What is in this article?:
- Weather, China will be key influences on cottonâ€™s future
- Export numbers should be up
- Sees terrific demand
- Good reason to be optimistic
• Long range weather patterns are suggesting that West Texas and the Southwest will remain dry, says O. A. Cleveland, Jr., and “some of that drought is going to ease over into the Delta area and move on eastward across the entire Cotton Belt,” which will have an influence on the market in months ahead.
• China's rebuilding of its strategic cotton reserve and reduced cotton plantings worldwide will also play a role in where the market goes, says the Mississippi State University Extension economist emeritus.
Good reason to be optimistic
“I think there’s good reason to be optimistic. We took the market down to the 85-cent level in November, which was a little bearish, and we’ve not been able to get it back above $1. It was trading at 98-99 cents today (Jan. 23).
“Last week saw extremely strong export sales relative to what we had expected, 190,000-200,000 bales — much better than the 50,000 to 60,000 we’d seen for several weeks, and before that we went for two months with negative sales due to cancellations.”
Cleveland says he hadn’t thought cotton would drop to the 85-cent level it hit in November, and “I think most chartists’ opinions are that it was a drop-dead bottom.
“I think we can be very positive about cotton. But, if we get a lot of rain in West Texas over the next two months and plenty of moisture everywhere else, then we’d have to be concerned about the possibility of staying around 88 cents to 90 cents, with a potential range of 85 cents on the low end to $1.20 on the high end.
“I think we can make a realistic case for the market not going below 85 cents. I think it’s going to be easier to take it up to 98-99 cents than to take it down to 85 cents — but we can’t write off a drop to 85.
“There’s a lot of demand out there — we just haven’t been able to get the price where the mills would begin to buy. The anticipation now is that they seem a little better off, despite all the negative things we read about the economy, and that pent-up demand from consumers is slowly coming back into the market.
“We’ve seen a firm base for demand, but supply, in the short and medium term, is going to be more important than demand. If they get a lot of rain in West Texas, it’s going to take the market down.”
(Additional cotton market information can be found at http://southeastfarmpress.com/markets/2012-cotton-market-fundamentals-resemble-2011 and http://southeastfarmpress.com/cotton/industry-expectations-cotton-s-acreage-decline-may-be-overstated).