“There’s no doubt that yesterday’s report was bearish,” Stevens added. “When you look at the world situation, we are flush with cotton.”

The move to a lower and narrower trading range began about a month ago, according to Stevens. “The market looked pretty strong, with the moving average and the momentum all pointed higher. We thought we would stay in the $1.15 to $1.25 trading range to the upside and 95 cents on the downside. Then on Sept. 19, it broke below $1.09. It was an absolute killer. It broke well-defined uptrend lines and led to nine straight sessions below a dollar. The amazing thing was that the market continued to hold.

“The last 16 sessions, we’ve had three weeks with a less than 6-cent range, from 98 cents to $1.04 area. We’ve built up layers of overhead resistance on the charts from $1.04 to $1.08. The interest really runs out when you get up to $1.04.”

The downside has been firm too, notes Stevens. “For whatever reason, the market continues to have good support around a dollar. We get down there and run out of gas on the downside. We’re stuck in this real small trading range.”

One good thing about the narrow trading range, according to Stevens, “is that it has brought the option volatility down to some very manageable levels. This low volatility should be taken advantage of.”

“There is a shopping opportunity with options.” said John Robinson, Extension economist at Texas A&M University. “If somebody had cotton to sell, and hasn’t put a floor under it, they could. Or they could harvest, contract it, then buy an inexpensive call spread.”

Carl Anderson, Extension professor emeritus, Texas A&M University, is still very concerned about weakness in cotton demand. “Economics always wins in the long run, and (lack of demand) is beginning to show in the numbers,” he said. “I’m seeing much more polyester blend with the cotton. It really bothers me that we have an export-driven market. If China and Pakistan, India and Brazil have cotton to sell, they’re going to sell it. We have a very troublesome market. I’m very concerned about the future of the market once we get a realistic supply and demand picture in line with the speculative side of the market.”

Anderson sees cotton prices ranging from 85 cents to $1.05 for this fall. “But when you have a buildup of cotton supplies, you’re going to have a low, weak harvest price throughout the year. Look at what happened in 2003 when October shot up based on unexpected Chinese purchases. Prices started out the year in the 65 cent range and ended up at 40 cents.”

Cleveland doesn’t see a trading range quite that low, but doesn’t see much potential to the upside either. “I’ve stuck with a 93- to 95-cent floor. Getting above $1.06 to $1.08 is a challenge. I don’t think it’s possible that it will go above $1.15. I’d be stunned if we got above $1.08.”

Cleveland noted that the Chinese typically start to rebuild their reserves somewhere around 95 to 98 cents. “So there’s fairly good support there, not for consumption, but to store.”

Another buoy for cotton prices in 2012 is that for cotton to acquire acreage, the price has to remain competitive with the grains and oilseeds.