Back in September when December 2010 cotton futures inched over a dollar a pound, a collective gasp of surprise and excitement swept across the Cotton Belt. As it turned out, we hadn’t seen anything yet.

On Feb. 17, the cotton market again took the cotton industry’s breath away when May 2011 cotton futures rose by the Intercontinental Exchange limit of 7 cents to a record $2.0193 a pound. The March 2011 contract closed at $2.0402. Market analyst Mike Stevens, Mandeville, La., pointed out that cotton options “went up another 7 cents. So synthetically, you’d have to put another 700 points on top of May.

Stevens says $2 cotton looks good on paper, but in reality almost every bale in the world at this time is either sold or spoken for. “We’re not trading cotton. We’re trading chalk marks.”

While $2 cotton is a historic level, rapidly rising cotton prices as of late are probably doing more harm than good, according to Stevens.

“This includes producers who marketed their cotton wisely from 80 cents to a dollar; merchants, who’ve hedged cotton and are having to send margin money to New York; and the mills who bought cotton on call, which is setting a basis and fixing the price on dips, because the market hasn’t dipped.”

Stevens also noted that some west Texas cotton producers whose production came up short of expectation had to scramble to acquire cotton to fulfill contracts.