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High Quality Cotton Bumps Export Demand and Prices

By Blair Fannin, Texas A&M AgriLife Extension

 

The 2016 U.S. cotton crop produced high yields and high-quality fiber, triggering a spike in export demand and higher market prices, according to a Texas A&M AgriLife Extension Service economist.

“No question, we had high-quality cotton produced in 2016 that was widespread across the board,” said Dr. John Robinson, AgriLife Extension cotton marketing economist in College Station. “We had high yields, which resulted in more quality cotton to market. That put us in the cat bird’s seat.”

Since August, Robinson said the demand relationship has shifted “outward,” meaning more cotton has been flowing out to the export markets due to political unrest and India losing some of its market share. Cotton prices have reached the upper 70s in recent weeks.

“Some of our export competitors had problems, whether it be political policy or India losing export market share, and we picked up the slack,” he said. “We were shipping more as a result of the India policy issue. That’s all great and does mostly explain the strengthening in old crop futures. I don’t know if those will carry over into next year.”

Fashion trends such as fitness wear have shifted demand from cotton to synthetic materials, holding back demand for cotton. “Instead of cotton expanding beyond population growth, it’s been limited by that fashion trend,” Robinson said.

However, trends tend to fade over time, and consumer preferences may switch back to cotton.

Robinson said it’s hard to predict whether U.S. cotton producers will produce another year of top-quality cotton.

“Weather is hard to predict,” he said. “I’m advising producers to be careful, since this strong demand may not be there and prices may not be as strong. You might want to do something with high prices now, because they may not last. And, you’ve got to factor in that we’ve got a huge crop coming potentially with the additional acres that were planted.”

For Texas, cotton crop conditions appear to be favorable heading into the summer growing season.

“So far we are good in terms of moisture,” Robinson said. “Most of Texas is showing adequate soil moisture. We are off to a good start. I saw a report that indicated a 50-50 chance for an El Nino event that could start as early as August.

“Those rains in August can make a big difference. You multiply that times the acreage increase and we could have a lot of supply – and we could have lower prices. We could see futures prices at 60 cents (per pound) or lower by harvest time.”

 

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