Cotton prices soar in 2022; projected to drop in 2023

Cotton prices soared upwards in 2022, but this year that trend may begin to fall. Prices are projected to be lower in 2023 along with acres.

Last year’s growing season was marked by severe drought that smothered cotton planting in west Texas and the American Southwest. The drought would eventually catch up with the Mid-South, but with somewhat better results.

“For cotton, 2022 was a year characterized not only by historically strong prices, but also historically volatile price swings,” said Scott Stiles, extension economist for the University of Arkansas System Division of Agriculture.

The heavily marketed December futures contract traded to a high of $1.3379 in mid-May.

“That was the highest trade for the December contract since June 2011,” Stiles said. “Following the mid-May peak, the cotton market turned sharply lower for much of the remaining growing season.”

Stiles said that early on, “attractive cotton prices pulled our acreage up to multi-year highs. On the final day of January, the December futures contract traded above the magical $1 mark. Prices continued to trend higher until mid-May and competed well with soybeans and corn, which were also at decade-price highs.

The U.S. Department of Agriculture estimates Arkansas would harvest 630,000 acres in 2022. Prices forced a significant uptick in acres in the Natural State.

“This is up 155,000 acres or one-third from 2021 and the highest since 2011,” Stiles said.

From USDA’s November reporting, Arkansas is projected to have an average yield of 1,166 pounds per acre. This is down 82 pounds or 6.6% from last year’s record of 1,248 pounds per acre. Stiles said the yield estimate was only preliminary.

“The yield reduction from last year is likely attributed to the extreme heat and above-average daily temperatures,” he said. “Some areas of the state went for a period of 40 days without supplemental rainfall during the stretch of excessive heat. This could have played a detrimental role in pollination and seed counts per boll. The impacts varied somewhat by planting date.”

One advantage from the drought was easier harvest conditions.

“The 2022 season in Arkansas brought about issues we more commonly hear about from producers out west,” Robertson said. “However, the dry fall moved harvest progress at perhaps the most rapid pace we have ever experienced.

“Most of our crop picked very clean. Good cotton usually picks clean, especially when little rainfall occurs after boll opening,” he said. “Little weather-related losses gave us the opportunity to get almost everything the plant produced in the module. Our yield-per-acre values should be higher than expected. This is good news especially in our current economic situation.”

The downside is that dry cotton doesn’t pack well and most of round modules are 10 to 15% lighter, said cotton agronomist Bill Robertson.

“Our color is great and leaf values are low as a result of the dry cotton. The dry cotton is also presenting an unusual challenge for Arkansas ginners to have cotton conditioned to the moisture ranges that ensure lint quality is preserved,” he said.

Robertson said the dry fall was a bonus for consultants pulling soil samples and producers getting fields worked up for next year. However, the dry weather presents challenges for call cover crops.

“Establishing cover crops has been extremely challenging this year. Most expect poor growth at best with covers this fall as our temperatures dropped significantly before the moisture we needed for good growth arrived,” he said.

The biggest issue most cotton growers were facing post-harvest was an increased percentage of crop in the discount range for high micronaire, which represents thickness of the cotton fiber’s cell walls.

“The wonderful weather we had basically the whole month of September matured our top crop more so than we may have ever experienced in Arkansas,” Robertson said. “Between the more mature bolls and delays in initiation of our harvest aid programs, some varieties are falling in the discount range for high micronaire more than others.”

“Looking forward, it appears cotton acres could decline in 2023,” Stiles said. “The cotton market is closely tied to the health of the general economy. Lower consumer spending due to higher borrowing costs and price inflation for basic consumer goods have pressured cotton prices.”

Stiles said in last November that the December 2023 futures contract was trading near 78-cents.

“At that price level in a typical share rent situation, cotton will cover variable costs only on the highest productivity farms with a historical average above 1,300 pounds,” he said. “Too, with September ’23 corn trading at $6.20 and lower input cost soybeans at $13.78, these competitors could pull some acres away from cotton next year.”

“There’s still plenty of time for commodity prices to change before planting,” Stiles said. “U.S. cotton ending stocks remain tight at 3 million bales. For that reason, cotton prices may be forming a base of support at least. The cotton market needs to see mill demand start to recover.”

Robertson said cotton growers’ plans for 2023 should be falling in place.

“Variety selection is one of the most important decisions a producer makes,” he said. “Once planted, no amount of effort can make up for a poor decision.”

Arkansas’ sandy soil in the Mississippi River Delta Region is prime for growing the cotton crop primarily used in the textile industry. Mississippi and Craighead counties, alone, account for about one-fourth of the state’s cotton crop. Other top cotton producing counties include Clay, Poinsett, and Lee counties.