What is in this article?:
Growers need to realize that cotton prices are in a cycle. They don’t just go up and stay there.
While there’s a lot of excitement now about the cotton market, it’s easy to forget markets are cyclical, warns Glen Arnold of Arnold Consulting.
“We need to realize that cotton prices are in a cycle. They don’t just go up and stay there,” says Arnold, speaking at the recent Wiregrass Cotton Expo held in Dothan, Ala.
Looking back, Arnold says the general public has a different perception from farmers about what has occurred this past year. “We’ve seen a phenomenal year — one for the record books — in cotton this year. Who would have dreamed cotton would have gone from 67 cents per pound to more than $1.70? No one saw this coming, and if they did, it was sheer luck,” says Arnold.
What most people don’t realize, he adds, is that the Southeast was gripped by drought this past year, and there wasn’t a lot of extra cotton to sell. That, he says, takes some of the wind out of the good market news.
Quoting renown investor Warren Buffet, Arnold says that in the business world, “the rear view mirror is always clearer than the windshield.”
“We can always look back and see what we could have done differently with last year’s cotton. We went for four years when prices never got above 70 cents. We were jumping up and down when it hit 75 cents to 80 cents, and many of us locked in when it hit that range. No one knew what would happen,” he says.
Some economists have said recently that we’ve entered a new era of demand with India’s and China’s emerging middle classes, and that we’re going to enjoy these prices for years to come, says Arnold. “I cringe when I hear that because almost those exact words were said in 2008. Cotton had reached near 90 cents, and everyone was talking about China, and the fact high prices were here to stay,” he says.