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“The bull market in commodities has a good bit more life,” says O.A. Cleveland, Jr., Extension agricultural professor emeritus at Mississippi State University. “It could last another five years or more. But I don’t see inflation as a problem.” He says “a lack of money supply available to consumers” will hold inflation in line.
The brink of disaster
By 2005, Cleveland says, “The world was on the brink of a food disaster. By 2008, world carryover of oilseeds and grains had disappeared and prices exploded.” In 2010, just as there was a hint of prices settling down a bit, there came Russia’s wheat disaster.”
Cotton stocks were at record levels and frantic demand for grains and oilseeds sent cotton acres plummeting and grain/oilseed acres soaring. Mississippi cotton acres dropped to an all-time low of near 250,000.
But while cotton was taking a back seat in plantings over five years, the surplus in stocks was disappearing and prices were climbing.
“All this says is that economics works,” Cleveland says. “With cotton supplies used up, the market has to catch up with grains and oilseeds. More specifically, the price ratios between the various field crops have come back in line. That is what $1-plus cotton has done.
While the world is no longer on the brink of a food disaster, supplies of commodities remain tight and food prices are at all-time highs, Cleveland says.
“The world cotton supply can’t be rebuilt in a year. Neither can grain and oilseed stocks. Cotton is now on a competitive track for acreage, and will continue so for at least two years, or until all commodities can rebuild supplies.
“The next step will be for more land to be brought into production — and there is plenty of it. But, that will take five to 10 years. In the meantime, cotton will see many more months of the magic dollar sign.”