In December 2010, China imported 450,000 tons of cotton — by far the highest ever. If they set a record for imports, it doesn’t seem rational that this increase would be for one month, one time only. So, the fear of the unknown has added to the craziness in the cotton market.

“If $1.50 a pound doesn’t stop the Chinese from growing cotton, what will? If the internal price of cotton in China spikes again, the Chinese will buy more U.S. cotton and as long as it’s cheaper than the internal price of cotton in China, then the price isn’t too high,” Tancredi explains.

India was supposed to be the great savior for the cotton market. They produce more cotton and higher quality cotton, but the salvation didn’t come. The Indian government, fearing there would not be enough Indian-grown cotton for the Indian textile industry, put a halt on cotton exports.

“In the U.S. in January we were on track to need 28 million bales of cotton, later in the year that number dropped to 25 million bales. Last year we had a 1.9 million bale carryover on a 15.8 million bale crop. The numbers just don’t add up for a 25 million bale crop in the U.S. —not even with a two million acre increase in cotton planting.

“If the world truly needs that much cotton, the only solution is to force someone out of the user market,” Tancredi says. That too, isn’t likely to happen, he adds.

“If India doesn’t get its act together and those bales aren’t available for export, where will all those export bales go — they will go to the next available supplier — the U.S. How high will that kind of demand push prices and the answer is we don’t know,” Tancredi says.

“Though many people think the profitability of cotton is bringing huge amounts of new acreage into the crop — that’s just not happening worldwide. In the Southeastern U.S., cotton is still the most profitable crop. In the Delta, corn is still the top crop. So, whether we see the 13 million acres of cotton that some are projecting remains to be seen,” the cotton expert says.

 “We will see some increase in cotton in the U.S.  Other crops are bidding up prices to protect acreage. Growers can pick which crop is most profitable based on the kind of land they have, the kind of equipment they have, the proximity to markets and many other factors — not just on price.

“My best guess for U.S. cotton is a 20.5 million bale crop. Add the carry-out to that crop and we’re at about 22 million bales for the 2011 season. Take two million bales out for carry-out to keep the market from going crazy again. Take out domestic use, about 3.6 million bales out, and we will have about 16.8 million bales to export next year,” Tancredi says.

The big question for U.S. growers is will the world need 16.8 million bales of U.S. cotton? “There will have to be some substantial proof that demand for cotton will go down and cotton supplies will go up to cause cotton to sell for less than a dollar pound. If that doesn’t happen $1.50 a pound may not be high enough, Tancredi says.