Kyle Dean, Host: Back here on WTIF. And it is 9:37; time for our UGA Tifton Farm Chat Market Mondays and we are talking cotton. And Don Shurley joins us in studio from UGA Tifton. Don, it is good to talk with you again.
Dr. Don Shurley, UGA Tifton Campus Extension Economist - Cotton: Kyle, same for you. How are you this morning?
Kyle Dean, Host: Doing great and like I say it’s great to have you back with us. I think last time we talked to you, you might have been on the road or something. I can't remember, but it's good to have you here none the less.
We talk about the markets, you put out this cotton marketing news which is available at ugacotton.com, and we are seeing kind of the market getting weaker.
Dr. Don Shurley, UGA Tifton Campus Extension Economist - Cotton: That's true and it is unfortunate that we have to start off a Monday talking about it. (Dean: [Laughing] I know, what a downer.) But the market is showing some weakness here in the last couple weeks, and I think farmers need to be aware of that. I'm still optimistic because we've got a long way to go this year. Our acreage will be down; so we are going to be sensitive to weather obviously. (Dean: Right) And the farmers need to be aware of the fact that our markets have gotten a little weaker really over the last month. We can go back to the first part of February, we were back up above $0.95 or so at that time; and now, we are down in the high 80s just a little over $0.88 on Friday. So, the market has gotten a little bit weaker and there are some reasons for that. But the farmers just need to be aware that has happened and take that into account when they start making their marketing decisions.
Kyle Dean, Host: On you newsletter, like I mentioned is at ugacotton.com, you have a graph there that goes back to April, March-April somewhere in there, but show the down trend which is a steady down trend. Kind of explain what those folks can see on that if you will?
Dr. Don Shurley, UGA Tifton Campus Extension Economist - Cotton: What happens is we’ve been really in a down trend since really since early summer. We were up over $1.05 around $1.07 at one point and we've kind of gone down in this market then we'll recover. We go down again then we recover. Just recently, back the early part of February, we were up around $0.97 - $0.98. But we have trended down since then. But, what's happened is every time we make one of those recoveries, it is at a little bit lower level than it was previously. So what that signifies to people that look at charts like this is that long term, the fundamentals have gotten a little weaker, gotten a little bearish as we call them. And so every time we recover, it tends to be a little bit less and a little bit less. One of the other things that you will see in the chart is that we've got what we call support, or at least we did have some support, down around the $0.90 level and I've said on this program time after time after time that $0.90 level is very crucial. It is crucial not only because was kind of a support level or floor for the market, but also quite frankly, I think that's where many farmers are going to make their decisions at--not only here in Georgia and in the Southeast, but in other parts of the country as well. Cotton below $0.90 just flat out is not going to be as competitive compared to other crops. And, so I think that $0.90 level is very crucial and we are down to $0.88 now.
Kyle Dean, Host: Obviously farmers are already thinking about risk management and crop protection. Crop insurance, how does cotton compare to maybe some other commodities that are out there?
Dr. Don Shurley, UGA Tifton Campus Extension Economist - Cotton: I appreciate you mentioning that. That's going to be another important factor now. Over the next couple of months, we are going to get into planting pretty earnest here particularly as we get into May. And farmers making decisions about what to plant, crop insurance always, always factors into that. When you look at what we call projected prices on crop insurance, this is the price that farmers are paid for their losses, and if you look at that projected price for cotton, that price for Georgia it $0.94 a pound and that's $0.06 above where the market is today. So, that tells farmers that if we have another dry year, if we have losses this year and they have an eligible claim, that chances are they are going to get paid very well. They are going to get paid above the market, at least above where the market is right now, for that loss. The reason that's important is because if you compare that payment price, as we'll call it, to what that relative price would be for say corn or soybeans or even peanuts, cotton is at a very attractive level. So, even though the price of cotton has come down since early summer, from a crop insurance perspective, from a risk management perspective, cotton's still a very attractive crop to be growing.
Kyle Dean, Host: Something else that caught my eye in this newsletter, you mentioned an India export ban. For folks that don't know what that is, can you explain it to us?
Dr. Don Shurley, UGA Tifton Campus Extension Economist - Cotton: I'm not sure I know but (Dean: We start getting into political things with this.) but a couple of weeks ago, India had announced that they were not going to export any more cotton. Now, that is very crucial because India is the #2 producer of cotton in the world. And they are the number #2 exporter of cotton in the world behind the U. S. So, when they say they are not going to export any more cotton, that's a significant shock to the market. The day that that happened, the market went up $0.05, (Dean: Wow.) But since that time, it has trended back down. The cotton industry was very upset about their ban and, again, it did get political. But what they've decided to do since that time and this thing could change this week as a matter of fact, what India's decided to do, their ministry over there says they are going to go ahead and they are going to honor the export sales that they already have committed to, but they are not going to make any more. So, they are not going to ship anything beyond what they are already committed to ship. But again, a final decision I think is expected later this week.
Kyle Dean, Host: What could be the reasoning behind that? Did they not have enough cotton? What do you think?
Dr. Don Shurley, UGA Tifton Campus Extension Economist - Cotton: That’s a great point. I think they're concerned about drawing down on their stocks too much if they export. Basically, what a lot of these countries do, they only export what they consider to be their excess supplies. And their exports have been doing very well. Stocks have been low so they are concerned about digging into their supplies too much so they are just saying, “Hey, we are going to back off. We are not going to export anymore.” So they were going to cap those, put a ban on them. You are exactly right. Basically it was to protect what they consider to be some short supplies.
Kyle Dean, Host: That is stunning news and something that we don't really hear about on this side of the world. I'm sure it makes some headlines nationally, but these are some things that you can only get right here on our UGA Tifton Farm Chat. Don, what should we be thinking about here state side as it relates to cotton? What's the next move for farmers?
Dr. Don Shurley, UGA Tifton Campus Extension Economist - Cotton: Well like I said, we are going to be getting into planting here middle part of April and after. So we've still got a ways. I'm hoping that farmers were able, and I think many of them did base on the meetings I've had and conversations I've had with them, I hope many of them managed to get some of their crop maybe as much as 20 - 25%, maybe even a 1/3 of it, priced back when we were above $0.90 and hopefully they were able to do that. I hate to advise people to sell into a down trend and I would not do that now. I would give this market a chance to recover, not saying that it will, but give it a chance to recover later this spring and if it does, add on to your sales at that point. Of course after we've said before on this program, after what we've been through the last couple years with drought and everything else, farmers aren't going to get too heavy into contracting too early in the game anyway. So, most of them may feel like they are at a fairly comfortable level right now already. But, eventually they are going to make more decisions and hopefully the market will recover. Give it a chance to recover. Don't panic necessarily and run out right now and do anything, but wait for the market to get hopefully back up closer to $0.90, above $0.90, and then go ahead and book some more.
Kyle Dean, Host: As always, thanks for your time, Don.
Dr. Don Shurley, UGA Tifton Campus Extension Economist - Cotton: Thank you Kyle. Appreciate it.
Kyle Dean, Host: That's Don Shurley, UGA Cotton Economist, right here on our UGA Tifton Farm Chat. We will come back after this on WTIF.