Much intrigue, confusion regarding Chinese approach to cotton market. Rumors stalk marketplace. Manmade fibers in the mix.
THE 2014 SOUTHERN Cotton Ginners Association Summer Meeting main session was held on July 22. Among those attending was Robert Royal, left, of Midnight Gin in Midnight, Miss., and Teddy Hazlehurst of Bemis Gin and Warehouse Company in Jackson, Tenn.
Confused about what to do in the cotton market? Welcome to the club.
“Part of the problem is I’m not sure if the (cotton) marketplace even knows what the questions are,” said Anthony Tancredi, Head, Cotton Platform, Louis Dreyfus Commodities, at the 2014 Southern Cotton Ginners Association Summer Meeting on July 22. “Or, maybe, they aren’t asking the right questions in the right fashion. Sometimes you can get the right answer but it is the wrong question.
“So who’s in control of this cotton market? Are we back to ‘normal,’ whatever that may be for cotton?”
Much of the confusion is due to Chinese actions. “There are a lot of questions. Are they stepping aside? Is China finally going off the grid instead of being on?”
Tancredi said the market situation is muddy despite the ability of “learned” colleagues to come up with informative data in past years. The current situation makes it “very difficult to come up with data that says ‘here’s what you can expect.’”
Pointing to a chart showing cotton futures from 2000 through 2013, Tancredi acknowledged the 2010 price spike. Following that, “everyone is talking about how cheap cotton is. It’s fallen out and we’ve moved back to the 70 (cent range), even into the upper 60s. But if we look at it historically, it still isn’t really that cheap.”
Referring to the market from 2000 through 2009 -- a run when cotton barely rose above 70 cents several times -- Tancredi said, “the hardest part was back in the day when cotton was competitive with manmade fiber. One of the biggest problems I see with where the market is heading today is (following the 2010 spike) it took out cotton usage and replaced it with manmade fiber. … It was so much cheaper than cotton, which had gone so high.”
The resulting problem? Currently, “China is one of the biggest manufacturers of manmade fibers -- and (the fibers) are cheap. They’re staying that course.”
Cotton must compete with manmade fibers and take demand back but “so far, China have been masters at not letting prices fall” to allow such.