Policy pennings: 6-decade trend in US cotton exports is more like soybeans, but with tumbled profitability

Harwood D. Schaffer and Daryll E. Ray Agricultural Policy Analysis Center
Farm Forum

The promotion of crop exports has been central to U.S. agriculture since the export boom of the 1970s, triggered by the entry of the Soviet Union into world grain markets in the early 1970s and sustained by international development loans to less developed countries that were, in part, used to purchase grain to feed their people.

In the last three columns (http://www.agpolicy.org/articles21.htm) we examined corn, soybeans and wheat, as well as the hoped-for link between exports and long-term profitability. Soybeans have seen increased exports with financial returns above the full cost of production while corn and wheat have experienced negative financial returns to production. Overall, exports have failed to deliver on the promises of an export-led “new era of farm prosperity,” despite U.S. farm policies designed to make U.S. crops more price competitive in world markets.

This column’s focus is on cotton, which once was king of U.S. export markets.

Cotton export levels since 1970 are less like corn and wheat with relatively flat export levels and more like soybeans where exports have been increasing.

In the 1970s, U.S. cotton exports averaged 5.2 million 480 lb. bales (traditionally the bales were 500 pounds with 20 pounds of wrapping, thus 480 pounds). The high exports were 9.2 million bales in 1979 and the low exports were 3.3 million 480 pound bales in 1975.

By the 2010s, U.S. average cotton exports were 13.2 billion bales, or 2.5 times their levels in the 1970s. The decadal high cotton exports were 15.5 million bales in 2019 with the low of 9.2 million bales in 2015.

That leaves us with two questions: 1) why did cotton exports increase while corn and wheat exports languished?, and 2) did the increase in exports result in profitable cotton prices?

In the 1970s, the U.S. exported 43.3% of production while the remaining production was processed by U.S. mills. In the 1990s, U.S. mills were shut down as production was shifted elsewhere. Raw cotton followed the loss of U.S. jobs in spinning and clothing production.

For the answer to the second question, we turn to USDA’s commodity costs and returns for cotton. Cotton farmers experienced a loss of $35.10 per acre over the 22 year period from 1975-1996, as residual returns to management and labor (https://tinyurl.com/4baw26zs). In addition to the domestic use of cotton, the crop’s price was supported by a nonrecourse loan rate.

In the 23 years since (1997-2019), cotton producers have experienced an average annual loss of $130.27 per acre as value of production less listed costs and there were no commodity price support programs.

We have now looked at four crops: corn, soybeans, wheat and cotton. For two of them (corn and wheat) exports have been relatively flat and for the other two (soybeans and cotton) exports increased. Of the four, only soybeans turned a profit and that profit has not been large enough to compensate for the crops in rotation with soybean production.

There has not been a pot of gold at the end of the farm commodity export rainbow.