Mills hope for lower cotton prices

06 Oct '07

3 min read

Thus, increasing cotton prices will not encourage farmers to increase cotton acreage. It is a near certainty that if cotton prices were to gain on grain and oilseed prices even in the intermediate term, it would still be far too late to increase world cotton acreage.

Yet, current offering prices are not high enough to keep U.S. growers from entering cotton into the loan program. This keeps the current crop off the market, yet U.S. carryover, at near a record high, is more than sufficient to meet any export need well into 2008. Thus, it is becoming increasingly difficult to expect New York futures to increase within the next two months.

As a testament to the recent price rally, net export sales of U.S. cotton for the week ending 9/27/07 were 103,400 RB. Upland sales were a very poor 100,800 RB. The primary buyers were Turkey (47,700 RB); China and Indonesia. Pima sales were only 2,600 bales with India (1,200 RB); Indonesia and Thailand being the primary buyers.

Shipments of Upland were 260,200 RB with China (106,400 RB); Mexico and Turkey being the primary destinations. Pima shipments were 2,200 RB with China (800 RB); Indonesia, and Japan being the primary destinations.

Thus, mills have all but left the marketplace in anticipation of another 200 to 300 point drop in prices. Mills have typically had the strength to wait out the sellers in recent years. However, the overall bullish speculation surrounding world commodities may prove difficult to send prices much lower. Mills still have more time, but without any speculative selling, cotton futures will find little maneuvering room below 60 cents.

O.A. Cleveland

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