What is in this article?:
- Will new crop cotton hit 85 cents?
- The big question
- China is hanging on to about half of the world’s ending cotton stocks and no one is exactly sure of how it plans to dispose of them.
- The Chinese textile industry is importing yarn rather than buying from spinners. Large volumes of yarn have led to a significant increase in demand for U.S. cotton.
The big question
Cotton prices have room to move higher, but not significantly, according to Cleveland. “The big question is what China will do with the large reserve of cotton stocks on hand. I think it’s clear from Chinese policy that they haven’t decided what to do. But they have over $30 billion invested in the stocks that they’ve bought. We don’t see any reason why they would dump that cotton on the market. They dump the cotton on the market and they will destroy their investment.”
Carl Anderson, Extension professor emeritus, Texas A&M University, says the surging yarn sales “are the underlying force in the market. One reason why the market is strong is because two-thirds of the global use of cotton is taking place outside of China.”
Anderson says China’s huge stocks will keep the market “from going to extreme highs. So we’re dealing with a market that wants to move sideways 5 cents to 8 cents. It’s a market that’s quite different from a year ago, when we had such a big move from high prices to low prices in the first half of the year.”
Anderson sees a range for old crop cotton in the low 70s to high 70s, and 75 cents to 85 cents for new crop cotton. “Based on the information we’re seeing now, we’re looking at a market that is not likely to go above 89 cents, or drop below 69 cents for the crop that were going to plant.”
Cleveland sees excellent support for old crop at 77 cents to 79 cents a pound. “A month to six weeks from now, we could push it into the very low 80s. In new crop, I would start pricing at 79 cents to 79.5 cents. I’m uncomfortable getting above the high 80s, because of the Chinese stocks. I don’t think the Chinese stocks are bearish on this market. They are put away. They are not available. The Chinese have far too much invested, and they have worked for three years to push cotton prices high. I’m comfortable with the mid-80s in new crop.”