The US cotton acreage could be nearing an 18-year low as farmers migrate in growing numbers to more remunerative crops like corn and wheat, analysts said ahead of an official cotton plantings report due shortly.
The US Department of Agriculture is scheduled to report on the area of cotton that farmers planted - as well as intended to plant - as of June 1, and analysts said the number could be about 500,000 acres below a similar survey taken three months back. In March, USDA had estimated 2007 cotton plantings at 12.147 million acres. Analysts expect the latest figure to be revised downward to between 11.5 million and 11.6 million acres.
"If this number materialises tomorrow, it will be the lowest area under cotton since 1989," said Keith Brown of Keith Brown and Co in Moultrie, Georgia. "That year, we grew 10.59 million acres." He added, "And if you compare it with last year, you are looking at a reduction of about 25 percent in crop size."
On Thursday, the benchmark cotton contract for December delivery on the New York Board of Trade closed at 61.63 cents per lb, up about 2.5 percent from its level at the end of December, helped by a run-up in prices this week as analysts began predicting Friday's USDA report would show a drop in acreage.
Still, the higher cotton prices paled in comparison to the 10-year highs posted this same week in corn futures on the Chicago Board of Trade. Indeed, corn has been in a prolonged bull market since last year due to an overwhelming demand for corn-based ethanol.
Wheat prices on the CBOT have also been up and running in recent weeks due to tight global supplies. "What's happened to cotton is strictly a case of economics the economics of planting grains versus cotton," said Mike Stevens, an analyst at Swiss Financial Services in Mandeville, Louisiana.
Stevens said Friday's USDA report might give a conservative picture of cotton plantings in the United States as the period covered was only until June 1, and more areas under cotton have presumably been lost since. "It's conceivable that these numbers are inflated somewhat from reality," he added.
While the number of cotton fields itself had shrunk, bad weather has been crimping production of the fiber. "We've been in a drought in the south-eastern United States, which hurts production," said Brown. "We've had excessive rains in West Texas, which could somewhat hurt production. And then in China, a couple of areas over there are beginning to show drought."