Longer run price outcomes for the 2025 crop will depend on expectations of supply and demand. The first supply-related question is how much acreage will be planted. The price of competing crops, relative to cotton prices, is an important consideration to the level of planted acreage. The chart below shows a fairly strong relationship between the level of U.S. upland and pima cotton planted (as measured on June 30) and the ratio of December CBOT corn futures and ICE cotton futures during the first quarter of the year. The higher the ratio, the less cotton is planted. Of course, there are other important competing crops as well: sorghum, soybeans, peanuts, and perhaps wheat. And there are other non-price influences, including how dry it is in Texas, the insurance base price, fixed cost influences, and the psychological influence of the preceding growing season. But the price ratio of corn to cotton appears to capture a lot of these other influences in explaining variations in cotton plantings.
What does the above chart imply for 2025? We’ll have to wait and see where crop prices are during the first quarter of 2025. But as of March 13, the Dec’25 CBOT corn/Dec’25 ICE cotton ratio in the first quarter of 2025 averaged was 6.5 after a gradual uptrend (i.e., new crop corn price was rising relative to cotton). This current price ratio is historically associated with between 10.0 and 10.5 million acres of all cotton. But there are two other potential influences that might lead to plantings different than that predicted by this chart. First, the negative memory of declining/low prices during the 2024 crop season may linger on growers’ minds and have more influence on their planting decision in 2025. Second, if the Southern Plains continues it’s present drought condition, this could lead to average plantings that are then abandoned at higher rates in the Southern Plains region. The recent rainy pattern helped some portions of Texas but was mostly concentrated over the Delta Region.
But on the other hand, NOAA has changed their ENSO advisory climate forecast from La Nina watch to likely ENSO neutral (i.e., normal weather), so there are mixed influences on planted and harvested acreage. We’ll have to see. For what it’s worth, the example in the middle column below assumes the upper end of the range of planted acreage (10.5 million), with 17% abandonment and 855 lb/acre average yield. That results in a healthy supply of cotton. Making more assumptions about the possible consumption and exports, it is easy to pencil out ending stocks remaining at a price neutral level around five million bales, or even bearishly higher.
On the other hand… The National Cotton Council published a lower planting intentions number in mid-February (i.e., 9.55 million acres). If that outcome is realized (right most column below), the bottom line could be a reduction in ending stocks and a higher price range, year over year. The most current estimate of planted acreage (USDA Prospective Plantings as of March 31) lies inbetween. We’ll have to see where USDA’s June 30 Planted Acreage forecast is.
