Louisiana To See Small Benefit From Cotton To Corn Switch; Farm Households Are Big Winners

Matt Fannin, Paxton, Kenneth W., Bogren, Richard C.  |  11/2/2007 1:38:57 AM

News Release Distributed 11/01/07

Louisiana agriculture shifted gears in 2007 as growers moved almost 300,000 historically planted cotton acres to corn. Initial estimates from LSU AgCenter economists show the net effect of this shift in production to be only $700,000, or 0.57 percent above what the Louisiana economy would have earned had the acreage remained in cotton.

This net effect was the result of $29 million in increased spending from the sale of corn countered by an almost-equal $28 million in losses sustained by farm suppliers.

Some sectors of the economy are winners while others are losers from this commodity switch, the economists said.

“Farmers are likely to be the main benefactors from the economic impact caused by this shift in production” said Dr. Matthew Fannin, an LSU AgCenter economist.

Farm households in Louisiana are expected to see an increase of more than 300 percent in direct income from $2 million to more than $8 million from the switch from cotton to corn, he said. The increased income is driven by increased corn acreage combined with higher corn prices, which gave higher profit margins than cotton in 2007.

This increase in income is expected to have an effect of more than $33 million in total sales in the economy, Fannin said. If the state average corn yield continues to increase above initial estimates, these effects could be even higher.

On the other hand, local suppliers of agricultural inputs and cotton ginners appear to be most negatively affected by the switch. Because costs to grow an acre of corn are less than the costs to grow an acre of cotton, the state is expected to have a net loss in sales of almost $22 million in farm inputs, the economists said. In addition, lower costs of drying and handling corn compared to ginning cotton will cost the state economy another $3.5 million.

“If this shift in production were to be sustained over an extended period of time, the infrastructure supporting the cotton industry may not be able to recover,” said Dr. Kenneth Paxton, an LSU AgCenter economist. Some gins have chosen not to operate during the 2007 season, and those that are in operation will be processing at reduced levels.

Longer-term effects are difficult to predict, Paxton said. On one hand, increased operating margins for corn will encourage a reinvestment in such items as farm equipment, thereby positively affecting portions of the local farm retail sector.

If corn prices remain high, however, cotton gins are likely to continue to struggle as fewer acres of cotton make it increasingly difficult for these value-added agribusinesses to stay afloat, he said.

More information on the economic impact of corn production versus cotton production is available on the Internet at www.lsuagcenter.com.

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Contacts:
Matthew Fannin at (225) 578-0346 or mfannin@agcenter.lsu.edu 
Kenneth Paxton (225) 578-2763 or kpaxton@agcenter.lsu.edu 
Editor:
Rick Bogren at (225) 578-5839 or rbogren@agcenter.lsu.edu

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