PCG EMAIL SERVICES: MYPLAINVIEW.COM - The bouncing ball of cotton prices
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Thu Sep 18 14:29:09 CDT 2014
MYPLAINVIEW.COM - The bouncing ball of cotton prices
Posted: Wednesday, September 17, 2014 10:40 am
By HOMER MARQUEZ hmarquez at hearstnp.com
Will cotton prices stay down or will they climb? That's the question that will consume local producers for the next few weeks as weather and global harvests have thrown any ground for price predictions out the window.
"We're just in limbo right now," said Dr. John Robinson, a professor and economist for the Texas A&M AgriLife Extension Service.
Robinson explained that before the 2014 planting season, farmers were expecting another hot and dry year which would wither any chances of a high-yielding cotton season. The expectation of low cotton yields drove future cotton prices up to 70 cents and 80 cents per pound. At its peak, spring prices rose to 84 cents per pound.
However, down came the rains as the Memorial Day weekend marked the beginning of a relatively wet summer in the area.
The timely rains rejuvenated faith in cotton, as predictions of Texas High Plains cotton production was thought to come in at just under 5 million bales.
But with more supply, cotton prices began to tumble as future prices for cotton fell from the high 70-cent range to the 60-cent ballpark.
As of Monday, the price of cotton was sitting at 63 cents per pound.
Some farmers were able to lock in the future prices with contracts earlier in the year; however the risk and commitment to produce a set amount of bales deterred many to wait to the end of the harvest to find buyers.
"There's a lot of risks and extra costs when you contract that early," said Robinson, who explained that if a farmer's crops come out low and he cannot cover the contracted yields, producers sometimes have to cover the difference.
But low prices may not be the final result for the area, as rains have continued to fall through the September, subsequently affecting cotton maturity.
Cold, wet weather at this point of the year can bring down the cotton's quality and slow the maturing of cotton plants. For the best results, the area will need to experience several weeks of hot and dry weather.
It has been reported that very little cotton has actually opened in the area, so the rains may have not yet affected plants' fiber quality. But some crops have already been washed out from the rain as conditions eventually stopped the maturing processes.
Crops predictions on the High Plains took a cut, falling 535,000 bales to 3.865 million. That prediction is still 58 percent higher than 2013. Around the nation, U.S. production prospects fell 964,000 bales to 16.538 million, mainly due to declining estimates for Texas, Georgia and Arkansas.
The drop in U.S. production may help cotton prices for those who still have skin in the game. However globally, production expectations have risen by 370,000 bales to 11.8 million.
The U.S. Department of Agriculture has suggested that India will produce 30 million bales of cotton this season while China will produce 29.5 million bales. China is also setting on a substantial cotton reserve brought on by a cotton shortage in the country several years ago.
Prices could plummet if China decides to flood the market with cotton; however Robinson said that scenario is not considered probable. Robinson said recent flooding in India may reduce that county's production.
"Right now we are just taking it day-by-day," said Robinson as farmers can only sit and wait to see how the fluctuating market will end. "We should have a better picture at the end of September."
If cotton prices do come out low, farmers have an option to save their cotton and sell it later if prices go up. Federal loan programs are available in the meantime.
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