Cotton growers plan to expand their plantings by a sharp 3 percent this spring, taking away land from soybeans, the most prominent casualty of the Sino-U.S. trade war, said the National Cotton Council over the weekend. Meanwhile, the USDA said the soybean stockpile will double in size by the time this year’s crop is ready to harvest, creating the largest “carryover” ever.
The Cotton Council survey was one of the first signals from the field that growers are looking for crops that offer a better chance of a profit. “Weaker competition from soybeans” makes cotton more attractive, it said. Analysts have predicted farmers will cut back on soybeans this year because of weak market prices — the USDA says the 2018 crop will sell for the lowest average price in 13 years.
“Unless producers have good yields, current prices may not be enough to cover all production expenses. Despite these challenges, cotton is still the better alternative for many growers,” said the council, an umbrella group representing growers, handlers, warehouse operators, shippers and users. The survey of growers in the 17-state Cotton Belt indicated plantings of 14.5 million acres this year, up 408,000 acres from 2018, with Mid-South making the largest switch away from soybeans. With good weather and average yields, growers are headed for a harvest of 22.7 million bales weighing 480 pounds each, the third-largest crop on record.
The USDA and CBO, as well as private forecasters, say soybean plantings will drop by as much as 7 percent this year, with corn likely to be the big winner. Soybean prices have strengthened somewhat during the winter so the shift may not be as large as initially thought, some say.
Before the trade war, half of U.S. soybeans were exported. The portion will drop to four of every 10 bushels for the 2018 crop, said USDA on Friday in its first WASDE report since December. China increased its reliance on Brazil for soybeans after tit-for-tat tariffs made U.S. soybeans too expensive. U.S. soybean exports during the current marketing year will be 11-percent smaller than during the previous year, says USDA, a turnaround from forecasts before the trade war that sales would rise. Carryover stocks are forecast for 910 million bushels at end of this trade year, compared to 438 million bushels on hand at the start.
China will import 88 million tonnes of soybeans this trade year, compared to 94 million tonnes in 2017/18, said the USDA. China said it would switch to thriftier feed rations and look for alternatives to soybeans because of U.S. tariffs. An epidemic of African swine fever has cut into the size of the Chinese hog herd, the largest in the world.
Along with mammoth soybean exports, Brazil will ship a record 6.2 million bales of cotton overseas this trade year, aided by rising demand in China, said the USDA in its Cotton: World Markets and Trade circular. “Brazil’s burgeoning production amidst greater global demand is expected to propel 2018/19 record exports even higher this month, driven by a record crop,” said the USDA.
U.S. cotton exports could be the second-largest ever, at 17.4 million bales, if the trade war ends by late summer, when the 2019 crop goes on the market, said the Cotton Council. Even with large exports, the cotton carryover could be the largest in 11 years. If tariffs remain in place, U.S. cotton would “backfill trade into other markets” and grow from the 15 million bales forecast for this trade year. “The longer-term imposition of tariffs would dramatically increase the likelihood of permanent losses in market share in China.”
A large U.S. delegation was scheduled to open five days of negotiations with Chinese counterparts in Beijing today. The talks would be elevated to the ministerial level on Thursday.
President Trump has set a March 1 deadline to increase tariffs on $200 billion worth of Chinese products if there is no resolution of the trade dispute.