Farm Progress

Will King Cotton regain its throne in Alabama?

Jim Langcuster 1

July 14, 2008

3 Min Read

Will King Cotton ever be restored to what was once its uncontested throne — the sprawling croplands of north Alabama’s Tennessee Valley?

In the view of some, that remains doubtful now that cotton acreage has dwindled to only a fraction of what it was only a few years ago. As cotton goes, so go the cotton gins and other infrastructure and with them any hope of restoring King Cotton’s preeminence in the Valley, even if the crop’s economic fortunes improve sometime in the future — or so goes the reasoning.

But could it be that the accounts of King Cotton’s death have been greatly exaggerated?

It’s possible, say two Alabama Cooperative Extension System economists.

They say never to discount a farmer’s willingness to raise a profitable crop — or, for that matter, an entrepreneur’s readiness to process it when it’s harvested.

“When cotton or any other crop makes a rebound, the market will adjust,” says Max Runge, an Extension economist.

This resilience has been demonstrated time and again in Alabama history. Runge says other parts of Alabama have undergone relative declines in cotton acreage, only to experience a revival when commodity prices rebounded.

“The gins and all of the other infrastructure eventually return,” he says.

While the current cotton picture couldn’t exactly be described as rosy, Runge’s colleague, Robert Goodman, predicts this will change as demand for the commodity increases — a demand that will be felt acutely now that so much acreage is devoted to corn and other biofuel crops.

“There is a world demand for cotton and a limited amount of cropland, and sooner or later someone is going to be willing to pay more than 70 cents a pound for cotton” says Goodman, an Extension economist and Auburn University associate professor of agricultural economics.

While a surplus of cotton remains, Goodman believes the cropland squeeze will result in this supply being consumed quickly in the next few years.

“We still have nearly 50 million bales in storage, and we’re using 120 million bales each year,” he says. “And when this is gone, we may see the price of cotton take off.”

In fact, 2009 futures already price cotton at 90-plus cents — a sign of things to come, Goodman says.

That’s not to say that a cotton renaissance in the Tennessee Valley is in the making. Right now, the staying power of corn bears a striking resemblance to the Energizer bunny — it keeps going and going. And as Goodman sees it, no end is in sight.

“People ask me if this current interest in corn is a bubble,” Goodman says. “And I say just because it usually turns out to be a bubble doesn’t mean it is this time.”

Goodman says the current $8 a bushel price of corn may be the genuine value of corn in this new ethanol-driven economy.

“With $140-a-barrel oil, this could be an accurate price, but that raises another question — is the current price of oil a bubble?” Goodman asks, adding that this possibly could be the case.

If this proves true, the current high prices associated with corn will turn out to be a bubble too and, at some point, prices will go down.

But this speculation remains only that — speculation. And Goodman says it’s just as likely that corn could remain a highly lucrative crop for years to come. As he sees it, it all boils down to the price of oil.

“If the current price of oil represents its real value in the economy, then $8 corn probably isn’t a bubble, and we’re probably going to see these prices continue,” he says.

Acreage availability is another factor contributing to high corn prices. With little acreage available to grow more corn, few factors currently push prices downward, Goodman says.

“The acreage is just not available in the world,” Goodman says.

Africa remains the only part of the world where large tracts of land can be converted to row crop farming, and it will likely be years before this occurs, he says.

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