Record high cotton prices have dampened world demand for cotton products, slowing U.S. exports, and pointing to somewhat lower prices for this year’s crop, says O. A. Cleveland, Jr.

“I would suggest that the crop that’s in the field now will be 10 cents to 15 cents less valuable than last year’s crop,” he said at the joint annual meeting of the Mississippi Boll Weevil Management Corporation and the Mississippi Farm Bureau Cotton Policy Committee at Grenada, Miss.

Even with Texas’ dismal crop outlook as a result of a severe ongoing drought, there will be an increase in world production and carryover this year, “and that will probably keep price from going back above $1.25,” says Cleveland, Mississippi State University agricultural economics professor emeritus.

“But, I think you’ll still have ample opportunity to price cotton at $1 or more.

“The bottom line is that cotton still has to compete for land.  With cotton carryover remaining relatively tight, and grain carryover still relatively tight, that balance is going to keep prices somewhat in the range of $1.10 to $1.25 for December 2011 cotton.

 “I think you’ve got at least a couple more years to see a dollar sign in front of your price,” Cleveland says. “I’ve been bullish from $1.45 cents all the way down to $1.13 where we are today (July 7), and I remain somewhat bullish. I think the reality of the matter is that cotton, at $1.13, is not overly expensive — but then, neither is it particularly cheap.”

Demand for cotton has slacked off somewhat, he notes. “This is due to somewhat less demand from consumers in response to higher prices for cotton products, and a bit of slowing of purchases by textile mills because they had yarn sitting unspun in inventory and they had to move that out before they would step in and buy again.

“Even though they’re now that coming into the market again, consumer demand is not as strong as it was, so the mills are basically operating hand-to-mouth and trying to sort through the Chinese situation.”

More and more, Cleveland says, the cotton market is being influenced by China, India, Brazil, and countries in the Asian sub-continent.

“Whether that influence is production oriented or demand oriented, Chinese and Indian consumers are now the big horse pulling the demand/price wagon, as opposed to the many decades when U.S. consumers pulled that wagon.

“China, India, and Brazil — these are places where the future of demand truly lies. We used to laugh and say if we could just get Chinese consumers to buy one more tee shirt that it would do wonders for cotton demand. Well, now they’re buying one more tee shirt, and sometimes two, and that’s what’s given us $1.50 and $2 cotton.