Talk about a disconnect. On a day that farmers were shredding un-harvested cotton stalks in the Harlingen area of south Texas, December futures dropped 40 points.
A consultant from Raymondville, near Harlingen, said 80 percent of the cotton in Willacy County, Texas, would be destroyed because of drought. Others said 65 to 70 percent of the Rio Grand Valley's 300,000 cotton acres may be disked under. This is an area that harvested two and three bales per acre last year when rains were not overly abundant but fell on a timely schedule, said the consultant, shaking his head over the contrast.
The gravity of the situation was not lost on a group of Mid-South consultants and Extension specialists attending a field day for a new cotton defoliant. “Anyone who thinks conditions are bad in the Mid-South, ought to see this,” said one as their bus passed fields of cotton that didn't appear much over 7 or 8 inches tall.
South Texas is only a blip on the radar for world cotton production. The market has become convinced that U.S. farmers may harvest a gargantuan crop — 19 million bales, according to USDA's July 11 crop report. Some analysts say it could grow even larger — to as much as 20 million bales, according to Joe Nicosia, chief executive officer of Allenberg Cotton Co.
Much of the argument for a bigger crop is based on the perception of the growing conditions in the Mid-South states where, USDA says, growers increased their plantings by 21 percent. USDA has been rating 70 percent of the Mid-South crop in good to excellent condition.
Or is it? The Mississippi Delta was blessed with 3 to 4 inches of rain the week ending July 13. Some are saying even the “insurance” cotton could now make two bales to the acre. But other areas remain dry. In Louisiana, where farmers reportedly increased their acreage 28 percent in 2001, only the Mississippi River parishes received rainfall. The Macon Ridge area, where much of the cotton is concentrated, got none. Portions of northeast Arkansas, which may have increased its plantings by 22 percent, also are dry, as is southeast Missouri.
A timely rain as we go to press could change things. But, with many fields nearing cutout, even a 2-inch rain may not help. Whether or not any of that matters for cotton prices is a good question at this point. Some analysts say that what happens to the U.S. crop is of little consequence given the projected increase in world supplies and lackluster demand.
In its July supply/demand estimates, USDA said world production could reach 94.63 million bales in 2001/02 — nearly 5 million bales above the marketing year that ends July 31. Prospects for mill use, meanwhile, appear to be declining as the world economy continues to slow.
Even two years ago, reports of cotton being destroyed in the Rio Grand Valley or of 2 million acres being “zeroed out” in Texas and Oklahoma would have sent futures soaring. Not any more. Although the United States will continue to produce a significant amount of cotton, we are in danger of becoming redundant in the world cotton market.