Acreage Battle Brewing In Cotton Country

Jan 22, 2021  | 5 min  | Ep4623

The battle for acres is a frequent topic on this program. With a pivotal USDA report just 2 months away, it’s anybody’s guess on which commodity will dominate. Cotton continues to watch its portion get smaller but this year’s question will be “by how much?”.

Our next MtoM podcast will feature two cotton analysts, Rogers Varner of Mississippi and Markham Dossett of Texas, discussing this question. Part of the conversation is our Cover Story.

Markham Dossett, Talon Asset Management: “It's a crop that you plant because you always planted or because you love it. It is hard.  It is hard to plant hard to maintain, hard to grow, it's easy to be disappointed by the weather. And, and when you only have limited export customers like China and Turkey. It's easy to be frustrated on the export size by bribes from other countries that that are producers in say South America or wherever else. So, the, but, people that grow cotton are going to grow cotton, because when you, I mean, they're not going to switch out every year they grow, now they've got to make a decision to buy a $300,000 picker. And that picker can't be used for corn, wheat or beans or rice. It's got to be used for cotton. So you're making an investment so you're going to plant cotton you're in your up where's my corn, we've been customers for one year, they may plant No, no corn or soybeans. They may plant no wheat or corn and beans. They may plant all corn and wheat, no beans, they can switch back around and rotate. And of course cotton steals nitrogen out of the soil. So you've got to rotate your cotton land. But if you're planning cotton, its, we made the investment in the equipment, you're probably going to plant cotton every year. Because of that, you don't lose as many acres unless the price really goes below cost of production. And even then you'll still have people who grow cotton.”

Paul Yeager: “As you go into ‘21 do you see the industry having more headwinds or tailwinds? Or is it going to be choppy seas? Let's use a sailing metaphor.”

Rogers Varner, Varner Brokerage: “Well, I look at the balance sheet. First I'm, I'm a balance sheet guy. And you know you like to try to calculate the production based on the yield the acres, then you take a look at the consumption of what we're going to do. I'll show you the cotton balance sheet, and it's gone from being extremely burdensome back in May, to being what I would call adequate today. We're not in a shortage. But we're nowhere near what we were back in May. And I think the price on the new crop and 77, 78 cents. It would be considered as an inducement to plant if it was not for one other thing, and that would be the prices of the other row crops. And once, once you get out of West Texas, and let's just start at the Louisiana border with Texas that would be the Sabine River. Basically all the states east of the Sabine River, plant cotton and have alternatives. But the areas of West Texas, Kansas, Oklahoma, Arizona, California, they don't they, they either plant cotton or they don't know what to do. So anyway, we've got a good price going in. And we got two variances or variables out there. One is the drought in West Texas and West Texas has the highest density of acreage in this country for sure. And nobody really knows if we're going to get enough rain to plant those Texas crops. If we do, and we get a couple of three rains during the year, okay, we'll have a lot more cotton. If we don't well, then the price has to take care of it. But the other thing is the price of soybeans right now is leading what I call the profitability tables.”

Markham Dossett, Talon Asset Management: “You are in an acreage battle over here, and cotton will rise when they see soybeans and corn rise like this, they know we will lose some acres on the south. And as a result, in result, you're going to have to go up to keep those acres because you can shave from 500 acres down to 400.” 

Paul Yeager: “Do you have producers really on the fence still? Or do you think they already kind of know you? You hinted that some might be making a change? But when do they make that decision? And can the y make it super late in the game, say a week or two before it's time to plant?”

Rogers Varner, Varner Brokerage: “They can but that would be on a what I would call a marginal amount of acreage, I think that you take a farmer with 1000 acres, he's probably already got an ideal 900 of them right now what he's going to do. And you know, maybe later, depending upon seed availability and light price, he could he can make do with the last 40 or 100 acres. But going into late January, I think 90% of the decisions already made because the seed companies require a pretty good bit of advance notice, just so they know what to prepare for, and they know how many seeds to make available to the market.”


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