Cotton or Corn?
One farmer told the NY Times, “It’s going to be cotton stalks everywhere.”
With cotton prices soaring, acreage in Texas and other Southern states that had been used for wheat or corn now has cotton growing.
The Economic Lesson
This is classic supply and demand. For cotton, the increase in supply will eventually push price down. Meanwhile, for corn and wheat, as supply is less than it would have been, price remains elevated.
On the demand side, with these supply curves moving, the quantity demanded will change. For cotton, the search has begun for alternative fabrics. And, as we previously noted, when crops get higher prices, so too does the land on which they are grown.
Consequently, even corn farmers are happy that cotton’s price is high.