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Agricultural Outlook for Cotton 2012

Agricultural Outlook for Cotton 2012. _________________________________________________________________________________. Darren Hudson, Director, Cotton Economics Research Institute, Texas Tech University Maria Mutuc , Post-Doctoral Associate, CERI

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Agricultural Outlook for Cotton 2012

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  1. Agricultural Outlook for Cotton 2012 _________________________________________________________________________________ Darren Hudson, Director, Cotton Economics Research Institute, Texas Tech University Maria Mutuc, Post-Doctoral Associate, CERI 39th Annual BankersAgricultural Credit Conference, November 18, 2011 International Cultural Center, Texas Tech University

  2. Year in Review • “Unmitigated disaster…” Me, Bloomberg, September 14, 2011 • Although not the largest year-on-year percentage decline in production, by far the largest loss in terms of crop value • Insurance helped, but financial impact was real and if we see consecutive years of drought, we will start seeing farm failures. • Weaker demand kept a lid on prices this year, despite the shortfall in production • Stocks still tight, but more availability than in 2010; increase in economic activity will still put substantial upward pressure on prices, but outlook there is not particularly strong

  3. Economic Impact of Drought 2011 State Production Losses by Crop, $US B

  4. Effects on upstream & downstream industries State-wide Economic Impacts by Crop, $US B

  5. U.S. Futures Contracts Quotes (as of Nov 1) Dec 2011 Contract Dec 2012 Contract Current momentum is sideways at 94-98. Largely irrelevant A 94-98 futures translates to a local cash price of 87-91 cents.

  6. U.S., 1990-2020f Production (‘000 bales) and Yield (lbs/acre)

  7. U.S., 1990-2020f Ending Stocks (‘000 bales) and Farm Price (cents/lb)

  8. World, 1990-2020f Production (‘000 bales) and Yield (lbs/acre)

  9. India, 1990-2020f Production, Mill Use and Net Exports (‘000 bales)

  10. China, 1990-2020f Production, Mill Use and Net Exports (‘000 bales)

  11. Brazil, 1990-2020f Production, Mill Use and Net Exports (‘000 bales)

  12. Pakistan, 1990-2020f Production, Mill Use and Net Exports (‘000 bales)

  13. Conclusions • Expectations for higher U.S. and world production, partially on yield gains, but some recovery of planted area as well. • Longer-term moderation of prices, but still well above historical levels. • Although definitively tied to ethanol production, US cotton prices are likely more responsive to weather events (supply-side) and economic growth and textile production in Asia (demand-side); need to pay attention to weather events in China and India (and to some extent Brazil and Australia) to adjust your expectations for price.

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