Tight supplies and speculative investment money entering the commodities market have fueled cotton prices, according to a Texas AgriLife Extension Service economist.

"This has been a very unusual year," said John Robinson, AgriLife Extension cotton marketing economist. "We had good moisture conditions before the crop was planted in early 2010, particularly in Texas with more than half the crop planted."

Analysts were expecting an increase in planted acres and good yield projections heading into the new crop season, Robinson said.

"But then we’ve had an unprecedented price rally during a time when (there was) evident harvest-price pressure," he said.

From July up until September, Robinson said cotton prices have jumped 20 cents on the futures markets, partly driven by “speculative investments.”

"Evidently that speculative money is being put into a number of commodities, but cotton appears to be a special selection for that speculative buying," he said.

There have been a lot of questions regarding world supply, which has had an effect on the cotton market, Robinson said.

"The domestic supply situation looks pretty good," he said. "This tight supply situation worldwide, coupled with a robust demand for cotton fiber and yarn, has led to extremely tight supply forecasts. You combine that with all of the other conditions and this is what has fueled this price rally."

Planted acres for Texas are 5.6 million with projected harvested acres at 5.4 million, according to the U.S. Department of Agriculture-Texas Agricultural Statistics Service. Yields for the state are projected to be 8.8 million bales versus 4.6 million bales in 2009, according to the USDA. The projected yields for the 2010 Texas crop are more than double from 2009.

"The 8.8-million-bale crop is a very strong projection," Robinson said. “How this plays out all depends on the weather. West Texas has received exceptional soil moisture and in some areas received too much. What’s needed out there is some nice, sunny and clear days to dry things up heading into October harvest. Those conditions could bump up harvest estimates."

Another aspect working in favor of cotton producers has been relatively stable petroleum prices, which kept input costs in check this growing season, Robinson said.

"Right now, oil prices certainly haven’t gotten back up to $100 to $120 a barrel we saw three years ago," he said. "That aspect of it hasn't been bad, but cotton production is expensive related to pest and weed management. Overall, growers should be in a good situation if they get high prices for their product and can handle their input costs."