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More cotton acres may restrain price

Economist O. A. Cleveland Jr. says he's been forecasting a May-July trading range for cotton of 62 cents to 67 cents a pound, “but now I'm beginning to think the low end of that range is more likely.”

Speaking at a Clarksdale, Miss., seminar for farmers, sponsored by Covenant Bank, he said forecasts being made for U.S. cotton acreage this year — from 14.05 million acres to as high as 14.5 million — are “starting to scare me.”

While the recent rally in cotton prices “is good,” the analyst says, “it does suggest there will be increased acreage here and around the world.”

Going into the spring planting season, Cleveland looks for December cotton to trade in the range of 62 cents to 65 cents per pound.

“As we get into the season, it's then going to have to negotiate its way through the actual acres planted numbers and the crop's progress, but I think we'll see a fairly strong market into December.

“The bottom range, in my opinion, will be 55 cents to 60 cents. The top range, if everything goes well, will be 65 cents to 70 cents. The closer we get to 65 cents at the end of the planting season, that will be telling us that we're likely to see 60 cents, or high 50s at harvest time.”

If December cotton is trading in around 65 cents in August, the POP would be 5 cents and the counter-cyclical payment would be 5 cents to 9 cents, Cleveland says.

“The counter-cyclical checks that will come out in August or September for 2002-03 will be the maximum; the ones that will come in 2004, for cotton you'll be putting in the ground this year, will be between 5 cents and 9 cents. With the acreage outlook, I would expect it to be on the high side, 9 cents.”

The cotton — beans price ratio has to be around 10-to-1 to favor beans, Cleveland notes. “It was there about a year ago, but now it's around 9-to-1, so cotton is in favor vis-à-vis beans. September corn versus December cotton needs to be 5-to-1 for growers to plant more corn. We were at about that ratio in the October-December period, but now it's about 4.2-to-1.

“These numbers are telling me we're going to be planting more cotton than we anticipated as recently as a month ago.”

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