What is in this article?:
- Strong demand outside China supporting cotton prices
- Chinese government actions
• Quality remains an important issue. And China remains the market catalyst.
O.A. Cleveland can’t see 90-cent cotton — 86 cents a pound, maybe.
“There is not a lot of cotton left in the world outside China,” Cleveland said during the Southwest Cotton Technology and Innovation Conference, sponsored by Bayer CropScience, in Austin, Texas.
“That’s why New York has cotton at 80 cents. Some say 90 cents. I can’t get to 90; 86 cents is my top for new crop Dec. cotton.”
Other cotton-producing countries “are reeling back cotton acreage because of price.”
A large quantity of certified stocks, Cleveland said, is coming to the board. “That keeps pressure on the top of the market.”
Weather could move those numbers. Recent USDA planting estimates put 2013 cotton acreage at 9 million. “About 5 million of that will be in Texas,” Cleveland said. The Mid-South acreage is expected to drop to 1 million acres with only 200,000 in Mississippi.
Production estimates of 12.86 million could dip if drought continues in the Southwest. “Weather analysts suggest the Southwest may be in for five years of drought,” Cleveland said. The region could be in the third year of that cycle now. Southwest cotton growers “need timely rain.”
Without it, production could drop to 10 million or 9.5 million bales. “That could spur prices.” That’s for middling 3/16 or 3/32, Cleveland said.
Quality remains an important issue. And China remains the market catalyst.
“Analysts tell us that demand is not there,” Cleveland added. “They cite a downturn in China spinning. But China was still weaving and knitting. They were importing yarn, especially from Pakistan.”
A lot of reports did not consider the amount of yarn coming into China, as much as 8.3 million bales worth of yarn. “That’s up from 1 million bales five years ago.”
Cleveland said China imported close to 22 million bales of cotton, including the yarn and 14 million bales of raw cotton. “They need a lot of cotton to keep the textile industry going.”
It gets more complicated. The Chinese government buys cotton directly from the country’s growers. The government has purchased the entire cotton crop for the past two years. “That does not occur with any other commodity in China,” Cleveland said.