Expect no rally. Don’t wait for the bulls. Anticipate no help from the demand side to pull cotton prices up.

In fact, says Texas AgriLife Extension cotton marketing specialist John Robinson, based on world ending stock estimates, cotton prices should be lower than they are.

At best, Robinson expects prices to continue a sideways pattern—within the 70 cents to 80 cents range but with volatility and “considerable downside risk, especially if certain situations occur.” Those situations would include China dumping a significant number of bales from their massive reserves—which no one expects.

Robinson delivered this less than optimistic market outlook at the inaugural Red River Crops Conference, a joint venture of Oklahoma and Texas Research and Extension programs held Jan. 27 and 28 in Altus, Okla. The venue will alternate between Oklahoma and Texas in coming years.

Robinson said outside forces continue to influence cotton prices but the largest ending stocks level “ever” weighs heavily on the market.

The price boom and the surge in world cotton consumption that sent markets soaring back in 2010 changed the landscape.  China began stockpiling cotton and helped the U.S. cotton industry as export markets increased. “We moved from a domestic market to an export market,” Robinson said.

A pattern of price spikes, increased acreage, price drops and reduced acreage often defines markets. “The price spike of 2010 resulted in excess production in 2011 and built up a surplus. But the market remained stable.”

That surplus has reached “historical levels. The price should be lower,” Robinson said. The reason it is not lower is because China bought a lot of cotton at a high price—from $1.40 up to $1.50 a pound. They have much of that in reserve; estimates run as high as 42.6 million bales while the rest of the world has “tight supplies.” China’s huge reserve has kept cotton prices artificially high, Robinson said. If they unload those stocks, they lose a lot of money; so they wait.

He said those high prices also produced “ripple effects,” in markets. “Cotton became less competitive with synthetic fibers. Normally, mills replace cotton with polyester and cotton prices fall. “But cotton has held up, even though we have lost market share. That can only be fixed when cotton becomes more competitive.” And that’s not likely to happen as long as China holds the reserves. The situation “has long term implications for building cotton demand,” Robinson said.

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He also said a flat yarn price is not helping cotton prices. “I don’t see a downstream market pulling cotton up.”