DEBARATI ROY
COTTON farmers in Texas, the biggest US growers, may abandon a record number of acres after the worst drought in at least a century damaged plants and boosted costs for textile makers, including Gap.
The US is a leading cotton producer, and a drop in output there will hit already high prices of raw cotton, as well as retailers’ profit.
"This year in the US will probably rank among the top abandonments," said John Robinson, a professor and extension economist at Texas A&M University.
"The situation looks very grave."
About 55% of the Texas cotton fields were in poor or very poor condition on June 26, matching the record low in 2006, the US agriculture department said this week.
More than 70% of the state was experiencing "exceptional" drought as of June 21, and nonirrigated crops in the Panhandle and South Plains regions had all failed, a Texas A&M research unit said.
While the Midwest got too much rain this year, the dry conditions in Texas — the worst since record- keeping began 116 years ago — may force farmers to make crop- insurance claims rather than harvest cotton. Abandonment in the High Plains region, which usually produces about two-thirds of the state’s cotton, may reach 50%, the highest since 53% of the crop was left to rot in 1992, according to Texas-based Plains Cotton Growers. The agriculture department says the record is 42% in 1998.
Cotton futures in New York as much as doubled in the past year, touching a record $2,197/lb on March 7, as adverse weather lowered output in China, the world’s biggest consumer and producer.
Gap, the largest US apparel chain, cut its full-year profit forecast 22% in May, citing higher costs, while Polo Ralph Lauren posted a 36% fall in net income in the quarter ended April 2. Prices have dropped 45% on signs of slowing global demand, particularly in China.
Cotton for December delivery closed at $1,214 on ICE Futures US in New York yesterday. Cotton may climb to $1,59 by the end of the year, according to a Bloomberg survey of 14 analysts and traders.
"On one hand, output is declining in the US, and on the other, demand has taken a severe hit," said Peter Egli, the director of risk management in Chicago at Plexus Cotton, a UK-based merchant . Bloomberg
Source: http://www.businessday.co.za/articles/Content.aspx?id=147372
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