Increased backend to raise 2008 acreage - Cotton Forum
14 Jul '07
4 min read
The annual Cotton Forum, sponsored by the New York Board of Trade, concluded Friday with speakers in general agreement that the front end of the market would find weakness and that the back end would need to increase in order to increase 2008 cotton acreage in the United States. The December 2007 contract, based on individual speaker comments, is expected to range from a low of the very upper 50's to a high of the very low 70's.
Joe Nicosia, CEO of Allenberg, was the first speaker to suggest that market price leadership would come from the December 2008 contract as opposed from the current crop 2007 December contract.
He offered that the agricultural commodity markets were, in reality, trading corn. He stated that the price direction of other agricultural markets, including cotton, would be based on the corn market and individual price ratios of other crops specifically with the corn price.
Mike Stevens, of Swiss Financial, Jarral Neeper of Calcot, Carl Anderson of Texas A&M and O.A. Cleveland suggested 2007 crop progress across the U.S. regions of growth was generally very good. While USDA projected the U.S. crop at 17.5 million bales, current crop conditions suggest that a crop of 18.0 to 18.2 million bales should not be discounted.
The speakers suggested the crop would not fall below 17.3 million bales. Current crop conditions suggest that Arkansas, Mississippi and Louisiana could also see average yields above 1000 pounds peracre.
The discussion surrounding the idea that price leadership focused on a number of ideas. World cotton demand suggests that US cotton acreage must expand, but that the current price ratios continue to favor corn, oilseeds in many instances and a wheat oilseed double crop in other instances.
Too, the current cotton wheat price ratio itself, for many growers, still favors wheat. Therefore, the December 2008 contract must rise not only to keep 2008 cotton plantings from further declining, but to obtain the needed acreage increase of about two million acres in the U.S.
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