China to keep building cotton reserves

Speaking today in Lubbock to a full room audience at the Board of Directors meeting of the Plains Cotton Growers, Inc., Wallace Darneille, President and CEO of Lubbock based Plains Cotton Cooperative Association (PCCA) explained reasons behind the cotton price volatility and the need for the Chinese to stock cotton.

Unstable export policy of India, European financial situation, battles between international commodity firms for dominance are some factors that influence cotton volatility.

Opening his presentation with a slide showing a Chinese man feeding his baby, this July squeeze is hurting mills and affects cotton consumption, said PCCA President Darneille.  Commenting on cotton supply, world’s cotton carryover is largest ever and will grow.

China is holding about one-third of carryover said, Wallace Darneille. According to him, China’s long-term problem is food and they will not dump cotton.

Wallace said Chinese government plans ahead for five years and will instruct farmers to grow food crops to feed its huge population; this Chinese situation will make the High Plains of Texas to be the center of cotton universe.

Commenting on current cotton price situation, he said, U.S. cotton producers cannot make money at December cotton trading at 70 cents. They have to produce at least 3 bales cotton per irrigated acre and keep cost low to make it through this year.

The reaction on this year’s cotton among the farmers who attended today’s meeting was mixed and almost everyone needed rain.

Seshadri Ramkumar