Cotton prices and acreage rise; two more gins in the state

Cotton prices are on the rebound and more cotton acres will be planted in Arkansas in 2018. The agriculture commodity was selling for 86 cents per pound on Monday (June 25), according to Market Insider.

The price is 11-cents down from the 52 week high of 97 cents and its 20 cents above the year low of 66 cents per pound. The price is 16 cents higher than the price per pound in late June 2017.

Numerous factors determine how much a cotton farmer gets per pound including the contract signed in the spring, whether it’s fixed or mobile, the quality of their cotton, subsidies, and others. Better prices have led to an upswing in cotton acreage and gins in recent years.

Arkansas is ranked fourth nationally in cotton production in 2017, according to the U.S. Department of Agriculture (USDA). The state harvested an estimated 1.06 million bales, up 22% (220,000 bales) compared with 2016. Yields were 1,162 pounds per harvested acre, up 66 pounds per acre from earlier projections, and up 87 pounds from last year. Farmers planted 438,000 cotton acres in 2017, a 16.8% (63,000 acres) uptick.

Cotton farmers are predicted to plant 480,000 acres this season, an 8% increase from last year, according to the USDA’s National Agricultural Statistics Service (NASS). NASS projected that by the end of May 89% of the state’s cotton crop was planted, about 15% ahead of the five year average. Cotton acreage had been in steady decline for more than a decade. Lower prices, higher input costs, the profitability of other crops and other factors led to the decline. One side-effect has been the decline in cotton gins.

Arkansas had 33 cotton gins in 2017, an increase of two gins from 2016. Craighead and Mississippi counties lead the state with seven cotton gins each, according to NASS.

“With a recovery in cotton acres the last couple of years, Arkansas is also seeing some gins come back to life,” said Scott Stiles, extension economist for the University of Arkansas System Division of Agriculture. “In 2017 we saw two more gins operate than in 2016, one each in Craighead and Lee counties. the trend toward much larger and higher volume gins is certainly continuing.  A gin is definitely a massive investment in equipment that requires a lot of volume to make the numbers work.”

Added acreage and prices are positive signs, but lower cottonseed prices could stunt potential cotton gin growth, Stiles said. Cotton gins rely on cottonseed prices to stay in business, he said. Cottonseed prices spiked in June 2014 at $460 a ton and sank to $130 per ton in November 2017. Cottonseed prices are projected to be in the $180 per ton range, but could push higher as the season unfolds.

“From discussions at our winter production meetings I did hear of at least one gin that did not plan to operate this fall,” Stiles said. “They cited low cotton seed prices as the reason. Earlier this year cotton seed prices fell to decade lows. Revenue from seed sales is the lifeblood for gins.”