Cotton acreage for the new season is expected to decline for the third year in a row. The main reasons are high costs and financial risk associated with cotton production, a sluggish cotton market, relatively strong corn and soybean prices, and fixed transition payments by the government. Acreage planted to cotton dropped from 16.9 million in 1995 to 13.9 million this season, or 18 percent fewer acres in two seasons. Because price levels for cotton, corn, soybeans and several alternative crops continually change in response to market forces, cotton acreage for 1998 will remain uncertain until the June 30 USDA planted acreage report. A review of production costs for cotton indicates the lowest costs per pound are in the Southeast and Southwest regions.
Production costs are higher in the Delta and the far West.
Thus, cotton acreage is likely to decline the least in the Southeast and Southwest. The largest acreage reduction is expected in the Delta, with acreage in California and Arizona fairly stable. Given the production costs and alternative crops, I currently expect 1998 U.S. acreage to be in the 13.2 to 13.7 million acre range. In order to have a point estimate, I will use 13.5 million acres until information suggests otherwise. Besides, the U.S. cotton industry needs at least 13.5 million acres to meet an 18.0 million bale market at price levels that are internationally competitive.