 To be quite honest, I am not sure I know where we’re headed right now as we deal with this current environment. It’s hard to comprehend what is happening in cotton with these high prices.
This much I do know. I’m starting my 52nd crop season, and I have never had the marketing opportunities that I have had in the last six months. We had some good opportunities in 2010 for those who didn’t sell early.
Ironically, my brothers and I thought that 2010 was the year to sell off the combine and cotton picker. Now that prices have increased even more than they were in 2010, it’s the first time in my farming career that I have had the opportunity to put something down on paper and figure a profit on any crop scenario that we decide to plant.
Normally, you have one crop that will outrun the others. But with what is happening in the world’s economy and food supply, we are seeing increased prices in all commodities.
I have been hearing about increased world demand for U.S. commodities for nearly all of my life. There have been experts who had predicted that this day would arrive, and it has finally come to pass.
As far as these record cotton prices, did I think we’d ever see $2 cotton? Well, I have a chart on my wall here in the office. It shows prices all the way back to 1828 and 1829, and I have been watching this chart for a long time. During the Civil War, cotton prices did go up to $1.90, and now it seems that they are close to surpassing that price.
I never thought I’d see $2 cotton. I have had one opportunity in my life where I could sell cotton for more than a dollar, and that was just a few bales. I’d forgotten that I even had that cotton, and that’s why I had it to sell.
What kind of decisions should producers be making in this price environment?
In our operation, we’re trying to look ahead and do a good job of figuring our cost of production. We want to project how high input costs will go. We also have set a price for our cotton where we will start selling the crop the minute we hit that number. Everything is based on these assumptions.
I told my brothers that once we reach that level that’s when we’ll sell. We can’t look back because you can’t really do anything about what has happened in the past. Just develop a plan and go with it. That’s what we’re trying
to do.
There is the temptation for being greedy in this market. I looked on the computer, and cotton went down 700 points today, but that just shows you the volatility that we’re dealing with. It went from $1.31 back down to $1.22. You can’t look at those numbers and start second-guessing yourself. Lock in a price that you can live with and then be happy and proceed ahead.
What kind of impact are these prices having on our cotton infrastructure in Mississippi? I would say they are stabilizing it to the point where we won’t lose any more than we already have. If we maintain these levels, we can increase our cotton acres, and that will certainly have a trickle-down effect on the cotton economy here in our region.
I am hopeful that we can continue these prices for at least two to three years. Historically, we’ve seen a bump in prices and then our input costs go up. Then, when the price goes back down, the input costs stay the same. That’s when we get caught in a real price squeeze.
And let’s don’t forget that cotton is the most expensive crop to grow. You will see some cautious farmers who want to watch this market before they invest in a new cotton picker that costs $500,000 to $650,000. These are big investments, and farmers will want to know that cotton is really making a comeback.
Having said all of this, am I optimistic about cotton as we look ahead? Well, you have to be optimistic to have planted a crop for 52 straight years.
Kenneth Hood is a cotton, corn and soybean producer in Gunnison, Miss. |
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