Esteve believes China’s role in cotton production will continue to drive prices. “They produce over 30 percent of the world’s cotton, spin 40 percent of the world’s cotton and they buy 40 percent of the world’s imports. What China is doing with its reserve buying will have a major impact. They have bought close to a million tons (4 million bales) of imported cotton and they are buying cotton at a clip of 70,000 to 80,000 tons daily.

“Today, we estimate that China will put 4 million to 4.5 million tons (16 million to 18 million bales) into its reserve. Tomorrow it could be more. The million dollar question is how much of this cotton will they hold back, how much they will sell back into the market and under what policy and price level. They can create an artificial shortage in the market. So we could have prices go up in spite of the shortage. But what happens in 2012-13? Will China continue to restock and absorb excess supply? It’s possible, but I don’t think it’s probable.”

If cotton production continues to be strong as it is today, and consumption continues to weaken, another 3 million bales could be added to the world supply surplus, Esteve said. “World stocks would go to 73 million bales. That’s a tremendous stocks-to-use ratio. At some point, the market is going to have to buy consumption. Prices will have to do that job.”

Esteve sees a 35-cent cotton price range for December 2012 futures, between 72.5 cents to $107.50.

China’s buying of stocks could present a hedging opportunity for producers to price cotton at up to a dollar, he says. “I don’t see prices taking off beyond that. Obviously you could have some crop problems, and prices could take off. It’s hard to predict.

“Just remember that these dynamics are changing all the time. Things could be different a month from now. Nothing is static. Once you think you have it figured out, you get blindsided by something you couldn’t foresee.”

In answer to a question on the prospects for recovery in the world economy, Terry Townsend, executive director of the International Cotton Advisory Committee, said, “We do not expect a double-dip recession, although we acknowledge that it could happen. We think that by 2012-13, the world economy and mill use will be back into a stable trend.”