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Large cotton supplies, weather will weigh heavily in 2013
By Blair Fannin
COLLEGE STATION -- Record-high carryover stocks of cotton and future weather patterns are just a few factors affecting cotton prices heading into 2013, according to a Texas A&M AgriLife Extension Service economist.
“We will see a cutback in Texas cotton acreage as farmers take advantage of strong corn, wheat, and sorghum prices,” said Dr. John Robinson, AgriLife Extension cotton economist in College Station.
Robinson said cotton prices are still adjusting to historic prices in 2010-11 when $2-plus per pound cotton prices led to higher world production and reduced consumption. That set of circumstances led to record-high carryover stocks of cotton worldwide and weaker prices.
Robinson said China accounts for about half of the world’s carryover stocks, and most of those are held off the shelf in government reserve, he said.
“The combination of these bearish fundamentals and policy uncertainty sets the stage for what we may see in 2013,” he said. “We can certainly expect significant reductions in cotton acreage, starting with Australia, Brazil, and Argentina last month.”
With the strength in 2013 corn, soybean, and wheat future prices, Robinson said there will likely be major shifts to grains and oilseeds in the Midsouth and Southeast. He projects if U.S. cotton planted dips to 8.9 million acres, “We could still see 14 million bales of production.”
“I would project a likely range of December 2013 prices at 65 to 85 cents per pound,” he said. “The upshot is that the insurance base price established in early 2013 will likely be in the 70 cent range -- far, far lower than in the previous two years.”
The continuation of the sovereign debt issues in Europe or fiscal cliff fears in the United States “will only reinforce negative to slow economic growth in 2013,” he said.
“That suggests little room for a demand-driven rally in cotton prices,” Robinson said. “In addition, if some major cotton-producing country has a production disaster, the market shock could easily be squelched by China simply releasing some of their government reserve stocks. In short, weak demand and policy distortion will likely keep the upside capped and the downside open.”
Blair Fannin is an associate news editor and communications specialist with the Texas A&M AgriLife.
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