Can cotton maintain the momentum built over the last two years? According to industry insiders, cotton has a better chance of maintaining its momentum than most other commodities. However, to do this, the world economy also needs to continue a steady growth.
Dusty Findley, chief executive officer of the Southeastern Cotton Ginners, says that cotton is more of a world supply, world demand driven market than most other U.S. commodities.
“Certainly there are world influences in those prices, but it seems that cotton is very much dependent on the world,” he says.
“If one region in the United States has a drought or a flood, it used to be that the cotton market would react strongly to that. It doesn’t do that any more. It takes something catastrophic, such as the floods in Pakistan, plus production issues in China, plus the increased world demand this year to drive the market.
“Economists are saying the world economy is sputtering at best and on the brink of disaster at worst, but still cotton usage has gone up and prices have reacted accordingly.”
Findley says the next year or so of burning off the world carryover will help keep those prices strong, but it will require steady offtake driven by the world need for cotton.
Stocks Not Rebuilt In A Year
Ways To Support
U.S. Cotton Demand:
Richey Seaton, executive director of the Georgia Cotton Commission, agrees that maintaining this price momentum will be a challenge, but projections are for favorable prices to continue into the next growing season.
“Cotton stocks are now at historically low levels, and even with a good crop, United States and world stocks will not be rebuilt within the next year,” he says.
“The price increase had been expected even as early as 2009, but the worldwide recession led to a decrease in consumer spending. At the same time, U.S. producers significantly reduced acreage in response to the market, and decisions were made to move away from cotton until both the prices and supplies returned to more profitable levels.”
Do Things That Support Demand
Problems in world production drove up cotton’s price, and it could take some more time to work through all of those issues.
“I don’t see a reason to be pessimistic about cotton at all,” says Findley. However, he does say that the industry needs to keep doing those things that it is good at to help support continued demand.
“Promoting the use of cotton worldwide and continuing to ensure that U.S. cotton is preferred for many reasons, such as quality, lack of contamination, packaging, sanctity of contract, will help ensure that demand for U.S. cotton continues even when the supply isn’t so tight,” he says. “This will help to keep U.S. cotton prices up when the worldwide production catches up.”
Seaton says, “Our industry has proven promotional programs from Cotton Incorporated to Cotton Council International, and they continue to build on the consumer’s preference for cotton and cotton products both domestically and abroad. That’s why producer support of the cotton industry’s organizations is most important; by working together we can make a difference.”
Seaton says Georgia will have an increase in cotton acres, but not at the level of increase of the states that reduced their acreage significantly in recent years.
“Producers should make planting decisions based on what commodity prices are and what crops perform well on their farms,” he says. “They can also hope that cotton growers in other countries do not overly respond to high cotton prices and plant a crop that will build stocks.
“Both producers and our customers are served better by a reasonable and stable price for cotton,” Seaton adds.
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