Measuring the Relative Profitability of Mid-South Cotton Production from an Alternative Gin Seed Rebate Model

Abstract

The purpose of this paper is to assess the opportunity returns forgone to cotton producers in the lower Mid-South region of the United States for growing cotton, compared to alternative commodities. We calculate the actual net returns per acre for selected cotton-producing counties in Arkansas, Louisiana, and Mississippi. In addition, we calculate the opportunity returns per acre if the acres planted in cotton were planted in the highest net return commodity per acre between corn and soybeans during the period 1997 through 2008. Our results find that producers in these cotton producing-counties faced sizeable opportunity revenues foregone averaging 43% between 2003 and 2008. Most observers of the cotton industry would argue that these foregone revenues are a function of historical cotton producers not planting a higher proportion of their acreage in the more-profitable corn enterprise in 2007 and 2008. However, opportunity revenues per acre foregone averaged 37% in the 2007-08 period. This finding suggests that cotton producers recognized a few years prior to the corn price spike in 2007 that alternative commodities, such as corn and soybeans, would generate greater returns on their land. Our research suggests that the higher corn price helped push cotton producers over the edge into planting a greater percentage of their acreage in alternative commodities.cotton ginning, returns above variable costs, cotton, corn, soybeans, Production Economics, Q10,