Lower Cotton Prices Spurs Decreased Acreage

JON DEVINE

MEMPHIS, TENN.
   Statements from the Federal Reserve last week indicated that they were willing to maintain lower interest rates.
This news sent the dollar lower and coincided with a move in prices for the May contract that sent values back above the 62 mark.
In recent trading, May prices have been able to hold onto the gains and have been bouncing between 62 and 65 cents.
   Upcoming Acreage Report
   In terms of market news, the next big release will be the USDA’s prospective planting report on March 31.
Similar to the National Cotton Council (NCC) projections released in early February, the upcoming USDA figures are based on a survey of producers. 
   The NCC’s survey was distributed in December and January. while the USDA’s survey was distributed in the first two weeks of March.
   With the decrease in cotton prices over the past twelve months, a decrease in acreage is expected.  The NCC indicated a 15 percent decrease, with total acres planted for the upcoming season forecast to be near 9.4 million acres.
   It could be expected that upcoming USDA report will predict a similar decline, but there was some movement in crop prices and some changes in growing conditions that could result in a slightly different figure.
   Ginning Data Suggest a Slightly Larger Crop
   To generate the production estimates in their WASDE reports, the USDA conducts extensive research to determine a level of acres harvested.
   Once levels of harvested acres are determined, they are combined with yield estimates derived from objective surveys. The resulting figures are published each month in the WASDE report.
   For cotton, the WASDE estimates are supplemented by ginning data.  Each month of the harvest, the USDA attempts to contact every gin and collect data regarding the number of bales processed.
   These ginning data are considered to be more accurate than the survey-based estimates and the April WASDE report is commonly revised to match the figures published in the March ginnings report.
   The March ginnings report was released this week.  It indicated that 16.3 million bales had been processed and suggests that the USDA production number will increase 200,000 bales in next month’s WASDE.
   If the export figure is unchanged, this will imply a corresponding increase in ending stocks in the April WASDE report, which would be another bit of wood on the pile of the 70 percent increase in carry out already forecast. ∆
   JON DEVINE: Senior Economist in the Corporate Strategy & Program Metrics Division, The Cotton Board
MidAmerica Farm Publications, Inc
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