Cotton Prices Rally As Texas Growing Conditions Turn Mixed
KARN DHINGRA
COLLEGE, STATION, TEXAS
After two years of low prices, cotton prices rallied — though Texas growers’ fortunes still depend heavily on where they farm, said a Texas A&M AgriLife Extension Service expert.
John Robinson, Ph.D., an AgriLife Extension economist-cotton and professor in the Texas A&M Department of Agricultural Economics, said conditions form “a definitely mixed bag” depending on location.
He said conditions for cotton across the state match a Drought Monitor map that shows distinct lines between dry, moderate-drought and drought-free areas.
Growing conditions split by region
Texas’ cotton acreage is concentrated in the northwest regions of the state in the AgriLife Extension districts of the Panhandle, South Plains, Rolling Plains and West Central, with the rest spread across the Interstate-35 corridor, Gulf Coast and Rio Grande Valley, Robinson said.
The Rolling Plains, West Central Texas, the I-35 corridor, the Gulf Coast and the Rio Grande Valley have seen increased rain and cotton fields have steadily improved, Robinson said. Cotton in South Texas is nearing harvest, and producers now need dry weather to avoid delays.
The upper Panhandle has stayed hot and dry most of the season and has likely lost significant dryland acreage, while the South Plains, home to most of the state’s cotton, has seen only patchy rain along with extreme heat.
“It just sort of depends on where you are,” Robinson said.
A June 30 U.S. Department of Agriculture report projected Texas cotton acreage at 5.4 million acres, slightly above last year, Robinson said.
He said cotton often performs better than corn or sorghum under drier conditions.
Prices rally on fund short covering
Prices broke out of an unusually flat, low range in May, jumping from about 65 cents per pound to above 80 cents per pound and briefly touching 88 cents per pound before settling into the upper 70 to lower 80 cents per pound range, where they sit now.
In a report for Southern Ag Today, Robinson said much of the rally came down to large investment funds buying back cotton contracts they’d bet against for two years. Those funds had been betting prices would keep falling — a bet known as a “short” position — but as prices held firm, they started buying back into the market to close out those bets, which pushed prices even higher.
Government data from the Commodity Futures Trading Commission, CFTC, confirms the shift: in April, these funds flipped from betting against cotton to betting on prices to rise, right around the same time prices jumped roughly 20 cents per pound. Robinson said growing concern about supply, driven by the dry start to the season, added even more fuel to the rally.
Disrupted fertilizer exports due to conflicts in the Middle East have also raised input costs, though this year’s prices leave growers better off than the previous two seasons, Robinson said.
Outlook favors some seasonal softening
Robinson expects some seasonal price softening as harvest approaches, based on a 20-year average pattern that sees prices typically ease from mid-July into harvest as uncertainty leaves the market and harvest data confirms actual supply. Harvest begins in South Texas soon and will move north through fall. Barring a major shift in supply and demand, he expects that pattern to hold.
An El Niño pattern has driven this year’s wetter-than-normal conditions over much of the state and should strengthen further into fall and winter, Robinson said.
Cotton fields in the Rolling Plains and High Plains could still use rain, but producers along the Gulf Coast need hot, dry weather to finish harvest. How much cotton Texas ultimately harvests will depend on how that wet pattern unfolds, Robinson added. ∆
KARN DHINGRA
TEXAS AGRILIFE