What is in this article?:
- Wild cotton market ride may be repeated for 2011-2012 crop
- Could price destroy demand?
- Does the world need 17 million bales?
- On paper it looks like the fundamentals of a more normal supply and demand are kicking in. However, the days of a simple cotton market are gone for now.
- The return of volatility to a once staid cotton market is “based on unknowns more than anything else."
- Marketer believes U.S. cotton acreage will reach 13.3 million acres, but extraordinary pre-planting prices could change people’s minds and more cotton could be seeded.
Could price destroy demand?
It is currently high enough to attract land for cotton worldwide, but he warned there is a danger that it could reach a point where it would destroy demand. He thinks that point is above $1.80 per pound.
Mills are already looking at 60-40 blends instead of 100 percent cotton due to higher natural fiber prices, although the high price of oil is sending synthetic fiber prices higher.
If it passes that $1.80 level, Tancredi said textile and apparel companies could simply stop making cotton products.
Going into the 2011-2012 season, Tancredi did not surprise anyone when he said the world will respond to record cotton prices by planting much more of it.
China, the largest producer and consumer of cotton, remains the unknown. The Chinese government dictates what farmers produce and that may not be cotton in the most populous nation in the world. However, cotton is the most profitable crop to grow there, and he expects growers will find a place to plant it — “under a tree or in a ditch” — regardless of what their government tells them to do.
In India, the only crop more profitable is sugar cane. “Cotton is going crazy there. People are calling us to see if we want to invest in cotton farming operations in India.”
Cotton is once again a strong competitor for land against other, equally profitable crops in the U.S. It is No. 1 on the list of money markers for the Southeast. It is running neck-and-neck with corn in the Delta “for the first time in a long time.”
Texas is unquestionably cotton. Acreage will be huge there, and if it rains, so will the crop.
He believes U.S. cotton acreage will reach 13.3 million acres, but extraordinary pre-planting prices could change people’s minds and more cotton could be seeded.
Tancredi predicts a 21-million bale U.S. crop to be added to a 1.9-million carryover would give a total supply of 22.9 million bales. Holding back 2 million bales to stay above the “panic” point and selling 3.7 million bales to domestic mills would leave about 17 million bales for export.