The holiday shortened week was active with futures starting out on Tuesday up roughly 40 points across 2014 contract months, then fell hard on Wednesday before rebounding a bit on Friday. A stronger U.S. dollar has dampened export sales, the driving force behind the recent bullishness in the market. Despite still being ahead of schedule with exports, the recent increased costs to U.S. trading partners as a result of the more expensive U.S. dollar has added pressure.
News out of Washington, D.C. from USDA’s Outlook Forum pegged total cotton plantings at 11.5 million acres for 2014, above the recent industry estimate of 11.3 million in early February and higher than the industry average January estimate of 11.0 million. So, the trend appears to be a slight increase in cotton acres as decision time approaches for producers. Lower corn prices have likely led to the shift, despite cotton’s roller coaster start to 2014.
A quick look back at how these three crops compare price-wise (and how acreage is allocated) is depicted in the two figures here. Both depict the price ratios of Soybeans-vs-Corn, Corn-vs-Cotton (scaled by one-half), and Soybeans-vs-Cotton (scaled by one-fourth) during the month of February. The first also shows U.S. acreage changes compared to 2000, while the second shows Mississippi acreage changes compared to 2000. As cotton became more attractive leading up to planting in 2011 (as seen by the dip in the red and green lines), a shift to more acres for cotton is seen (although still lower than 2000, both U.S. and Mississippi acres increased).
Also in the figures are the current February price ratios for the three crops. Despite corn’s fall, soybeans appear to be the current winner in the acreage battle. The Soybean-vs-Corn ratio is near 3.0 (i.e., soybean price is roughly three times the price of corn). The Soybean-vs-Cotton ratio has actually moved in favor of beans as well. It is currently near 15.75 meaning soybean price ($/bu) is almost 16 times the price of cotton($/lb); however in the chart it is depicted at almost 4, but keep in mind this ratio is scaled by one-fourth (4 times 4 equals 16). The Corn-vs-Cotton ratio has dropped significantly, implying cotton prices have become more attractive when compared to corn.