Uncertainty created by coronavirus for Texas cotton producers

Uncertainty surrounding the spread of coronavirus has Texas cotton producers in limbo regarding their crop options for 2020, according to a Texas A&M AgriLife Extension Service expert.

John Robinson, AgriLife Extension cotton marketing specialist, said cotton prices have been dropping due to the disease’s effects on global production, manufacturing and consumption.

The ripple effect of coronavirus on the global supply chain and U.S. imports and exports is spreading, he said.

“The human toll is evident, but there’s also a lot of disruption to commerce, including to cotton,”  Robinson said. “You’ve got hundreds of millions of people in Asia who are staying at home. That affects everything from ships not being unloaded to textile manufacturing and consumption.”

Uncertainty spreads with outbreak

The National Cotton Council’s prospective planting surveys suggested growers would plant 13 million acres of cotton in 2020, but prices have since plunged.

Prices fell 3-4 cents per pound in a week as the U.S. stock market dropped 1,000 points per day for three consecutive days, he said. On Feb. 27, cotton futures were down to 64 cents per pound.

Robinson said the average producer needs cotton futures prices to be around the mid-70 cent mark for any possibility of profit.

The recent U.S. Department of Agriculture cotton outlook adjusted U.S. planting expectations to 12.5 million acres. But Robinson said the extent of the coronavirus outbreak could mean further price dips and more producers looking for other planting options.

Robinson said 5.4 million bales of cotton may carry over from the 2019 growing season, which is similar to the previous marketing year. However, typical price rallies on cotton futures, which occur March through May during planting season, seem to be in jeopardy.

“I’ve never seen it like this,” he said. “How the information is changing week to week on the prices and acreage outlooks shows the uncertainty regarding how far and wide coronavirus could spread.”

Producers in limbo

Robinson said conversations with cotton growers suggests they’re not ready to commit to a crop due to the uncertainty. But options are limited for many growers in parts of the state.

Cotton acres have increased north of Amarillo over the last several years, he said. Those acres switched from corn because of irrigation limits and better cotton prices.

“Cotton is more tolerant to drier conditions, and prices helped that trend,” he said. “But now you have a lot of farmers who have invested in cotton equipment, and there’s been investment in gins. So, this has some growers in a difficult spot.”

Many dryland growers will have even fewer options because wheat and sorghum prices aren’t any better, he said.

“It may come down to which decision will lose less money,” he said. “We’re hoping the coronavirus will be a short-term problem and that there will be some positive news as we move through the planting season, but right now the unknown has everything in limbo.”

Source: Texas A&M