⋅ BY YANGXUAN LIU ⋅
DEPARTMENT OF AGRICULTURAL & APPLIED ECONOMICS
UNIVERSITY OF GEORGIA
Southern agriculture faces unique challenges with limited crops that are both suitable and competitive in the region. Cotton, one of the major row crops in the Southern United States, has historically been favored for its drought resistance, making it well-suited to the region’s soil and weather conditions.
In 2024, the United States is projected to produce 14.5 million bales of cotton. While market prices are expected to be around $0.66 per pound (USDA WASDE), the value of cotton production is approximately $4.6 billion nationwide, underscoring its essential role in the Southern region.
Recent data from the USDA’s Economic Research Service highlights the complexities of cotton farming, showing that growers have faced financial challenges over the years. This data accounts for all costs incurred by participants in the production process, including farm operators, landlords and contractors.It reflects actual production costs incurred by cotton farmers, including labor, equipment and other inputs, as well as the revenue generated from cotton sales. However, these figures do not reflect government payments and crop insurance indemnities received by producers during this period. The government payments include traditional Farm Bill programs for farmers with base acres, as well as ad-hoc disaster relief programs.
Scramble To Cover Costs
Producers are compelled to become more efficient in their operations to achieve profitability. However, over a 27-year period, cotton only managed to exceed total production costs in four years. On average, cotton growers faced annual losses of $94 per acre, highlighting the crop’s ongoing struggle to cover total production costs — including fixed expenses like long-term asset depreciation for buildings and equipment — presents a serious risk to the agricultural future.
Many farmers are increasingly relying on personal equity to keep their operations running, a practice that is financially unsustainable in the longterm. As a result, many are turning to government support, including Farm Bill programs and disaster relief initiatives, which can provide a safety net during challenging times. With long-term economic loss for cotton production, the economic health of Southern agriculture and the livelihoods of its farmers are at risk.
Potential Solutions
Following are some thoughts I have regarding possible strategies:
■ Enhanced Risk Management Strategies
Use of Crop Insurance: Cotton producers are vulnerable to unpredictable weather patterns and market price volatility. A strong crop insurance strategy can protect farmers against adverse weather conditions, yield losses and price fluctuations.
Access to Government Programs: For many cotton farmers, government support can be a critical lifeline. Programs under the Farm Bill and ad-hoc disaster relief programs provide essential financial assistance during challenging seasons.
■ Efficiency Improvements
Precision Agriculture: Implementing technologies, such as GPS-guided tractors, soil moisture sensors and drones for crop health monitoring, can improve farm efficiency. These tools allow farmers to precisely monitor field conditions and optimize their use of resources like water, pesticides and fertilizers, ultimately reducing input costs and enhancing yields.
Cost-Benefit Analysis of Inputs: Rising costs for inputs like seeds, fertilizers and pesticides continue to pressure profit margins. By evaluating input costs relative to yields, farmers can adjust their strategies to respond to market conditions and reduce costs where feasible.
■ Alternative or Supplemental Crops
Cotton farmers can reduce financial risk by diversifying their crops. Rotating cotton with other crops suited to the region’s climate can create new revenue streams, potentially reduce reliance on cotton and improve resilience against market and environmental shocks.
■ Co-ops for Input Purchasing, Product Marketing
Through cooperative buying, farmers can negotiate lower prices for inputs, reducing per-unit costs. Additionally, cooperative marketing of cotton products can help small- and medium-sized producers capture better prices and increase their profit margins. Cooperative models may also help smaller operations access modern technologies and infrastructure that would otherwise be financially out of reach.
■ Market Development of Foreign Buyers
Expanding export markets could offer significant economic opportunities for Southern cotton producers. Facilitating and maintaining good trading relationships with current buyers and building relationships with foreign buyers could create a steady demand for U.S.-produced cotton.