Perhaps Mike Stevens, with Swiss Financial Services, in Mandeville, La., characterized it best when he called the bull in the current cotton market, “a 9-headed hydra. Whenever you cut off one head, two more appear in its place.”

That’s an apt description, considering that cotton prices have reached nearly mythological proportions lately. December 2010 futures spiked to $1.51 a pound on Nov 9 before profit-taking took them back into the mid-$1.40s by Nov. 11.

Impressive, but U.S. cotton prices still have a ways to go before achieving the price levels seen in China in 2010. They’ve reached well over $2 a pound, according to Stevens.

Stevens and other analysts speaking at the Ag Market Network’s November teleconference say current and future cotton prices begin and end in China. For example, the news behind U.S. futures surging to over $1.50 came on USDA’s lowering of estimated Chinese beginning stocks for 2011 by 3 million bales from the previous month.

This is a big reason why USDA dropped world ending stocks to 42 million bales, a 36 percent stocks-to-use ratio, “which is low by any historical standard,” according to John Robinson, Extension economist, Texas A&M University.

The bulls are on the loose in the United States too, according to Robinson, where USDA cut projected U.S. production by 450,000 bales “primarily due to lower production in the Southern High Plains and the two Rolling Plains reporting districts.”

Forecast U.S. ending stocks declined 500,000 bales, “which is quite an adjustment this time of the year,” Robinson said. “It takes us down to 2.2 bales of ending stocks, which is the lowest ending stocks we’ve had in 85 years. Just like in the world situation, it provides rationale for continued price strength.”

Gary Adams, vice-president of economics and policy analysis, National Cotton Council, said China continues to be the lead bull in the price charge. “While China is the largest producer, largest processor and largest importer of cotton in the world, they are also the biggest area of uncertainty. We don’t have a good handle on exactly what the stocks situation is in China. It’s got to be a very tight situation.

“What we do know is that over the last 15 months, China has been aggressively auctioning cotton from its state reserves, somewhere around 16 million bales. You have to think this has brought stock levels down tremendously.”

Adams noted that USDA’s significant reduction in projected mill use in China is an indication that high prices are starting to affect demand. “The numbers we hear certainly suggest that mill use is slowing. That’s one thing we really need to watch. If cotton prices are higher relative to polyester prices, can we sustain demand at this level?”