Cotton Price Trends
June 15, 2011 In the U.S. cotton industry, few names draw greater attention than that of Dr. O.A. Cleveland, the noted economist and professor emeritus from Mississippi State University. Born in Canton, Mississippi, in 1950, Dr. Cleveland has always been well-known in the agricultural community, but his visibility reached an even higher level of prominence when cotton prices began to skyrocket last year.
In October 2010, he predicted that cotton could exceed $1.25 – a statement that some said he made simply to be sensational. People said the same thing in February 2011, when he predicted $2 cotton.
Suffice to say, no one is making those types of claims anymore.
Agriculture has been in Dr. Cleveland’s blood since he was a young boy, and although he officially retired in 2000, he still has an office at Mississippi State. But not even a lifetime of experience in the industry could prepare him for the volatility we’ve seen over the last six months. And while he accurately predicted certain aspects of the price spike, that doesn’t mean he isn’t amazed by it like everyone else.
“To this day, it’s still astounding to me,” he says. “Sometimes I still ask myself, ‘Is this really happening?’ But the reasons for what happened are very clear, although it took me a while to realize it.”
The turning point came when Dr. Cleveland was doing one of his monthly radio shows on the Ag Market Network (www.agmarketnetwork.net/), a joint venture of state extension services to furnish cotton producers an improved flow of marketing information following the monthly U.S. production reports and World Agricultural Supply/Demand Estimates. Listeners all over the world can listen to the show free of charge at www.kflp.net.
Most experts were predicting that cotton could reach $1.03 or even $1.05, but Dr. Cleveland shocked his listening audience when he boldly predicted cotton would hit $1.25. “That’s when some readers of Cotton International decided I was crazy,” he says with a laugh. “But the market was just too strong for what we were seeing, and I’d started to hear rumors about India restricting its exports and that Pakistan’s crop was more severely damaged than reports were leading us to believe.”
As history has shown, even that supposedly “sensationalistic” prediction was nearly $1 less than the heights market would eventually climb. Dr. Cleveland has earned the right to have the last laugh on those who doubted him, but he never took it personally when people accused him of predicting such high prices just to grab headlines.
“Let’s face it, I later predicted that prices would reach $1.50 to $1.75 and the market went to $2.20, so it’s not like my prediction was right on the money,” he says, “and even a blind hog finds an acorn now and then. When I look back, there were clues to what was going to happen, but most of us didn’t see them because cotton at $2.20/lb didn’t seem possible. The signs were pointing to a place none of us thought we could go, so we overlooked them.”
The big question, of course, is where cotton prices go from here. Dr. Cleveland believes prices will come down from their current levels, but not any time soon. “There’s still a lot of arable land left in the world and there are major efforts under way to develop it. But this isn’t a cotton issue; it’s a commodity issue. Cotton will still have to compete with other crops, and getting new land into production takes time. We could see cotton prices stepping down over the next three to four years, but I wouldn’t expect any kind of sudden drop.”
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