Cotton futures are unlikely to rise above 70 cents in 2015-16 because China is likely to limit its imports of cotton. That was one of the predictions of Joe Nicosia, executive vice president of Louis Dreyfus Commodities LLC in his speech at the Mid-South Farm and Gin Show.
If that prediction comes true, cotton producers need to focus on maximizing the sale of equities in their cotton to boost their returns, says Nicosia. Higher strength and color grades of 2014 Mid-South cotton crop and other returns on cotton enterprises should help them bring their returns closer to the 70-cent mark.
“Focus your marketing attention on maximizing your equity potential,” he said. “You’re doing a great job growing it, a great job of increasing the quality. The marketplace is recognizing the quality, the longer staple, higher grades. Focus on your equity. That’s where you will get your rate of return while we work through these stocks.”
“Don’t dismiss growing cotton just because you think it doesn’t work,” said Nicosia, speaking at the Gin Show in Memphis, Tenn. “Really put a pencil to all your income, to what it is.”
In some cases, that will be the equities merchants offer for cotton to buy it out of the Commodity Credit Corp. loan program, he noted. It could also include rebates from cotton ginning and warehouse operations.