EDITOR'S NOTE: Don’t Miss a Beat! Kitco News is launching a weekly Newsletter highlighting our most popular features, articles and videos! Sign Up by clicking on the
Kitco Newsletter Box.

EDITORIAL: Lower cotton prices have some area farmers thinking about alternatives

Lubbock Avalanche-Journal (TX)

Feb. 07 --Cotton has been king in West Texas for generations. However, some area farmers are considering changing at least some of their crops for the near future. That strikes us more as a statement of the resiliency of farmers than as a weakness of cotton as a crop.

Cotton isn't going away. It's a desirable fiber whose worldwide demand is going to remain strong. However, an overabundance of supply is affecting the economic principle of supply and demand to the point some agricultural producers question whether cotton has a large enough profit margin.

Cotton economists have been uneasy for some time about China's stockpiling of cotton, which is believed to be about 62 million bales.

China reduced its 2015 cotton imports, which caused cotton futures to fall to a five-year low. Obviously, China was able to fill in its cotton needs from the stockpiles, but what's going to happen with the remaining bales?

Cotton bales sitting in a warehouse have a limited shelf life of about five years, so at some point China is going to have to use or sell its supplies or risk losing them.

A significant supply of Chinese cotton on the international market will drive down the value of cotton further.

China isn't the only foreign nation with influence on global prices. India and Turkey also are factors, said Darren Hudson , a Texas Tech agricultural economist.

India is selling its stockpiles, and a Turkish lawsuit accuses U.S. firms of selling cotton in its markets below production costs, Hudson told A-J Media.

Cotton is selling around 60-cents a pound, and that's low enough to make farmers think about what they want to do.

"Unless it goes back to 90 cents or a dollar, I'm not gonna grow cotton anymore," Hale County farmer Chance McMillan told A-J Media. "The input costs are too much. There's not enough return on investment with 60-cent cotton."

For the area producers who change a portion or all of their cotton planting to alternative crops such as sorghum, wheat or corn, it doesn't mean cotton will be gone from their fields forever.

McMillan's point demonstrates they may be doing so only temporarily -- until a change of economic factors brings up the price of cotton again.

West Texas isn't the only place in the United States where farmers are likely to be changing their planting habits. Hudson said a drop of about 15 percent in cotton acreage in the nation should be expected.

Cotton is an important commodity in almost every nation in the world. That's important to cotton-producing nations, but the production costs of growing can be significant.

Agriculture producers are business people, so it's only expected they would weigh the costs of growing a crop against the price they will get for selling it.

While it's understandable some farmers would consider trying other crops during the near future, it seems likely cotton prices will rise again before the majority of them would ever give up on cotton.

Cotton has been the No. 1 cash crop here for a long time, and we don't see that changing soon. But it's not the only profitable crop grown by South Plains farmers.


-- Our position: Cotton prices have fallen to about 60 cents a pound, and we could see why that would discourage area cotton producers and cause some of them to consider alternative crops. Farming is a business like any other that requires a sufficient return on the investment and labor to make a profit. But the economic factors of cotton prices will change, and it seems likely cotton will remain the most important crop in our area.

-- Why you should care: The local economy is closely tied to agricultual production. The success of area farmers obviously is important to them, but it's also important to many businesses in our city and area. Low cotton prices have brought a downturn, but area farmers are resilient.

-- For more information: Log on to our website, www.lubbockonline.com , and enter the words "cotton prices" in the search box.


(c)2015 the Lubbock Avalanche-Journal (Lubbock, Texas)

Visit the Lubbock Avalanche-Journal (Lubbock, Texas) at www.lubbockonline.com

Distributed by Tribune Content Agency, LLC

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
kitco news

Precious Metal Charts

Click to see this Precious Metal chart
  1. 24h
  2. 30D
  3. 60D
  4. 6M
  5. 1Y

Interactive Chart