The weather problems in China and India — along with those in Pakistan, which has been hit with devastating floods — have the market in a near panic. There have been unwanted rains in both India and China and, now, possible frost in a northern (cotton-growing) Chinese province.
Before Mid-South growers move back into major cotton acreage, they’ll need to factor in the cost of dealing with a burgeoning population of glyphosate-resistant weeds.
With current wheat, corn and bean prices “it will take 90 cent cotton” to bump up Delta cotton acreage, said Kenneth Hood, a north Mississippi producer who was also on the call.
“This resistant-weed thing in cotton is very, very serious,” said Hood. “I farm 100 miles south of Memphis and the resistant-weed problem is continually growing into a wider and wider area. Two or three years ago, you didn’t see much of it. Today, (resistant weeds) are in almost every cotton field. The cost of production is going to affect us.”
All in all, “we see an extremely bullish situation,” said Cleveland. “Funds continue to pour money into the market. I think they’ll continue to do so because of their concerns about the U.S. and world economies. … Even with a 6-cent drop (in price) the market would still be very strong, technically.”
From a fundamental viewpoint, “if the USDA is on target with its 2.7 million bale carryover, we could have an entire season where 75 to 80 cents looks cheap,” said Stevens. “The market has now become completely abstract. And with empty pipelines it’s extremely difficult to justify prices with the fundamentals.”
The situation, said Stevens, brings to mind a truism: The market can stay irrational longer than you can stay solvent.
“How far can the market go?” asked Stevens. “The answer is too far.”