What is in this article?:
- Mother Nature will be strong force in cotton market
- Not active in export market
• Cotton prices seem to have some solid support at around 70 cents to 80 cents a pound, but could go higher, say analysts.
• The market still has to determine how much cotton gets planted in the United States and the world.
• China continues to hold a large reserve of cotton, and could hold onto it for a while.
Over the next few months, December 2013 cotton futures could trade in a price range between 70 cents and $1.05, according to cotton analysts speaking at the Ag Market Network’s April conference call.
The range will likely narrow as uncertainties in the market are resolved, including nailing down planted acreage and production in the world and the United States and pinning down export potential.
Analysts are unsure how higher cotton prices, weather and bearish corn price forecasts will affect U.S. cotton acres by the time spring planting is over, but most agree that what U.S. growers intend to plant in cotton this year has likely risen some.
U.S. cotton acreage and production, “is not going to get resolved until the August and September snapshots by USDA,” said Texas A&M Extension economist John Robinson, who sees a trading range for December futures between 70 cents and 90 cents. “Uncertainty by itself will keep futures in the upper end of the trading range, between 80 cents and 90 cents. When that production uncertainty is resolved, prices could slip back into the lower end of that range, between 70 cents and 80 cents.”
O.A. Cleveland, professor emeritus at Mississippi State University, said China’s recent announcement that it would continue its policy to offer domestic producers $1.49 a pound “was met with considerable disappointment in the Chinese cotton community. That seems very high to us, but they were expecting a higher support price because of the high costs of production there. What the Chinese did was increase the support price for grains and food crops at the expense of cotton.”
Based on this, Cleveland says China’s cotton acreage could decline from previous expectations. Cleveland also pointed to USDA’s recent 1.5 million bale increase in Chinese imports as a sign that they’ve “put a padlock on the warehouse,” in terms of releasing its reserve supply.