Delta Soy Acres Dominate Cotton and Wheat
Since 2008, acreage in the Delta states — Arkansas, Alabama, Louisiana and Mississippi — has been dominated by the soybean. While the timing of the acreage allocation into soybeans strongly suggests a response to an acceleration of Chinese demand, the reallocation of acres away from cotton and wheat has been particularly acute.
Since 1990, soybean acres in the Delta have risen by 17% or 1.03MA with all states adding acres. Driven by planting economics, a changing global demand structure and a strong dollar U.S. dollar, the shift to soybeans from other crops has been significant and seems to be permanent. The annual planted corn acres in the region have remained inside of a fairly defined range, an annual standard deviation of +/- 500,000 acres, making corn a normal crop so a comparison is not made here.
While cotton has always been a cornerstone of agricultural production in the Delta, the switch from cotton to soybeans since 2006 has been rapid. While cotton acres in all states in the region have declined, the compression in Mississippi and Louisiana in both absolute and percentage terms has been the largest. From 2000-2018, cotton acres in the Delta have declined by 50% or 1.75MA. Louisiana acres have declined by 72% or 515,000 acres, while Mississippi acres have declined by 52% or 680,000 acres. At the same time, regional soybean acres in the Delta have increased by 17% or 1.025MA. Lack any coincidences, the states with the largest acres switched into soybeans were Mississippi and Louisiana. Louisiana soybean acres increased by 44% or 410,000 acres, while Mississippi acres increased by 92% or 530,000 acres.
While the historical planting economics have assisted with the switch from cotton to soy, the increasing number of poultry/broiler operations in the region combined with a growing export demand for soybean meal have also helped been supportive. Adding to the compression of cotton acres has been a strong dollar, which has made cotton in other origins — India, Brazil and Pakistan — more competitive in the global market. Since 2008 acreage in the delta states: Arkansas, Alabama, Louisiana, and Mississippi has been dominated by the soybean. While the timing of the acreage allocation into soybeans strongly suggests a response to an acceleration of Chinese demand, the reallocation of acres away from cotton and wheat has been particularly acute.
While SRW in the Delta has never commanded the same type of acreage presence of cotton and soy, the declines in Arkansas, Louisiana and Mississippi have essentially left the states with no material wheat presence. Given the challenging economics for U.S. wheat as both a feed input and as an export commodity, both the national and regional pivots away from SRW have left acres at their lowest historical level.
Since 1990, SRW acres in the Delta have compressed by 86% or 2.5MA to 405,000 acres. Louisiana wheat acres have declined by 97% or 450,000 acres. Mississippi wheat acres have declined by 91% or 550,000 acres. Arkansas wheat acres have declined by 88% or 1.3MA. The switch away from wheat in the area has been so profound that at less than 500,000MA planted acres in the Delta, regional wheat production is a shell of what it used to be.
The rise of soybean aces in the Delta at the expense of cotton and wheat has been dramatic during the last 10 years. A strong U.S. dollar combined with a shifting global export regime for both cotton and wheat combined with a reprioritization of the global soybean demand structure have altered regional farm economics in the Delta and aided the decision to increase soy acres. The demise of wheat acres in the Delta can be further attributed toward a shift in feed inputs as the emergence of DDGs have replaced wheat in the regional poultry ration.
While U.S. cotton acres have been expanding over the last three years, led by Texas switching from wheat, absent Chinese restocking of national reserves or a spike in the price of synthetic fibers, U.S. cotton should struggle to compete in the global market. While the economic reverberations of the U.S./Chinese trade situation and the growth of Brazil’s soybean industry have provided challenges for the soybean producer in the Delta, the growth of wheat and cotton acres in 2019 could be temporary and limited.
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