Export restrictions by India are also fueling higher prices, according to Adams. “This is also adding to the price levels we’re seeing and to uncertainty in the market as well. There is some thought in the trade that the India crop is slightly larger than the 26 million bales the USDA is currently estimated.”

Meanwhile, Pakistan’s cotton crop “is not as large as originally stated due to effects from flooding,” Adams said.

It all makes for a bullish environment, according to Adams. “It’s also part of the reason why we’re seeing U.S. export commitments and shipments through October just shy of 12 million bales, a level that is unheard of for this early in the marketing year. The highest we’ve been in the past is roughly 8 million bales.”

Carl Anderson, professor emeritus, Texas A&M University, says there continues to be a wide gap between foreign use and foreign production of about 20 million bales, which has provided plenty of export potential for U.S. cotton. But Anderson warns marketers about the impact of very strong price signals.

“If we have a 10 percent increase in world cotton production and a slight decrease in use, we could play catch up on the supply, stocks and carryover very quickly. We have to be careful in a market like this. When you can see a limit up and a limit down in one day, it’s unusual. So don’t get too optimistic and wait another day to see what the market is going to do.”

Anderson has heard that Chinese mills are moving toward more polyester in their blends. “That’s why I’m prepared for a 2 percent reduction in world demand for cotton.”

Stevens says traditional signs point to a market that has made a top. “However, not knowing what is coming next from the Chinese traders, one has to be cautious. This bull is like the 9-headed hydra. For each head cut off, it grows two more.”

Cotton producer Steve Verett, executive vice-president, Plains Cotton Growers, Inc., Lubbock, Texas, likes the high cotton prices, but is concerned that they might not necessarily translate into higher net income for producers.

“I’ve been farming more than 30 years, and there’s never been a time when prices for commodities increased, and we didn’t see a corresponding increase in input costs. Whether it’s going to be good for net farm income or not remains to be seen.

“There are some real scary numbers out here on fertilizer prices. A lot of importers have been caught short. With the early harvest in the Midwest, there have been a lot of fertilizer applications which have drawn the stocks down.”

Verett added that Texas cotton producers are a long way from locking in high cotton prices for 2011. “This morning, December 2011 was at 94.52, which is certainly a good price. We’re hopeful. Corn and soybeans have been enjoying high prices for a few years. The cotton industry would like to be able to take advantage of that too.”