Mike Quinn, CEO of Carolinas Cotton Growers Cooperative, told an audience at the Beltwide Cotton Conferences the fundamentals for cotton — production and mill use — remain roughly the same for 2012 as they were in 2011, except there's a good likelihood ending stocks for the coming year may increase about 12 percent — based on a lot of "ifs."

But, he says, there are several factors that hold the key to identifying where the market will go this year that will just have to play out.

First, he said, the sovereign debt crisis faced by Europe (the largest economic unit in the world) will have to be dealt with either by monetizing that debt or through governmental austerity measures — the balance of which is important to avoiding defaults that could slam the global economy back into more chaos. He said he's optimistic bankers and politicians in Europe will find the balance.

Second, China is in the midst of building national reserves of cotton and in doing so could remove 15-18 million bales of cotton from the world supply in 2012 if it continues that trend. That would be enough to offset the potential increase in ending stocks.

Too, Pakistan is also on an internal buying binge that could negate its cotton production from bloating world stocks, he explained.

Given an optimistic resolution to the global debt problem, and China and Pakistan removing cotton from the market, Quinn says such a scenario would be very supportive of prices.

However, he noted, that Chinese and Pakistani cotton reserve doesn't cause cotton to disappear; it only provides what he called a "synthetic demand" for the year. "The cotton is still in the warehouse and has to be considered as part of world stocks eventually," he said.

Any interruption of either of these processes could derail the status quo in cotton prices just shy of $1, but Quinn notes the far futures cotton contracts are showing strength in early January they haven't seen in recent months — indicating hedge fund traders and other investors are "looking at commodities again."

He says with today's technology in which "millions of dollars can move almost instantaneously at the click of a mouse," growers and their marketers should keep a close eye on far contracts for opportunities.