Looking Ahead Towards 2019: Cotton Opportunities and Risks

April 9, 2019 11:33 pm Published by Leave your thoughts

Just like those who farm other types of crops, cotton growers must always be thinking ahead, so as to not miss out on opportunities as well as avoid a variety of costly and time-consuming risks. As is true every year, the size of this year’s cotton crop will influence the supply of the next season’s balance sheet in the form of carry-in stocks, often amounting to millions of bales.

Experts in the cotton industry will tell you that it is never too early to be thinking about cotton opportunities and risks. While you’re focused on advancement, also consider having your cotton gin parts in Texas inspected and cleaned by professionals. Make repairs and replace components to ensure the efficiency of your equipment and boost your odds of success during the 2019 cotton season. Read on to learn more about what this year has in store.

Potential production in 2019

One can’t help but question how cotton production will pan out in 2019. Taking into account the lower ratio of corn futures prices compared to cotton future prices, cotton prices were relatively good throughout 2018. Historically, when considering that corn futures prices are low in relation to cotton futures prices, it’s expected that planted cotton crops could be between 13 and 14 million acres. This may be a big contributor to the cotton acreage planted in 2019.

The weather in 2019

The weather during any crop planting season or year will always be a major consideration. The El Nino watch forecast predicts a 60 percent chance of wetter-than-normal conditions for crop growing during the months spanning September through November, only to increase to 70 percent during the harsher winter months. All this wetness is sure to increase the possibilities of soil moisture accumulations, lower abandonment and higher yields for crops planted in the spring in the drier regions of the Cotton Belt.

Bale crop

Assuming average United States yields and abandonment, if 13.5 million acres are planted, the potential production is 21 million bales, implying a rather healthy supply of 25 plus million bales. It has been a while since the U.S. has had futures below 70 cents, but it’s important to know of the possibility of downside price risk.

In such situations, growers should have realistic estimates of their expected per unit costs of production that they must cover if they plant cotton. Also, keep in mind the risk of hanging onto unsold 2018 bales. A final thing to consider is pricing or hedging some 2019 cotton early while December 2019 futures prices are still high. This can protect cotton crops against the risk for December 2019 futures falling significantly in price. By acting quickly to create and impose a strategy for cotton opportunities and risks in 2019, those in the industry can set themselves up for a rewarding season.

For a selection of quality cotton gin parts in Texas, look no further than M.B. McKee Company, Inc. Call us or visit one of our locations today and let us know how we can help you!

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