Cotton is one of the U.S.’s oldest crops, and the country’s cotton farmers have weathered many storms. The outlook at this point seems to indicate that the cotton industry has many obstacles for the 2016 season before it. While the domestic use of cotton has risen over the last four years, it only represents about a quarter of the total world cotton use. Take a look at the challenges faced by U.S. cotton farmers.
High Global Cotton Stock
The first issue that poses a problem for American cotton producers is that there’s quite a bit of cotton sitting in warehouses the world over. According to an AgWeb.com article, 2016 started with 103 million bales in global inventories. While global cotton stocks are declining, it won’t be by significant amounts.
Reduced Cotton Use World-Wide
China is a major buyer of exported U.S. cotton, but China’s demand for the natural fiber continues to drop. It’s fallen the last three years, and it’s expected to fall further for 2016. One reason behind the decline in demand is that cotton costs nearly twice as much as synthetic alternatives like polyester.
High Planting Numbers
In the laws of supply and demand, the last thing you want when you have high inventories and low demand is an additional high supply, but the current forecast planting acres shows just that. In a December 15th survey by the National Cotton Council concerning planting intentions, producers indicated they planned to increase planted acres by 5.7 percent for Upland Cotton and 31.2 percent for Extra Long Staple Cotton over 2015 acres.
Low Cotton Prices
According to a December article on AgWeb.com, cotton prices are at their lowest level since 2009. High input prices and cash-flow issues only add insult to injury.
Lack of Crop Insurance
Cotton’s lack of a designation that falls under any farm safety net definition means that cotton producers are without the crop insurance that many other ag sectors count on. At a 2015 House Agriculture Committee’s General Farm Commodities and Risk Management Subcommittee, National Cotton Council vice chairman Shane Stephens proposed that cotton be given a designation of “other oilseed” so that cotton producers could participate in the farm safety net program and enjoy a measure of stability.
Some in farm lending have voiced concerns over cotton producers’ ability to qualify for loans and banks’ inability to meet the lending needs of cotton farmers in the future. As the land loan specialists, AgAmerica Lending’s number one priority is the farmers and ranchers who work every day to provide for us all. It’s our mission to help the country’s ag producers to weather the storms of the ag industry with our low interest rates, long amortizations, and outstanding 10-year line of credit.
To read more about our cotton land loan expertise, click here.