U.S. cotton market outlook for 2008 is bright

Anderson addressed the Cotton Economics Symposium during the 2008 Beltwide Cotton Conferences Jan. 10. According to his predictions, the expectations of a decrease in supply due to reduced cotton acreage across the Belt will support December 2008 futures to increase about 10 cents per pound since August 2007, reaching 76 cents the beginning of this year.

With high corn, soybean, and wheat prices, cotton acreages are being switched to grain, Anderson explained, and the result is in 2008 and 2009, cotton acreage is estimated to decrease to nearly 9.5 million acres, the lowest since 7.9 million acres in 1983. This is a 38 percent decrease since the 15.27 million acres in 2006.

Anderson estimates with higher yields reaching n average of 850 pounds per acre, the U.S. cotton crop could reach about 14 to 16 million bales, with offtake at about 20 million bales.

The U.S. cotton crop for 2008 hinges on the weather in Texas, Anderson said. Texas will plant more than half of the total cotton acreage in the United States in 2008 and 2009, and two-thirds of that crop, Anderson explained, is dryland. “The U.S. crop can vary by at least 2 million bales, depending on good or bad growing conditions across Texas,” according to Anderson.

Cotton stocks are shrinking, with foreign cotton mill use growing, which is a cause for strong support in the 75- to 80-cent range in December 2008 futures Anderson said. With a projected shortfall of 20 million bales from foreign production, there will be high demand for U.S. cotton exports.

Texas researcher named 2007 Cotton Extension Specialist of the Year

Lemon received the award at the Extension Cotton Specialist’s annual banquet on Jan. 10, during the Beltwide Cotton Conferences in Nashville, Tenn.

Sponsored by Bayer CropScience, the award and banquet has been a featured event at the Beltwide Cotton Conferences since 1984. Extension cotton specialists representing every cotton-producing state select a recipient annually based on leadership and industry service.

Travis Miller, professor, Texas AgriLife Extension program leader and associate head of the Soil and Crop Science Department at Texas A&M University, has worked with Lemon since he was a graduate student at TAMU.

“Whatever is happening in cotton, Robert is on top of it,” he said. “He coordinates well with other specialists around the state. Robert has the best interests of cotton and cotton farmers at heart, and I couldn’t be more pleased for him.

“Robert is not bashful,” Miller continued. “He’s energetic, forward-thinking, well-organized and works well with people. He has a natural analytical ability to readily develop and implement a solution to any problem. Robert has had a great deal of success because of the way he thinks and his ability to relate well to producers and producer organizations.”

For example, Lemon initiated the successful chemical stalk destruction program. Timely cotton stalk destruction is important in boll weevil management. In regions engaged in the Texas Boll Weevil Eradication Program (approximately 1 million acres), this production practice reduces post-harvest spraying operations, decreases pesticide use and conserves program and producer funds.

Randy Boman, Ph.D., Texas AgriLife Extension Service cotton specialist at Lubbock, and the 2005 Extension Cotton Specialist of the Year, said Lemon is a skilled communicator and an excellent resource for his cotton grower clientele.

“He is an outstanding Extension specialist and works extremely hard to keep Texas Extension agents and producers informed of rapid changes in the cotton patch,” he said. “Robert has a comprehensive educational program supported by timely, well-designed and high-quality research trials.

“He’s a tremendous thinker,” Boman added. “He thinks outside of the conventional wisdom to truly bring valuable educational programs to the cotton grower. Robert was instrumental in the development of the 2005 Cotton Resource CD for Texas, which was updated to a DVD format in 2007. This DVD includes a tremendous amount of production information to help answer producer questions, as well as those by Extension agents, ginners and consultants.”

Boman said Lemon is a “great team player who is committed to the success of the Texas cotton industry. He is most deserving of this award, and I think it speaks volumes of his contributions to the cotton industry. I am proud to call him my colleague.”

Steve Nichols, Bayer CropScience U.S. agronomic manager, said the company is proud to sponsor this longstanding award.

“Extension is the backbone of our industry, and we are pleased to congratulate Robert Lemon on this achievement,” Nichols said.

To support his research focus, Lemon has successfully obtained $900,000 in funding from private, federal and state agencies. He has refereed 14 journal publications, written 23 Extension bulletins, eight technical publications, 71 abstracts and proceedings, two production guides, one book chapter and has been quoted in more than 112 popular press articles.

Lemon received his bachelor’s, master’s and doctorate degrees in agronomy from Texas A&M University. He and his wife Sharon have been married for 20 years and have two children.

Beltwide production faces challenges, opportunities

During this second morning session, a panel of cotton specialists from Extension programs across the cotton belt discussed their region’s 2007 crop year and offered up suggestions for the 2008 year.

Robert Lemon, with the newly renamed Texas AgriLife Extension, discussed the crop in the Southwest region of Texas, Oklahoma, Kansas and New Mexico.

“Planted acres in the Southwest Region dropped by 25 percent in 2007,” Lemon said. In Kansas, planted acres decreased by 57 percent, nearly 50,000 acres. Oklahoma decreased by 45 percent or 175,000 acres. And Texas planted 24 percent fewer cotton acres, nearly 4.93 million. New Mexico rounded out the list with only a 13 percent decrease, at 55,000 acres.

“In 2008, I suspect there will be a similar situation in the Southwest, especially if producers could plant wheat,” Lemon said. “A lot of acres went into small grains.

“We’re going to grow cotton, though, especially in the High Plains of Texas,” he continued. “It’s what feeds the infrastructure out there.”

In looking at trends from the Southwest Region, Kansas leads the pack in adopting transgenic cotton varieties, and nearly 51 percent of the acres planted in Kansas were Roundup Ready Flex cottons. The trend toward transgenics will continue, Lemon said.

Kansas’s growing season had good moisture up until the early fruiting of the plants, and then sporadic rainfall caused some boll drop. However, Kansas did have a respectable 533 pounds per acre yield.

Oklahoma’s crop had a cool and rainy early start to its growing season, and then in June it suffered a lot of rain. With heavier clay type soils, Lemon said, it waterlogged a lot of cotton, which caused some fruit shed. But, overall Oklahoma’s 2007 crop showed an 873 pounds per acre yield.

Texas, in the northwest, had a tremendous year for cotton. The spring months were cool and wet, so planting was difficult in most areas. But, heat units kicked up on August, September and October and the area produced 8.145 million bales, which is the second largest crop in the region’s history. The crop also came with record quality measurements, with 90 percent grading 21 or better on color and 35 staple.

For more coverage of the Beltwide Cotton Conferences, keep visiting www.hpj.com.

Maguire discusses farm bill at Beltwide

NCC Chairman John Pucheu alluded to the difficulties cotton faced during the recent farm bill debates in the U.S. House and Senate during his remarks earlier. Maguire expanded on just how difficult the process was for cotton interests.

Reform was the word, Maguire said. The cotton program was criticized for its high cost and that it is “out of balance” with other commodity programs, as well as its international challenges in the trade arena. In addition, the budget baseline for commodities was 42 percent below 2002, further strengthening the calls for reform of payment limitations.

The farm bill also needed to find new funds for specialty crops, an energy title and a permanent disaster program, Maguire said. Clearly, with the emphasis on payment limitations and budget concerns cotton had to find a reasonable alternative to protect what payments it could so that farmers wouldn’t be unduly penalized and the safety net of the farm bill would not be undermined, Maguire said.

The House bill, as passed in July, maintains the current program structure with market loans, target prices and direct payments. But, it also offers farmers the chance to choose a revenue option or target price.

Specifically for cotton, the House bill left unchanged the base loan rate, direct payments and base and included most of the industry’s 14-point proposal for mill assistance. It also extended the authority for storage credits until the 2011 crop.

The House version includes payment limit provisions, that eliminate the three-entity rule and apply direct attribution. The limit for direct payments is capped at $60,000 and the limit for counter-cyclical payments is at $65,000. While it eliminates certificate redemptions there are no limits on marketing loan gains and loan deficiency payments.

The House bill also includes an Adjusted Gross Income provision that looks at the three-year average for applicants and enhances the definition of farming, ranching and forestry income.

On the Senate side, Maguire said, the farm bill it passed in a 79 to 14 vote maintains the structure of the current program with market loans, target prices and direct payments. It also includes a revenue plan, the ACR, as an option for farmers starting in 2010.

For cotton the bill leaves the base loan rate, direct payment, base and yield unchanged. However, costs are off-set by lowering the target price; modifying calculation of premiums and discounts’ and eliminating location differentials. It also offers some assistance for domestic textile manufacturers and mandates storage credits.

The Senate version includes is own payment limit provisions, eliminating the three-entity rule and applying direct attribution, but it maintains a cap of $40,000 for direct payments and reduces counter-cyclical payments to a limit of $60,000.

It’s all up to the conference committee now. Some of the things left to be ironed out in conference will be establishing a budget baseline, and looking at the savings that have been created through adjustments in timing of payments and the allocations between programs.

Another issue is just how much reform of payment limitations the conference will be ready to implement, finding a balance between the House and Senate packages. The committee will also have to discuss revenue plans and options, a permanent disaster program, and specialty crop funding.

President Bush has stated that he will veto any bill that does not have true payment limit reform or has the current tax and “savings” provisions. A veto would set back the process, and the current law expires March 15. Winter wheat and spring crops will need to be planted and farmers need to have a bill on the books before then.

Maguire listed several challenges to cotton in 2008, including the economy, the presidential election, China and India’s impacts on world commodity markets and the value of the U.S. dollar. Most importantly, cotton is facing competition for acres from corn and soybeans due to increased renewable fuel production, and that will have an affect on infrastructure and rural economies, he said.

For more updates from the 2008 Beltwide Cotton Conferences, visit www.hpj.com.

NCC Chairman Pucheu updates on Council activities

While the Council's agenda in 2007 covered many fronts, Pucheu told producers the majority of its efforts were in defending the U.S. cotton program and attaining sound trade policy.

2007 saw a new farm bill under debate in Congress, and current cotton programs were under criticism. At last year's Beltwide, then U.S. Secretary of Agriculture Mike Johanns made it clear that cotton policy was going to have to change in order to meet trade obligations and budget concerns.

"Our situation was made worse by the attention the U.S. cotton program received in the WTO, with the ongoing case brought by Brazil and the unfounded claims by Oxfam and other international groups that the U.S. cotton program is the cause of the economic difficulties faced by West African cotton growers," Pucheu said.

The Council met with Johanns and reviewed its policy regarding cotton flow and the marketing loan program. The Marketing Loan Working Group was created to develop a set of recommendation to address loan premiums and discounts, discovery of world price, adjustments to the AWP, cotton movement and loan redemption flexibility. A majority of the recommendations from the working group ended up in the House Agriculture Committee’s farm bill proposal, Pucheu said.

Now that the farm bill is waiting conference approval, the Council has joined 31 other ag organizations to write a letter to Senate and House ag leadership to convene as soon as possible—no later than late January or early February. While a three-month extension of current law is a stop-gap measure, farmers need to have a farm bill before spring planting begins.

Trade issues were also on the Council’s radar in 2007, specifically the WTO Brazil cotton case.

Brazil still contends that U.S. actions still do not comply and in late July the dispute panel sent its preliminary ruling to both the U.S. and Brazilian governments, Pucheu said. The Council is urging the U.S. Trade Representative to appeal the decision. A final decision could come as early as May 2008.

For more reports from the 2008 Beltwide Cotton Conferences, visit www.hpj.com.

Beltwide Cotton Conferences begin in Nashville

The Beltwide Cotton Conferences begin in Nashville, Tenn., today, Jan. 9, at the Gaylord Opryland Resort.

Cotton Council International hosted a breakfast to kick off the day, sharing with media all of its accomplishments in 2007.

CCI President Michael Adams stressed CCI's message that sustainable cotton production is important to meeting both environmental and market demands.

"The amount of cotton in a pair of jeans, takes 3 pounds of CO2 out of the atmosphere," Adams explained. He added synthetic fiber production is petroleum-based and not renewable in the long run. Cotton produced using sustainable methods increases production on the same amount of land, saves soil and tractor fuel and causes less erosion.

A concern of CCI and most everyone in the cotton industry is the increasing amount of cotton acres that have been turned over into corn and soybean acres. Adams explained that the United States should have enough cotton carryover to meet demands until 2009, but what's more troubling is the infrastructure that's being lost in the meantime. Adams said several gins in his area have closed and several growers are selling equipment and those who stay in cotton in the next few years will benefit from better seed technology and a growing demand for cotton.

The Beltwide Cotton Conferences will continue through Friday, Jan. 11, here in Nashville. Visit www.hpj.com for regular updates.