What is in this article?:
- Two dollar a pound cotton is now in the past, but its influence worldwide continues to drive the price, the demand for cotton products and the planting intentions of farmers worldwide.
Two dollar a pound cotton is now in the past, but its influence worldwide continues to drive the price, the demand for cotton products and the planting intentions of farmers worldwide.
In the time since $2 per pound cotton shocked the entire world, the industry has seen a record expansion in global acreage, a contraction of demand and a historic effort by China to build reserve buffer stocks.
Joe Nicosia, CEO of Allenberg Cotton Company, says the confluence of these events is creating one of the largest global ending stocks of cotton in history and huge uncertainty as to what will happen to it.
Speaking at the recent Southern Cotton Growers and Southeastern Cotton Ginners meeting in South Carolina, Nicosia said, “The shortage last year was so severe China decided to begin a campaign to rebuild stocks in its state reserve. By the time the reserve is satiated with 2011/12 cotton it will have taken 15 to 18 million bales off the market.”
Two dollar a pound cotton created a shockwave in demand for cotton products — and not in a good way for farmers.
The price for synthetic materials remained stable at about a dollar a pound, and the world market reacted to the dollar price differential by gearing up to produce more synthetic material.
Though it may appear demand for cotton is strong worldwide, in reality it is the artificial demand created by China’s drive to build its domestic supply. Without the buying frenzy of the Chinese, the demand for raw cotton would reflect the downturn in demand for cotton products.
By planting time in 2011 cotton prices had declined to around $1.20 a pound, but was still high enough to encourage a huge increase in acreage worldwide.
Cotton growers world-wide responded to these prices with an 11 million acre increase. Worldwide, the cycle appears to be repeating itself this year.