Cotton Crop Expected to Shrink by 31% in State

The federal government on Wednesday cut its estimate of the 1998 U.S. cotton crop for the third straight month as the first field survey of the year showed worse-than-expected damage from wet, cool weather in California and drought in Texas.

The U.S. Department of Agriculture cut its estimate for the 1998 cotton crop to 14.3 million bales, down 4.7% from 15 million bales projected in July, and 23.9% less than 18.8 million bales harvested last year.

The projected harvest is the smallest since 1989, when farmers produced 12.2 million bales, and is less than the 14.5 million bales analysts were expecting.

The report sparked a rally in cotton futures on the New York Cotton Exchange, with cotton for December rising 1.65 cents, or 2.35%, to close at 71.97 cents per pound.

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The final harvest estimate may turn out to be larger than Wednesday’s USDA projection, because conditions have improved since Aug. 1, when the USDA surveyed the crop, said Judy Ganes of Merrill Lynch & Co. in New York. “I think it’s the low production number for the year. Hereafter, we could see increases unless the insects really attack the crop.”

Other factors driving prices higher include the USDA lowering estimates for world consumption of cotton and U.S. exports, she said.

David C. Brandon Jr., a senior vice president and cotton specialist at Salomon Smith Barney in Memphis predicted U.S. mills will look to foreign suppliers to meet their needs. “Cotton prices would have to go higher to allow imports,” Brandon said.

California’s crop is expected to shrink to 1.81 million bales, from 2.63 million bales in 1997, a 31% drop, the USDA said, in the first state-by-state breakdown of the cotton crop.

Nationwide, cotton yields will average 640 pounds per harvested acre, down 40 pounds from last year, the USDA said.

“In 104 years we had the wettest and coolest quarter in California and the hottest and driest in Texas and Louisiana,” said David C. Brandon Jr., a cotton specialist at Salomon Smith Barney in Memphis. “It’s the story of two extremes.”

Texas is expected to produce 3.165 million bales of cotton, down 39% from last year’s 5.194 million bales because of a four-month drought. Texas farmers abandoned 1.9 million acres of cotton, or 37% of the acres they planted.