Upbeat cotton market guides at higher price potential in 2006-07

10 Feb '06

3 min read

Smith recommended that producers and marketers price some of their cotton with puts if and when Dec. '06 futures reach 63 cents per pound.

"We could buy/use a December put at 57 cents per pound to put a 48-cent price floor on cotton that has a 53-cent loan value," he said. "It might be a good idea to figure out a pricing strategy that includes puts if Dec. '06 futures reach that 63-cent mark."

Smith and other Extension economists have scheduled three meetings in February to help producers develop a cotton marketing plan.

The 9 a.m. - 4 p.m. meetings are slated for Feb. 14 in Vernon at the Texas A&M University System Agricultural Research and Extension Center, February 15 at the Moore County Gin near Etter, and February 16 at the research and extension center at Lubbock. Smith and Dr John Robinson, Extension cotton marketing specialist based at College Station, will teach these sessions.

They will focus on market fundamentals, seasonal trends in cash, basis and contract pricing, pre- and post-harvest marketing strategies, and cash marketing tools. Participants will finish the session with a written marketing plan for their operation, Smith said.

"We also have an Advanced Options Strategies workshop slated for March 7 at Lubbock," Smith said. "We will take a look at advanced hedging techniques and futures/options strategies such as cover calls, spreads, and storage hedging."

Agricultural Communications Texas A&M University System

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