2023/24 Fundamentals, Outlook, and Caveats

The supply and demand picture for the 2023 crop is unfolding. To begin with, the size of the 2022 crop and carry-in is still being finalized.

Then there is the question of 2023 production.  The price of competing crops, relative to cotton prices, is an important consideration.  If you take Dec’23 corn futures trading under $6 per bushel and Dec’23 cotton in the lower-to-mid 80s, the result is an relatively high ratio of corn futures prices to cotton futures prices (Figure 1, x-axis).  The average ratio during the first quarter of 2023 was 7.0  History suggests that when pre-plant corn futures prices are this high in relation to cotton futures , we could expect cotton planted acres no higher than ten million acres, all other things being equal (see the graph below).  There are other influences of course, including how dry it is in Texas, the insurance price level (in the low/mid 80s), fixed cost influences, and the psychological influence of the preceding growing season.  But the price ratios for competing crops imply relatively smaller plantings of U.S. cotton, year over year.

Meanwhile, the combination of carry-in, March 31 plantings, and May WASDE new crop projections results in the balance sheet numbers in the right hand side column of the chart below, which represents a similar endings stocks outcome, year over year.  If realized, that implies a relatively flat seasonal pattern for Dec’23 ICE cotton futures. e.g., between 77 and 89 cents.


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