Shhh! Don't tell anyone, but cotton futures have risen nearly 700 points in the last four days (Aug. 17-20). If you wonder why I'm being reticent about broadcasting that information, let's go back a few months.

You may recall that last October, December 2003 cotton futures shot above 82 cents for the first time since the mid-1990s. Elton Robinson, editor of Delta Farm Press, wrote an article about December closing at 82.73 cents on Oct. 30.

The next day, the nearby futures contract started falling and didn't stop until October 2004 futures went limit up on Aug. 17. I'm not saying Elton's article caused a nine-month slump in cotton futures, but I don't think we ought to be taking chances on another jinx.

What caused the excitement in New York? Asian textile mills and the few left in the United States have been buying “hand-to-mouth.” With prices seemingly in a free-fall, why buy more than a few days' supply of cotton?

Chinese mill buyers, who triggered last fall's run-up in prices when they started trying to cover crop shortages, had stopped buying and reportedly canceled orders on 200,000 bales of U.S. cotton. The American Cotton Shippers Association has asked U.S. officials to talk to the Chinese about honoring the contracts.

Reports China's farmers increased their acreage by 16 percent and could produce a crop of 29 million to 31.5 million bales (vs. 2003's 22 million) have also hammered the markets.

But, as O.A. Cleveland said in his weekly marketing newsletter, most of China's crop won't be available until January. The U.S. crop is also expected to be later because of heavy rains in May and June along the Texas and Louisiana Gulf Coast.

The mills need cotton to run until the bulk of the U.S. harvest becomes available so buyers have started bidding up prices to get cotton out of the Commodity Credit Corp. loan and into trade channels.

Whether this run-up amounts to anything more than short-covering by mills remains to be seen. While USDA rates 73 percent of the U.S. crop good to excellent, crop watchers have been wondering about the impact of a return to dry conditions and abnormally cool temperatures on Mid-South and Southeast cotton.

On the other hand, you rarely win by betting against USDA's crop reports. Some analysts say bigger crops on the Texas High Plains and in California will offset any reductions in the Mid-South and Southeast crops.

Meanwhile, let's keep this to ourselves, OK?

Note: A recent column about the initial acreage target for the Conservation Reserve Program should have read 45 million acres and not 36 million. The 1985 Food Security Act set the target at 45 million acres. The 1996 farm bill reduced that figure to 36.4 million acres and the Farm Security and Rural Investment Act of 2002 raised it to 39.2 million acres. And the House Appropriations Committee, not the Budget Committee, put limitations on the Conservation Security Program.


e-mail: flaws@primediabusiness.com