Cotton good option for Good times and Bad times. 2-24-17 The Virginia state wide cotton meeting yesterday sponsored by the Virginia Cotton Growers Association was well attended and the program was well worth the total investment of a full day. It’s clear that if we are headed for a good growing season, then 2017 is just going to be a good year. Joe Outlaw, our morning key note speaker helped us remember that Agriculture is in a vulnerable financial situation as the current prices for some of the commodities are not providing stabilizing income unless we make above average yields. Grain is the best example for this which predominately focuses on corn which for the nation is the number one crop. However for our little spot on the map, with both peanuts and cotton up over 20% in price, we will make good profits with just average yields on both of these commodities.
We are still in the Insurance Sign Up period ending next week in North Carolina and March 15 in Virginia, so I am continuously focused on how we maintain agricultural stability even in a bad year. This actually is where cotton moves to the best option for our farms. With county yields in our core counties ranging from 987 pounds per acre in Southampton to 1038 in Isle of White and a price of around 74 cents, STAX is going to support county average revenue at $657 to $690. Northampton, Sussex, and Surry are in the middle and Suffolk & Hertford is only slightly lower. Crop revenue Insurance does the best job at supporting personal risk, so you need both for the best defense. If prices move up in the fall, all of these numbers just get better. If prices move lower, then it can get better as well because you could make a good yield and still trigger a STAX payment. If STAX triggers, then it looks like the best safety net for 2017. If it does not trigger, then that means we maintained prices and yield and it will all be good in the end.
Cool Fun Fact - Cotton does not have a break even yield this year because STAX and Insurance combined offer support around $100/acre above production cost and overhead. The exception would be an isolated disaster that did not happen to the county on a farm that had a personal insurance much below average.
NEXT TIME - Warm spring weather making the weeds grow. Implications for Burndown.
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