A few cautiously predicted that cotton could go over a dollar – with caveats of course.
“If things go awry with planting or production or harvest, and given the thin buffer of stocks on hand, it could happen. If we see a monsoon somewhere, we could see dollar cotton,” said one market observer back in April.
Then it happened.
There were floods in Pakistan and the threat of an export ban in India. There were reports that China wasn’t hoarding cotton any more. In fact, its supplies were dangerously low. Demand for cotton exploded. The bulls were officially on the loose.
Still, it was a bit of a surprise when December 2010 cotton hit a dollar a pound in late September, and then, like the Energizer Bunny, kept going, and going, and … well you get the picture.
In early October, Texas A&M professor emeritus Carl Anderson predicted December 2010 futures could reach a possible high of $1.15-$1.20, with the potential for spikes “that are completely out of sight.”
In late October and early November, they went out of sight all right.
As cotton harvest began, and cotton producers began to sell available bales, physical cotton prices leapt to over $1.50 a pound, with some qualities being sold north of that. This strong connection between futures and cash did not exist during the cotton price spike of March 2008 when physical prices essentially became decoupled from futures for a period of time.
Today, cotton fundamentals, which were missing in action in the 2008 run-up, are back in full force. World consumption is again expected to exceed world production. Stocks are down. There is simply not enough cotton to feed the market. The result is that cotton prices have at times been otherworldly.
In fact, the last few months of 2010 saw the strongest physical prices for cotton that we will probably see in our lifetime.
The last time cotton reached a dollar on fundamental news was in 1995, when U.S. ending stocks plunged below 3 million bales. In November 2010, USDA’s supply and demand report estimated U.S. stocks at an astonishingly low 2.2 million bales.
The cotton experts say that the strong demand and supply concerns will continue to buoy 2011 cotton crop prices. They expect world and U.S. acreage to increase, however, meaning the market is not likely to repeat its historic performance of 2010.
But how low, or high, can prices go as long as supplies are still a concern? How much cotton should producers lock in? These are questions that will begin to be answered in the Production Conference, the opening session of the 2011 Beltwide Cotton Conferences at the Atlanta Marriott Marquis.
The conference will include a session on pricing cotton that you don’t want to miss. There were so many pricing opportunities for cotton in 2010 that if you blinked, you missed a 10 cent spike.
The Production Conference will kick off Wednesday morning, Jan. 5 in the Atrium Ballroom, from 8 a.m. to 10 a.m., with introductory remarks by Eddie Smith, chairman of the National Cotton Council and a cotton producer from Floydada, Texas.
At 8:15 a.m., Guy Collins, with the University of Georgia, in Tifton will review the 2010 crop season. At 8:35 a.m., David Shaw, a weed scientist at Mississippi State University, will provide an overview of resistance education efforts by the Weed Science Society of America. Don Parker will provide further updates on resistance education from a National Cotton Council perspective.
At 9:05 a.m., John Maguire, senior vice president, the National Cotton Council in Washington, D.C., will provide a Washington report.
At the time of this writing, Beltwide coordinators had not confirmed a speaker for a 9:25 a.m. session on pricing new crop cotton.
Later Wednesday, in International 5 and 6, from 2:30 p.m. to 6 p.m., two cotton marketing experts will lead an introductory session on the use of options for pricing and hedging cotton. John Robinson, Texas AgriLife Extension Service, College Station, Texas and Mike Stevens, Swiss Financial Services, Mandeville, La., will invite attendees to participate in a hands-on market training exercise.
There will be a crop insurance workshop, Wednesday, Jan. 5 in International 5 and 6, from 1:30 p.m. to 2:30 p.m., at the Marriott Marquis, moderated by Gary Adams, vice president of economics and policy analysis for the National Cotton Council. At 1:30 p.m., Michael Moore, regional director, USDA Risk Management Agency, Valdosta, Ga., will review cotton combo crop insurance policy provisions. At 2 p.m. Shawn Wade, communications director, Plains Cotton Growers, Inc., Lubbock, Texas will provide a review of cottonseed insurance product. Both sessions will allow time for questions and answers.