August 27 2013
Survey by ICAC detailed how weed control is becoming increasingly expensive, emerging as the largest component of the net cost of cotton production in 2012-13. Cotton futures traded in the red most of the session and settled near the low Tuesday to give back nearly all the prior-day gain.
Benchmark December settled down 75 points to 84.15 cents, just below Monday’s low.
It traded within a 99-point range from up 16 points at 85.06 to down 83 points at 84.07 cents. October also lost 75 points, closing at 84.50 cents, and March dropped 69 points to settle at 83.36 cents.
Volume edged up to an estimated 14,500 lots from 13,224 lots the prior session when spreads totaled 2,897 lots or 22% and EFP five lots. Options volume slowed to 5,712 lots — 2,588 calls and 3,124 puts.
An interesting survey on the cost of cotton production by the International Cotton Advisory Committee has detailed how weed control is becoming increasingly expensive.
Expenditures on weed control per kilogram (one kilo is equal to 2.2046 pounds) rose from 9 cents in 2000-01 to 21 cents in 2009-10 and 31 cents in 2012-13, the ICAC said in a report. (These cost estimates are not adjusted for inflation.)
As a percentage of the net cost of production, expenditures associated with weed control rose from 11% in 2000-01 to 20% in 2012-13. (Net costs are total costs excluding land rent and the value of cottonseed.) Weed control emerged as the top component of the net cost of cotton production in 2012-13, more expensive even than harvesting and ginning.
Rafiq Chaudhry, head of the technical information section of the ICAC secretariat, said the adoption of herbicide tolerant Roundup Ready and Roundup Ready Flex cotton varieties may be contributing to higher expenditures on weed control.
The existence of the herbicide tolerant trait encourages herbicide use, he explained. With herbicide tolerant biotech cotton, farmers tend to apply herbicides as cotton is growing, he also observed, whereas without biotechnology farmers are compelled to use pre-emergence weed control measures. Herbicide use in non-biotech cotton is expanding very little, he noted.
The survey indicated that the costs associated with cultural control and manual weeding also seem to be increasing. There’s a possibility that the use of biotech insect resistant cotton varieties is lowering insect control costs and making more resources available for weed control.
The full cost of cotton production study will be presented at the ICAC’s 72nd plenary meeting, Sept. 29-Oct. 4, in Cartagena, Columbia. Futures open interest fell 1,312 lots Monday to 185,541, with December’s down 1,612 lots to 139,784 and March’s up 305 lots to 34,436. Certificated stocks declined 2,754 bales to 26,142.
World values as measured by the Cotlook A Index gained 65 points Tuesday morning to 90.50 cents, reflecting a 5.60-cent premium to Monday’s December futures settlement. The index was unavailable Monday because of a United Kingdom holiday. (Source: Agfax.com)