As cotton prices rose, mills switched to synthetic fibers for many uses, especially non-apparel items. Coincidentally economies weakened and total off-take also went down.

Rebuilding market loss to synthetics will be a key to future demand. Support for programs like Cotton Incorporated will be essential in rebuilding world markets.

A key to building demand for cotton also will be how quickly the European Common Market responds to poor economic conditions.

Some of the drop in demand may be a deferred drop that is tied closely to the spike in cotton prices. Robust retail sales in the 2011 Christmas season further depleted stocks of apparel products and may create a slow increase in demand worldwide.

Cotton prices of $1.30 or more last spring and 90 cents or more in the fall provided the incentive for India, Brazil, and Australia to expand cotton area.

Three years ago these countries produced 31 million bales. This year they are projected to produce 42 million bales.

As will be the case for increased production throughout the world, most of the increase in production will be exported. However, excluding China, world import demand is down by about 14 percent.

In 2011-2012 India, Australia and Brazil are expected to export nearly 19 million bales, more than double the amount the three countries exported in 2010-2011.

By comparison, the U.S. exported about 14 million bales of cotton in 2011 and is on track for a similar amount for 2012.

Although the U.S. wound up with ending stocks of 2.6 million bales last season, it took a lot of sales cancellations to achieve the result.

Between April and August last year the U.S. had cancellations of 1.3 million bales. The 2011-2012 ending stock is currently forecast at 3.7 million bales, and increased buying from China or crop failures in other parts of the world could drive stocks lower, Nicosia says.

With 89.9 million acres of cotton and normal yields, the world is likely to produce 121-126 million bales in 2012/13, Nicosia says.

If consumption can manage a 4 percent recovery to 114.4 million bales, another 7 to 11 million bale surplus is possible. If such a surplus does happen, the only entity willing to hold it will be China’s reserve, Nicosia adds.

In the U.S. a substantial decline in acreage is projected.

Ethanol is likely to continue to demand 40 percent of the U.S. corn crop and keep corn stocks low and prices high.

Corn isn’t feasible in much of Texas and in the Southeast non-irrigated corn yields are traditionally low, so these areas are likely to account for more than 75 percent of cotton acreage in the U.S.

As for marketing strategy for the 2012 crop, Nicosia says, “For 2012/13, when the market provides you the chance to lock in a desirable return, take it.

“If you want to speculate on longer-term higher prices, buy a call.”

rroberson@farmpress.com