What is in this article?:
- O.A. Cleveland: Record cotton carryover hampering upturn in prices
- Consumption recovery will be slow
- Growth in income, employment
“World cotton growers produced 24 million bales more than we consumed in 2011," says O.A. Cleveland, Jr., Mississippi State University Extension agricultural economics professor emeritus. “The bottom line to that is world carryover increased from about 49 million bales to almost 75 million bales — a record increase and a record world carryover. I could never have imagined I would see that kind of carryover; it’s difficult to even grasp it.” Given the excessive cotton supply, price tanked, Clevleand says.
JAMES ENGLAND, from left, and Pat Riley, and Dan Riley, right, all at Eupora, Miss., visit with Chip Upchurch, Staplcotn, Greenwood, Miss., at the the joint annual meeting of the Mississippi Boll Weevil Management Corporation and the Mississippi Farm Bureau Federation’s summer cotton policy committee.
Growth in income, employment
Consumption, Cleveland says, “won’t get any worse. We’re seeing growth in income and employment, and economic activity should improve somewhat. I think, coupled with reductions in cotton acreage in the southern hemisphere, that will warrant a boost of 15 cents to 25 cents in the cotton price, which would put it in the 95-cent range. I’m not saying it will go to 95 cents; that’s the absolute high I could see. I think it will probably spend a lot of time in the 80s range.
“Today’s cotton market is not your daddy’s cotton market — it’s an entirely different animal,” Cleveland says. “Today’s market is so heavy with speculative funds and traders from all over the world, so much money coming in, that outside economics and outside factors are having an impact on cotton, grains, currencies, oil, livestock, and other commodity markets.
“Trillions of dollars of speculative money is pouring into all these markets, and basically we have a situation of all that speculative money versus cotton traders.”
The impact of monetary crises in Spain, Italy, Greece, and other countries are also an influence, Cleveland says.
“We went for probably four months when, every Friday like clockwork, the market went down simply because there was a meeting in Europe to try to determine what they could do about the financial crisis in Greece.”
Asked about the USDA’s recent estimate for Mississippi acreage, which was higher than expected, he says, “It was a surprise to me because it was the same as their March estimate, and apparently didn’t factor in the impact of the hot, dry weather we were having. My bias would be for Mississippi acreage in the 515,000 to 520,000 range.
“I’ve second-guessed USDA all my working career, and my guess is that they probably didn’t have enough data at the time to revise their estimate downard to reflect the weather-related problems. Until they come out with their August report, I think we just have to go with our gut feeling.
“But while the number is very important to us in Mississippi, it is not very important in the overall scheme of the U.S. or world situation.”