For four years U.S. upland cotton prices have been flatter than a week-old West Texas road kill coyote, the victim of a convoy of more profitable, alternative crops.

Corn, soybeans and now wheat continue to rumble through the entries of many farm financial ledgers, generating black ink at the expense of lower-priced cotton.

That Texas coyote will never exit the blacktop on its own, but cotton prices may arise from the doldrums, because the strength of corn, soybeans and wheat prices are starting to slice into cotton stocks, making the market jittery about the overall world supply of cotton in a growing consumption market.

Kevin McDermott, vice president and senior manager for Jess Smith and Sons Cotton, Bakersfield, Calif., told the 24th annual Western Cotton Conference at Harris Ranch, Coalinga, Calif., that cotton prices look like they are getting off the mat and may be ready to rumble in 2008.

Tightening cotton supplies and continually growing demand may be getting to the point that the only way for prices to go — is up. Three consecutive years of world consumption outpacing world production says it is about time, according to McDermott.

He said there are several factors currently in a tug-of-war over the direction of cotton prices.

One is extremely large — Post Step 2 market U.S. carryover this season. “The other side of that is the big dog in the fight; competing crops taking more and more acreage away from cotton.”

U.S. cotton acreage tumbled 30 percent from 15 million acres last season to 11 million this season.

Overall, the U.S. crop is down this year more than 4 million bales.

On the demand side, the domestic mill demand free fall continues. McDermott predicts it will equal only about 4.8 million bales from this crop year's 5 million bales. In 1997, it was 11 million bales.

China, he said, continues to be the “800-pound Panda” in the world market. China reportedly produced 32.5 million bales last year, but McDermott said no one really knows for sure how much cotton the largest cotton producer in the world generates, including China.

“We think China had an excellent crop last year, and the crop size should be about the same 32 million bales this year,” he added.

McDermott predicts China will consume 54 million bales this season.

Overall, he believes China will need to import more than 16 million bales to meet its mill demand. “A large portion of that will be from the U.S.”

India will move into second place in world cotton production, moving the U.S. to third place this season. This is largely due to almost doubling the average yield there from 275 to 500 pounds per acre over the past few seasons with the introduction of Bt cotton.

India's crop should be 23.5 to 24 million bales this season.

India cotton exports displaced some U.S. cotton exports to China in the early part of last year and some people are concerned that will happen again with the bigger Indian crop. However, McDermott does not believe the threat is great.

Even with its growing crop, McDermott said India will continue to import American Pima and roller ginned Acalas from the West for its high quality.

Foreign production will increase only slightly this year, by about one million bales, largely due to India. India's increase is offset by major problems in Turkey, Greece and Africa.

McDermott expects the U.S. to export about 17 million bales this year.

Muddling the picture is the U.S. Census Bureau's loss of more than 1 million bales of cotton from last year. McDermott said all but about 300,000 bales of it may have been found. He predicts the carryover this year will be 9.4 million bales.

He sees U.S. ending stocks for 2007-2008 dipping to perhaps 5 million bales and world ending stocks falling to a less burdensome 51 million bales from the current marketing year's 58 million.

He believes recent price increases are a result of those changing market signals.

He believes every area of the U.S. will reduce cotton acreage next year due to competing crops.

“Every alternative crop you look at is more attractive to plant, not only at historic levels, but even more attractive now than a year ago,” he said.

Cotton is looking at a better price scenario in the 2008 crop than in recent years, and that could impact the marketing of this year's crop.

Price increases to this point, McDermott pointed out, have only taken away the POP payments and not put additional money into the bank.

“Only increases from this point forward will put dollars in your pocket and this will cut into counter cyclical payments. If prices go up, counter cyclical goes down,” he explained.

Growers just received the final 2006-2007 counter cyclical payment of 4.1 cents, putting the final payment at 13.7 cents. He encouraged growers to take marketing steps to protect the payment for the 2007-2008 crop.