Cotton for food: High food prices tempt US farmers to switch to wheat and corn

14 Feb 2023 --- Cotton farmers could move away from growing the plant in favor of wheat, corn and soy, which offer more financial rewards as staple commodities with global markets. As a result, 17% less cotton will be planted this spring in the US as farmers move away from the fiber seeking higher returns on their crops.

This is according to a survey by the National Cotton Council (NCC).

“History has shown that US farmers respond to relative prices when making planting decisions,” says Jody Campiche, VP of NCC.

“Relative to the average futures prices during the first quarter of 2022, cotton prices are lower while the prices of most competing commodities are relatively unchanged. Price ratios of cotton to corn and soybeans are at the lowest level since planting the 2009 crop. In addition, production costs remain elevated,” she notes. 

The impacts of restrictive monetary policy, high inflation, the Ukraine war and other pressures may continue to put downward pressure on cotton prices this year, which could drive more farmers to switch to producing food staples.

High commodity prices
According to Campiche, corn, wheat and soybeans are the most frequently mentioned alternatives by farmers moving away from cotton.

The USDA reveals that wheat products slightly outpace general food inflation. The US Department of Agriculture (USDA) reveals that wheat products slightly outpace general food inflation at 10% in 2022 (9.9% for general foods) and 13% for cereal and bakery products. 

Furthermore, the FAO Cereal Price Index for January puts cereals as the hottest commodity in price terms, with the index averaging higher than any other commodity – at 147.4 points, meaning cereal prices are 47.4% higher than the 2014-2016 baseline period.

Farmers are also moving to corn – the primary US feed grain. The US is the world’s largest producer, consumer and exporter of corn. However, not all are used for human and animal consumption, ethanol production accounts for 45% of total corn use, according to the USDA. 

“Strong domestic demand for livestock feed and fuel ethanol coupled with growing exports has led to higher prices, providing incentives for farmers to increase corn acreage. In many cases, farmers have increased corn planted area by shifting acres away from less-profitable crops,” the body explains.

Some farmers are opting for soybeans as vegetable oils remain at high levels, even after ten consecutive months of decreasing prices. Soybean production was down 4% in 2022 from a year earlier due to droughts, but production is expected to recover this year. The crop is set to yield 8% more soybeans in the next ten years.

By Marc Cervera