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Not since the Civil War era, says O. A. Cleveland, have the stars been so favorably aligned for cotton. And, the veteran cotton analyst contends, that long-dreamed-of $1 price is likely to be around for some time — perhaps as far out as 2014.
Price ratios affected crop acreages
“Price ratios have to remain constant, or stable, if we’re going to have stable production or stable plantings. For the last four years, we’ve not seen a price ratio that favored cotton. So, U.S. producers got out of cotton; acreage dropped from 1.1 million. to 300,000. This year, we could be back to 525,000 to 550,000.”
Since 2006-07, Cleveland says, “We’ve finally got the supply of these major commodities somewhat in line with demand. — but while we’ve been doing this, for the most part we’ve used all our carryover stocks. At the end of the year, there’s nothing left, which puts tremendous pressure on markets to stay high in order to bring in acreage to make sure we’ll have enough of these crops.
“Today, because we’ve not planted cotton worldwide at the same levels we planted it prior to 2006, we’ve begun to draw down the world’s cotton supply. We’re going to have about 1.9 million bales carryover this year, which will be the lowest I’ve ever seen in my career. Some are saying it will be as low as 1.3 million bales. This points to much higher prices.”
In the last two years, he says, “We’ve consumed 21 million bales more than we’ve produced. We’ve taken cotton from a record carryover down to a very low carryover. Now, we’re in the same boat with the grains. There’s no corn carryover, there’s no soybean carryover, there’s a little bit of wheat carryover, but not much. Cotton doesn’t have carryover. Grains have been up 150 percent; now cotton is up 150 percent.
“Analysts are projecting a $4 to $8 price range for corn and $12 to $16 for soybeans. With all this grain demand, cotton has to fight to be grown.
“Will $1.05 grow more cotton? Yes. We’ll get more acreage this year. Will we get 2 million additional acres? I’d love to see it, but I don’t think it will happen. Even if we should, it still won’t lower my price forecast. If we don’t get it, my price forecast for 2012 is going to be even higher.