The biggest question for cotton producers and one that Joe Nicosia hopes to answer Friday, Feb. 27, at the Mid-South Farm and Gin Show is the impact of global recession and demand destruction on the cotton industry.
Nicosia, president and CEO of Allenberg Cotton Co. in Memphis, will participate in the Gin Show's annual Ag Update session at 8:30 a.m. He'll address how the world's economy and loss of demand is impacting world cotton acreage. He'll also discuss the lack of U.S. exports.
“The ray of hope that we have is that the U.S. government program remains a very valuable safety net to the U.S. producer,” Nicosia said. “Until such time that the world economies and demand recover, our producers are going to be protected by the U.S. government program.”
Nicosia doesn't believe that the events which occurred in March 2008, when cotton prices suddenly spiked to close to a dollar, then fell precipitously over the next nine months, haven't obstructed access to the markets for merchants, but the markets are riskier and volatile than they've been before, “because there is more money chasing after the same opportunities.”
Nicosia says a situation like March “could happen again, but we're not going to see that type of situation continuously.”
The cotton market today is different in two ways from when Nicosia started out as a cotton merchant in the early 1980s. “Today information is disseminated so much more quickly, and it's so much more of a global focus today. Before, U.S. traders focused on the U.S. situation. If you got that right, that's all you needed. Today, you have to get the world right.”
Nicosia doesn't see the recession continuing for another two to three years. “I think we'll have positive growth within 12 months. I wouldn't be surprised if the economy was already growing again by the fourth quarter. It won't be at a breakneck pace. I think we'll have a general recovery, not a spiked recovery.”
Carl Brothers, senior vice president of Riceland Foods, also a speaker at the Ag Update session, will zero in on the rice supply and use fundamentals, rice acreage this past year and his concern that the size of the 2008 rice crop “is still a bit overstated.”
Brothers will also discuss why mill rice exports are down in certain parts of the world and whether or not those markets are expected to return soon. He'll also discuss a factor that hasn't gotten much attention as of late — friendly Dec. 1 stocks estimates.
U.S. rice prices compared to major competitors is another issue Brothers will touch on, as well as how futures are reacting to fundamentals and other factors.
Brothers will add a rice perspective to the events that happened in March 2008, “and the influence of commodity funds on Chicago, and the Las Vegas environment it created for the grain and rice industries.”
Brothers will wait until the end of February to say whether he's bullish or bearish on rice, but said the friendliest factor to the marketplace is the crop size itself. We don't have the rice to market this year. The downside of that is our own competitiveness and the financial straits we see in the world.”