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Federal Reserve Bank of Dallas FARM and RANCH BULLETIN U.S. UPLAND COTTON FACES STRONG COMPETITION IN FOREIGN MARKETS The U.S. share of the world cotton market shrank from more than two-fifths in the 1960 marketing season to less than one-fifth in 1969. The nation’s cotton exports have also shown an overall decline in absolute volume since 1960. And even stiffer competition for the U.S. upland cotton industry is indicated by the increases expected this year in foreign acreage and production. There are several reasons for the decrease in U.S. cotton exports. Most significantly, increased acreage and higher yields abroad among the major Free World trading countries have boosted production faster than consumption. Also, consumption has AVERAGE PRICES FOR TEXAS UPLAND COTTON CE N TS PER POUND been hampered by increased use of man-made fibers. Other major factors affecting U.S. cotton shipments from year to year include changes in cotton stocks abroad, the level and quality of dis tribution of U.S. supplies, U.S. Government pricesupport and export programs, and the prevailing patterns of Free World cotton trade. And most of these factors are either directly or indirectly influenced by the level of cotton prices and changes in them. Effects of cotton prices In recent years, Liverpool quotations for Strict Middling (SM) 1 1/16-inch cotton—often used as the price basis for world cotton trade—have gen erally ranged from 27 cents to 30 cents a pound. Within this range, changes in world prices in one year have generally been followed the next year by changes in cotton acreage in the same direction. For example, a world price of 30 cents or more for SM 1 1/16-inch cotton at Liverpool can encourage a substantial increase in foreign acreage, while a price of less than 28 cents tends to dampen the enthusiasm of foreign growers. Under normal conditions, the Liverpool price tends to be several cents a pound higher than the U.S. spot price of cotton. Although U.S. cotton prices have been fairly competitive in recent years, these prices began to rise in early 1971 to a level considered conducive to an increase in foreign com petition. The interaction of cotton production, consump tion, stocks, and trade patterns among the Free World countries directly influences year-to-year changes in U.S. exports. These factors, in turn, depend on such primary factors as cotton prices, U.S. COTTON SUPPLY AND OFFTAKE (Year beginning August 1. Million running bales) 1968-69 1969-70 1970-71 1971-721 Beginning carryover ........................... ....................... 12.3 Crop, imports, etc................................ ....................... 7.6 Total supply ................................. ....................... 19.9 6.4 10.3 16.7 6.4 10.1 16.5 5.8 10.2 16.0 10,3 Domestic consumption ...................... ....................... 9.0 4.2 Exports ................................................. ...................... Total o ffta k e ................................. ....................... 13.2 8.3 2.7 8.0 2.8 10.8 8.1 3.7 11.8 Item 1967-68 11.0 4.1 14.4 8.1 3.0 11.1 1. Preliminary and estimated SOURCE: National Cotton Council of America man-made fiber use, per capita income, govern ment programs, and cotton supplies both here and abroad. A statistical evaluation of the effects of these variables on U.S. exports from 1959 to 1970 was conducted by agricultural economists of the U.S. Department of Agriculture. Results of this study show that price was the most important factor affecting U.S. cotton exports. A change of 1 cent in the price of U.S. SM 1 1/16-inch cotton at Liverpool indicated a U.S. export response in the opposite direction of about 300,000 to 350,000 bales the following year. Based on these results and with current world cotton prices well above 30 cents, U.S. cotton exports may be dras tically reduced for several years. FARM REAL ESTATE VALUES, 1971 1967=100 TEXAS FIV E S T A T E S U.S. FARMLAND INCREASES IN VALUE The value of U.S. farm real estate totaled $221 billion on November 1, 1971—a 5-percent gain over a year earlier and the largest advance since March 1969. Values rose about 2 percent in the year ended November 1, 1970, and about 3 percent in the year ended November 1, 1969. But the per centage of change in values varied considerably 90 100 110 SOURCE: U.S. D e p a r tm e n t of A g r ic u l t u r e 1 20 ~T" 130 CHANGE IN DOLLAR VALUE OF FARMLAND *1 P e rce n t c h a n g e , N o v e m b e r 1971 from N o ve m b e r 1 9 7 0 NOTE: Based on in d e x n u m b e r s of a v e r a g e value s per a c r e , i n c l u d i n g im p r o v e m e n t s SO UR CE : U.S . D e p a r t m e n t o f A g r ic u ltu re among regions and states, according to a report of the U.S. Department of Agriculture. The largest price increase was 9 percent in the Northeast, fol lowed closely by 8-percent gains in both the South east and the Southern Plains. The smallest increase was 2 percent for the Northern Plains region. The stronger values in the Northeast are largely due to increased urban and recreational demand for farmland. Thirty-five percent of the farmland bought in that region in the year ended November 1, 1971, is expected to be under other uses within five years. By contrast, only 3 percent of the farm land bought in the Northern Plains is expected to change over to other uses within five years. In the Southeast and Southern Plains, a combi nation of factors apparently influences land prices. Substantial acreage is shifting to urban uses near metropolitan areas, and commercial farmers are purchasing land to enlarge their operations. In creased emphasis on feeder cattle production seems to have contributed to increases in the value of grazing land in Texas. Activity in the farm real estate market appeared substantially strengthened in the year ended No vember 1, 1971, by the easing of monetary restraints in late 1970. At the end of the third quarter of 1971, long-term interest rates ranged from 7.5 per cent to 8.5 percent, slightly lower than in the same period a year earlier. More loanable funds were available to agriculture from March through No vember 1971 than in the preceding six months. The USDA also reported that both inquiries for farm land and the number of properties sold were up from the previous year. PROSPECTS MIXED FOR 1972 PLANTINGS More acres of upland cotton and soybeans but fewer acres of corn and feed grains will be planted this year, according to the January prospective plantings report of the U.S. Department of Agri culture. Short supplies and favorable prices are encouraging the larger plantings of cotton and soy beans. The reduction in corn and feed grain acre age is influenced by the bumper 1971 crop, abun dant supplies, and generally weak market prices during the past harvest season. Both Louisiana and Oklahoma can expect sub stantial increases in acreage of upland cotton. Only small gains are indicated for Arizona and Texas, and New Mexico should experience no change. Total acreage planted to grain sorghum in the five Eleventh District states is expected to decrease only slightly, although a 7-percent decline is indi cated for the nation. INTENDED PLANTINGS OF SELECTED CROPS, 1972 _________ Corn_________ Upland Cotton _______Soybeans_______ Grain sorghum 1972 as Acreage 1972 as Acreage 1972 as Acreage 1972 as Acreage (Thousand percent (Thousand percent (Thousand percent (Thousand percent acres)________of 1971_______ acres)_______ of 1971_________acres)________ of 1971_________ acres) of 1971 Area Arizona .......................................................... 26 Louisiana ...................................................... 135 New M e x ic o .................................................. 53 O klaho m a...................................................... 105 Texas ............................................................. 600 Five states ............................................... 919 United States1 .......................................... 70,032 104.0% 94.4 101.9 97.2 84.6 88.6 96.1% 255 610 135 510 5,450 6,960 13,109 105.4% 119.6 100.0 114.6 104.2 106.1 107.2% 0 1,750 0 180 125 2,055 44,349 — 103 2% — 116.1 109.6 104.6 103.7% 185 80 492 1,120 7,650 9,527 19,773 97.9% 66.7 100.0 93.3 100.1 98.8 93.0% 1 1. 35 major producing states SOURCE: U.S. Department of Agriculture MOST FARM EXPENDITURES RISE Farmers are substituting capital for labor to a greater extent than ever before, largely due to the continuing pressures of the cost-price squeeze. This trend is expected to accelerate through the 1970’s, stimulated by continued adoption of technological advances, economies of size, and more efficient pro duction practices. Producers are also encouraged by the increased availability of capital and non EXPENDITURES FOR U.S. FARMING INPUTS (1950 = 100) 1955 I960 1965 1970p Power and machinery.. . 115 .141 Fertilizer and lime........ Land ........................... . ..102 Labor .......................... .8 5 Other inputs ............... . 113 115 169 98 67 129 122 250 104 55 145 130 353 107 46 170 Item p— Preliminary SOURCE: U.S. Department of Agriculture farm inputs at a lower comparative cost than labor and land. These shifts in use of resources have substantially boosted agricultural production. The large gain in productivity is evidenced by a 50-percent increase in food and fiber production in the past two decades even though crop acreage has declined moderately and labor use has dropped by more than half. AGRICULTURAL OUTLOOK BRIEFS • More cattle on feed in the Southwest support a continued demand for grain sorghum, but a bigger corn supply will likely hold the increase in grain sorghum feeding below the 7-percent surge of 1971. As a result, total grain sorghum use this year may be less than the 1971 season’s crop of 890 million bushels. • Although the nation’s laying flock is smaller and older than last year, the number of eggs per layer has increased. Production for the first half of 1972 is expected to average slightly less than for the same period a year earlier. Prepared by Carl G. Anderson, Jr.
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