“This was just a massive increase in world ending stocks and stocks-to-use ratio,” said John Robinson, Extension economist at Texas A&M University. “Sixty percent of the world’s needs for next year are already sitting in warehouses. Other times when the world stocks-to-use was at this level, the A-Index was at 55 cents. So we’re still at historically high and abnormal price levels given the surplus inventory.”

Much depends on how you view those stocks, noted Robinson. “Thirty-five percent of the stocks are in China, and much of that is in China’s reserves. Do you view that cotton as available? It’s at least a big uncertainty. I don’t think it’s good because it’s in the hands of policy and bureaucrats as opposed to being market-driven.”

Meanwhile, lower estimated U.S. cotton production and an increase in exports combined to lower 2011-12 U.S. ending stocks to 3.4 million bales.

“The numbers on the U.S. side appear bullish, but the USDA report is very bearish in total for the world, with USDA finding so much in inventory,” Cleveland said. “It jerked the rug out from under us.”

Cleveland also noted that Mid-South and Southeast cotton producers have been shifting to alternative crops since USDA’s March 30 Prospective Plantings report. “By the time we get everything planted, U.S. cotton acreage will probably fall to somewhere around 12.8 million acres, which 400,000 bales below USDA’s March 30 projection.”

Mike Stevens, cotton analysts from Mandeville, La., believes December cotton’s upside “is going to be limited to the low 90s. Given the fundamentals that we know, I don’t see December getting back to 95 cents. On the downside, if 87 cents doesn’t hold it, you’re looking at 80 cents to 83 cents pretty quickly.”

“I think December may have a little life left in it once we get our true acreage out there,” Cleveland said.

Chinese farmers could also reduce cotton acreage, noted Cleveland. “Their grain and oilseed prices are even higher than ours, which is telling them to back out of cotton if they have an alternative.”

On whether high corn and soybean prices could bolster cotton prices, Stevens noted, “The cotton market is telling you that there is plenty of cotton out there in the world, and it’s not particularly interested in buying acres this year. The world seems to be awash with cotton.”

Robinson sees December 2012 cotton futures at 75 cents on the downside and 93 cents on the upside.

The analysts noted that while cotton supplies are burdensome, most of the cotton supplies in the world are being held in a handful of countries, one of which, India, hasn’t proven to be a very good trading partner.

(With all that cotton in the world, demand must pick up. Cotton Incorporated recently found a big market for U.S. cotton after signing an agreement with Under Armour. For that success story, see http://southeastfarmpress.com/cotton/cotton-finds-big-market-under-armour).

erobinson@farmpress.com