China is In the process of relocating much of its cotton production, he says. “They’re converting most of their eastern crop land, which is basically rain-dependent, to grain and oilseed production, and cotton is being moved to their great northwestern territory, which has very rich loess soils and lots of water for irrigation

“They’re also making changes in their textile industry, beginning to focus more on high quality. Chinese investors are now building textile mills in Cambodia, India, Ceylon, Vietnam, and other locations outside their country, where labor costs are much cheaper. Labor demand is beginning to catch up in China and is not necessarily cheap any more.”

There is debate, Cleveland says, about consumption of textiles in China. “Some analysts are saying that consumption isn’t increasing, but rather is continuing to fall. But the USDA has come around to the position that Chinese consumption is increasing. China has become a very vigorous importer of high quality cotton yarn from Pakistan, India, the U.S., and elsewhere., and I think the U.S. will continue to sell high quality yarn to them.”

India, now the world’s second largest cotton producer and cotton consumer, had a “timely and spectacular” early monsoon season, he says, which resulted in a bit of pressure in the market. “Since then, however, the market is beginning to think their crop may be off somewhat, and that has affected price. I think the Indian crop will come back somewhat, although it could be stunted more than we anticipate at this point. The market is taking heed of this uncertainty.

“My analysis indicates the Indian crop will be smaller than USDA is projecting; I think their numbers are a bit over-estimated. Two days ago, India in-country prices were the highest we’ve seen all season, which indicates they’re looking for cotton somewhere.”

Looking at the U.S. crop, Cleveland says, “I would have never believed we’d see a time when the state of Georgia would have more cotton than all five Delta and part-Delta states combined.

“About 70 percent of U.S. acreage is in Texas and Georgia, so weather in those two areas is going to be a major factor as we go forward. Georgia has had a lot of rain this spring, but Texas, according to many meteorologists, continues in a 5-year to 10-year drought. Insurance adjusters have been in the fields since early July, and we’ll have to wait and see how much cotton acreage is zeroed out.

“The market is just now beginning to pay attention to this, and the December contract has moved up to about 87 cents. We’ll have to keep an eye on weather in Georgia and Texas. Texas is a huge part of U.S. cotton — over 50 percent of the crop.

“I think March and May contracts will remain reasonably strong, and cotton will continue to battle with grain and oilseeds for acres going into 2014. I hope I’m wrong, but I think 90 cents or more for the December contract is a challenge.”