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Tight supplies boost cotton

A “very tight supply situation” currently characterizes the U.S. and world cotton scene, and U.S. growers “should benefit from it,” says Dale Cougot, senior economist for the National Cotton Council.

“A really tight global supply, international demand increasing, and importantly, reduced stocks in the textile pipeline — all this can be favorable to cotton prices when there is any recovery at the retail level,” he said at the annual joint meeting of the Southern Cotton Ginners Association and the Delta Council’s Ginning and Cotton Quality Improvement Committee.

“Although a lot of factors will come into play between now and this fall, the supporting factor will be the tight supply in the U.S. and world — not just cotton stocks, but yarn stocks.”

Exports this fall are already shaping up to be large, relative to previous years, Cougot says. “Almost 5.75 million bales are sold for the short-term, which implies that over one-third of this year’s crop is already sold.

“If we see any stability of the U.S. economy going into the first quarter of 2011, then supplies could continue to be tight when the pipeline needs to start filling up again. This should be supportive of prices.”

He cautions, though: “There’s one caveat — these good times won’t last for long. Prices over 70 cents imply that producers around the world are making large profits. That means supply will increase, and it likely will happen a lot faster than we’d like for it to.”

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TAGS: Outlook
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