Can current cotton prices be sustained for more than just one year?
Americot Seed Co.
I am the eternal optimist. We’re seeing the economy coming back a little bit with a rebound in the real estate and retail business. I am hopeful that American housewives will now start buying new sheets, towels and clothes for their families. I think that we are looking at a a good two-year run. The pipeline has been reduced, but I still think we can produce a lot of cotton in a short period of time. That’s what we need.
Cotton is not unlike other commodities. Not only does it move in cycles, but it’s relative to other commodities. The grain crops had their run, and ethanol came and went. Cotton hopefully has hit its bottom price and is now on the upswing. I think this gives it a chance to find a stable range for a length of time. These new cotton prices should be able to drive global demand.
I think the cotton prices that we have right now are sustainable for the long run. And I also think there is some real upside in this trend. If the overall global economy continues to improve, then we’ll see a demand for cotton products. The other big factor is how worldwide production plays into all of this. China, India and Pakistan are planting more grain crops now and less cotton. For that reason, I think the American cotton farmer has an opportunity to take advantage of the market for the next three to four years. If the price can stay in the 85-cent range, that’s a profitable scenario for our farmers.
I believe this is definitely a trend that will be with us for several years. We have good prices and a low volume of cotton right now. It will take at least two or three years to fill that void. I had confidence that the prices would get better, but they’re actually better than I anticipated. I was thinking that if we got up into the 70 or 75-cent range and held it there, it would be good. But this is even better than I could have anticipated.
We’re a part of the business where we depend on the trickle-down effect in these situations. However, we are seeing the gins gearing up like never before, and that’s a very good sign. I am investing in some software for our business that will be important as we prepare for this uptick in cotton business. We think cotton is definitely positioning itself for the long run, and that’s encouraging. Our company has to anticipate and be ready to service ginning customers. That’s how we’re planning for this next year.