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Cotton acres up on soybean rust threat
MISSISSIPPI STATE -- Asian soybean rust did not cause the dramatic decline in acreage it could have, but its threat may have inspired a 13 percent increase in prospective cotton acreage.
The U.S. Department of Agriculture released its annual prospective plantings report March 31, and Mississippi producers indicated they will decrease soybean acreage 4 percent to 1.6 million acres and increase cotton to 1.25 million acres.
"A 4 percent decline in soybean acres may not seem like a huge impact, but I think we are going to have fewer acres than we would have had without rust," said John Anderson, an agricultural economist with the Mississippi State University Extension Service.
Anderson said producers are dealing with uncertainty and a lack of experience with rust.
"We know that Asian soybean rust can be managed. I think what is uncertain is exactly what it will cost to manage it and how difficult it will be," he said.
Very strong futures prices have kept producers from converting even more soybean acres. Prices have dropped in the last few weeks, but Anderson said current soybean prices still are a little more than $6 per bushel.
Fertilizer costs also may have encouraged producers to keep acres in soybeans. Extension agricultural economist Gregg Ibendahl said soybeans have an advantage over cotton and corn because they do not require nitrogen inputs.
"Right now, fertilizer prices vary from county to county, but the nitrogen price is at or near its all-time high," Ibendahl said.
Ibendahl said nitrogen is derived from natural gas, and when fuel prices rise, natural gas prices follow. Historically, fuel prices reach their low point in January and peak in early- to mid-summer around Memorial Day. Ibendahl said the current price increase is unique because it is caused by increased demand rather than supply issues.
"Some sources I follow are saying fuel prices might come down a little bit. But even if those prices do start going down, it won't be a very fast decline," Ibendahl said. "I don't really see any big change in fuel prices up or down, barring any unforeseen disasters."
The recent Texas refinery explosion affects about 3 percent of the U.S. fuel supply, but Ibendahl said he does not expect that to cause any long-term problems.
Ibendahl said biodiesel may become a more viable option to producers this year after a federal tax credit of up to $1 per gallon was introduced in January.
A significant increase in planned cotton acreage may be a result of producers' concerns about soybean rust. Anderson said other soybean-producing states also have increased their cotton acreage.
"Nationally, cotton is expected to increase by only 1 percent, but with Arkansas and Missouri increasing cotton acres about 8 percent each and Louisiana increasing cotton by about 24 percent, this could be an indication of the impact of the soybean rust situation," Anderson said. "With rust out there as a factor, I think some of those acres going to cotton potentially would have been in soybeans."
But rust fears are not the only factor contributing to increased cotton acreage. Anderson said demand and prices for cotton have improved.
"December cotton is at 57.5 cents a pound. The loan rate is 52 cents, so that's not a particularly high price, but it's better than the 2004 price," Anderson said. "With an expected increase in price, it's not surprising that we've got this increase in planned cotton acreage."
Producers indicated they plan to decrease corn acreage by 13 percent, to 400,000 acres. A "disappointing" market may be to blame.
"We had a record crop last year, and we're still looking at very large supplies out there on the market, which tends to move people away from corn," Anderson said. "September corn is at $2.27 per bushel right now, and those prices don't seem as attractive as cotton or soybean prices right now."
Mississippi rice producers plan to plant 260,000 acres, up 11 percent from 2004.
Anderson said it is important to remember the USDA report is a prospective planting report, and actual acreage numbers will not be known until June.
"Adverse weather could cause producers to shift from corn to soybeans in a lot of places. But this report gives us a good idea of what people are thinking right now," Anderson said.