What is in this article?:
- Cotton marketers: continued bullish prices
- Volatile factors
- Western cotton marketers predict bullish upland cotton prices in the short- and long-term.
- Calcot President Jarral Neeper predicts short-term December 2011 contract trading in the $1.15 to 1.25 per pound range on the low side and $1.35 to $1.45 per pound on the upside.
- John Chilton, president, Handwerker-Windburne, Inc., predicts $1-plus per pound cotton prices into 2013 futures trading, but an unlikely return to $2 cotton.
- The top issue driving cotton prices this year is weather.
Two Western marketers predict upland cotton prices will remain bullish in the short- and long-term.
“For the next three months or so, we’ll have a relatively tight trading range for the December 2011 contract in the $1.15 to 1.25 per pound range on the low side and $1.35 to $1.45 per pound on the upside,” predicts Calcot President Jarral Neeper.
Calcot is a cotton cooperative with members in California, Arizona, New Mexico, and West Texas. The company is based in Bakersfield, Calif.
For the 2011 crop year, Neeper predicts trading in the $1.00 to $1.70 per pound range; most likely $1.20 to $1.40 per pound.
“That sounds pretty disappointing since we were just looking at $2 per pound,” Neeper explained. “Before we got to $2, $1.25 looked pretty good.”
Many growers thought 85 to 90 cents per pound looked great back in August and September. Growers who sold at those prices, Neeper says, are a key reason why prices soared later. Cotton prices cleared the $2 per pound record-price hurdle in February. Neeper says a repeat of $2 cotton is unlikely.
Painting a similar price outlook, cotton marketer John Chilton, president of Handwerker-Windburne, Inc., Peoria, Ariz., predicts the cotton market will remain strong.
“Will it stay $2 strong? I have a hard time believing that,” Chilton said. “I don’t believe the price will fall below a dollar anytime soon. Anywhere in this price range makes the cotton market profitable for growers.”
Futures prices in late April traded in the mid $1.50 per pound range. Chilton predicts $1-plus cotton prices into 2013 futures trading. The cotton market should remain strong due to intense acreage competition between corn, soybeans and cotton. The 10-year baseline price for corn is 200 percent higher; soybeans are 142 percent higher. This creates competition for acreage and inflates prices.
Neeper and Chilton spoke to a standing-room-only crowd during the joint annual meetings of the Arizona Cotton Growers Association and the Arizona Cotton Ginners Association in Carefree, Ariz., in late April.
The rapid rise in cotton prices is a “perfect storm” with ties to many domestic and international issues. Chilton points to the continued drawdown of U.S. cotton stocks; floods, fires, and rain in Pakistan, Australia, Russia, and northwest China; a 10 percent gross domestic product growth increase in Asia; the weakened U.S. dollar; and “consumerism” in China, India, and Southeast Asia.
China is rapidly becoming more westernized with an expanding middle class demanding more protein-based food and pricier consumer goods.
“The old tale is the Chinese father used to want a radio, a bike, and a bowl of noodles/rice every night,” Chilton said. “The new China wants a flat-screen TV, BMW 5 Series car, and an affluent house on the hill. In this consumerism environment, the Chinese are consuming copious quantities of everything including cotton.”
Neeper added, “The Chinese don’t want to live in a crowded apartment anymore. They want a larger place to live, more clothes, and higher quality food. This helps support higher grain prices which in turn helps keep a firm floor underneath cotton.”