail level in this country.”
Of the total U.S. milled cotton, Lange says, about 2.5 million bales stay here and 5.5 million bales are exported, for a total of 8 million bales of domestic mill use.
To make matters worse, cotton fiber consumption worldwide is declining. “This year (2001) sees polyester becoming the dominant fiber for the first time. That means more polyester will be used than any other fiber, including cotton,” he says.
These bearish factors combined will likely keep downward pressure on the A Index. “The A Index is now 44 cents and today's (Aug. 15) U.S. quote is 52 cents,” Lange says. “The ending stocks picture has obvious price indications and New York has a ways to go before it finds the bottom.”
The outlook for rice unfortunately mirrors that of cotton. Like cotton, rice growers are anticipating harvesting an above-average crop this fall and carryover stocks are expected to feel the weight of these higher production numbers.
“The rice market is very much on defensive as far as price,” says Michael Hanthorn, a market analyst with Willard Sparks Companies in Memphis.
Hanthorn, who spoke to Delta Council members at the group's Aug. 16 rice and soybean committee meeting in Stoneville, Miss., is predicting rice farmers will receive an average farm price for the 2001 crop year of $5.25 per hundredweight of rice.
What concerns him the most, Hanthorn says, is that the 2001 U.S. rice crop is in much better shape than USDA is projecting. “We only have to go up 50- to 100 pounds per acre in production and we can add an awful lot to the carryover supply,” he says. “I think USDA's crop production number at 198 million hundredweight is low. I believe 2001 production will surpass that number and the United States could triple carryover stock numbers this coming year.”