Cotton growers face the third year of low commodity prices, high production costs and financial hardship, says an economic outlook presented at the industry’s annual meeting. “With current futures markets indicating steady prices, the economic situation is not likely to improve in 2016,” said economist Jody Campiche of the National Cotton Council. “There is concern that some producers will find it very difficult to obtain production financing for the current year.”
As the Cotton Council meeting got underway, House Agriculture chairman Michael Conaway urged the creation of a $1-billion-a-year cottonseed subsidy to mitigate “the crisis in cotton country.” In a letter, Conaway insisted USDA has the power, despite its contrary conclusion, to declare that cottonseed is eligible for the same subsidies offered to grains and soybeans. The 2014 farm law created a separate program for cotton. “These are different products, in different markets, with different economic impacts,” wrote Conaway to Agriculture Secretary Tom Vilsack.
Growers indicated in a Cotton Council survey that they plan to plant 9.1 million acres of cotton this year, up 6 percent from 2015, while cutting back on wheat, soybeans, corn, peanuts and sorghum. “While expected revenue from cotton isn’t much different than last year, corn and soybean prices are weaker, and we are likely picking up some sorghum acreage due to pest issues,” said Campiche. In Texas, which leads the nation by growing nearly 40 percent of the crop, growers say they will plant nearly 6 percent more land to cotton.
Larger planting will lead to a crop of 14 million bales, up 1.1 million bales, or 8.5 percent, from 2015, the council estimated. That would be comprised of 13.4 million bales of upland cotton and 595,000 bales of Pima cotton. The crop would be slightly larger than exports and domestic consumption, so the U.S. stockpile would rise by nearly 200,000 bales by the end of this summer.
Congress revamped cotton subsidies in 2014 to resolve a WTO decision against long-time U.S. supports. The cotton industry designed the new program, called STAX, which combines a revenue insurance policy and a minimum price for cotton. In 2015, STAX was a flop, attracting only 22 percent of cotton plantings.