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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.
Commodity pipelines near empty
“Even though price ratios are basically back more in line, there are no supplies of these commodities around the world. There’s a lot of pressure on Mother Nature to allow us to produce bumper crops. But, the El Nino/La Nino situation is telling us to look for another dry season in Texas. They had a very wet season last year, had a wonderful crop. But, they don’t have subsoil moisture now, and they’ve never had a good crop without it.”
What China and India do in terms of its internal production and consumption of cotton and other crops will also be an influence on markets, Cleveland says.
“China is the world’s largest cotton producer, the world’s largest cotton consumer, the world’s largest textile industry. Next door, India is the world’s second largest cotton producer, consumer, and textile industry. Those two countries have the largest populations in the world.
“We’ve always said if we could just get each Chinese consumer to buy one more tee shirt, it would work wonders for cotton demand. Well, now they’re buying those tee shirts and a lot more cotton goods, and they’re now consuming 50 million bales or more per year.”
In the last 15 to 16 months, Cleveland says, China has used its cotton reserves. “They’ve taken their reserves down to zero. They may increase cotton acreage this year, but their consumption is growing as much or more.
“They not only are the world’s largest importer of cotton, they’re also the world’s largest importers of corn and soybeans, in keeping with their commitment to upgrade their people’s diets. When Russia made its commitment in the 1970s to upgrade diets, they were feeding 130 million people. China and India, in upgrading their diets, are feeding 2 billion people and they’re using a lot of corn, wheat, and soybeans to do it.”
In 2006, Cleveland says, Oil World, the magazine for edible oils, commented, “What we’re seeing now is that we’re on the brink of a world food crisis.”
“Everybody scoffed at that,” he says. ‘But, we had the lowest per capita carryover of oilseeds that we’d ever had in the world. At the same time, there was wheat crop failure in Australia, rapeseed crop failure in Europe, and with weather problems in the U.S. we saw our cotton carryover become extremely low and higher prices for commodities.