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Agent: Many Issues Will Affect Cotton Market
BETTY VALLE GEGG-NAEGER
MidAmerica Farmer Grower
PORTAGEVILLE, MO.
Agriculture Business Extension Agent David Reinbott of Southeast Missouri thinks the cotton market faces the same issues that all other commodities face.
“We have large ending stocks both in the United States and in the world, and stocks could grow even more in the 2015-16 marketing year,” he said.
The growing ending stocks the last two years have put commodity prices under pressure. To understand the direction on cotton prices one must see what is happening in China.
“They hold almost 60 percent of all the world’s stocks, and have accumulated stocks the last few years,” Reinbott said. “The big question is will they continue to import cotton, or will they use more of their domestic cotton? Another concern in China is their economy. Is it continuing to grow or is it starting to slow down? It is easy to get mixed signals on their economy.”
There’s concern about the quality of their cotton. Many think their quality is not the greatest, so they may be importing a little more cotton to blend with their own.
Another question is U.S. acreage. Will it be 10 million acres, 9 1/2, or less?
“Some have projected as low as 9 million acres, but again, with less acres, trend line yields, and a 1.0 million bale cut in demand, ending stocks stay around 4 1/2 million bales. However with less acres and steady demand, ending stocks could slide to around 3.5 million bales.
Agriculture Business Extension Agent David Reinbott of Southeast Missouri, discusses issues with the cotton market and China’s important role.
Photo by John LaRose, Jr.
“Then there’s other outside factors, the U.S. dollar is increasing. This will cause U.S. exports to be more expensive, and possibly depress cotton exports,” he pointed out.
Lower oil prices and gas is important, and will help consumers to save a few more dollars. The question is, will those extra dollars be spent on cotton products or spent on other consumer purchases?
Also lower oil prices may not be completely the result of over production but a weakening worldwide economy. So only time will tell: Is it a slowing economy or just more over supply?
“Looking at other countries, India’s ending stocks are starting to grow. I hear that they may move more of their cotton into the world market. So that’s another important issue and we’re watching.” Reinbott said.
“All these items are worth watching right now,” he continued. “Again, looking at the 2015-16 numbers, most are looking at crop planted acreage in the 8.0 – 9.0 million acres. Harvested acres will also be a major factor in production this year. If it stays dry in Texas, it could mean less harvested acres. If they get some rainfall, the abandoned acres go down, which could account for a difference of half a million acres right there. Then you figure a trend line yield of 830-840, you’re looking at ending stocks somewhere around 4.5 million.”
The last USDA report at the first of the year, showed a national average price of near 61 1/2 cents, the FAPRI folks suggested around 60 cents, but each of them had ending stocks around 4.7.
“Right now we have a nice little rally, I think, due to some strong exports here in the last few weeks,” he noted. “I would say anywhere in the 58-cent range is probably a low for the next several months, but I think 64 to 68 cents is probably our top. Anytime cotton prices go back in that 64 to 68 cent range, the best bet is selling some old crop if you still have it, and maybe make some new crop sales,” he summed. ∆
BETTY VALLE GEGG-NAEGER: Senior Staff Writer, MidAmerica Farmer Grower
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