Cleveland is bullish on cotton. “I’m on an island by myself apparently. But you have to put your big boy pants on. December 2012 is 15 cents to 20 cents undervalued. Over the last four or five months, USDA has made significant changes to India’s supply and demand report. It’s been very difficult to get India’s consumption right. And this week, all of a sudden, India shows up as a huge buyer of U.S. cotton. That’s telling us that demand is stronger there than we realized.”

Cleveland says the cotton market must also reflect India’s faltering monsoon and the expectation that Brazil’s production could drop by as much as 23 percent.

“December 2012 has to go to 85 cents, and I would not be surprised to see it go to 90 cents. December 2013 will go higher, but it won’t be enough to keep acreage in cotton. Corn and soybeans will continue to dominate, and they will steal acres for 2013.”

Nicosia says cotton prices will be protected somewhat on the downside by the expected loss of acres to grains and soybeans. “But to the upside, I don’t see a big explosion in prices at all for 2012. Going into 2013, I think two things are going to happen. We’re going to create a deficit in world production, and the available supply in the world from other exporters could be tight. The competition that the United States faces in the export market is going to be drastically reduced in 2013-14, which sets the United States up for a big year, where prices could really react and the market takes off.”

Cotton consumption continues to be the bugaboo in the cotton outlook, Nicosia said. “I’m worried that we have only slightly over 5 million bales as demand base outside of China.”

Nicosia believes U.S. prices and Chinese prices will eventually converge, “where U.S. prices move up slightly and China’s moves down substantially. I think 2012 is going to be a flat year. In 2013, I wouldn’t sell any of my cotton at 75 cents or 76 cents. I would wait for something with an 8 in front of it. But don’t get too carried away. There are still 72 million bales of cotton in the world. Any explosion in price is still 12 months to 18 months off.”

The Cotton Roundtable is sponsored by Cotton Incorporated, Intercontinental Exchange, Certified FiberMax, the Ag Market Network and Farm Press Publications.