In it's August report, USDA estimated this years cotton crop at just under 19.2 million bales. While this is about 13% higher than last year's crop, 19.2 million bales was on the low side of what most analysts were expecting to see. As a result, the market has increased about 3 to 5 cents.

Most of the summer, the cotton market has bounced back and forth between 56 and 63 cents on December futures depending on rainfall and news of exports. December now stands at roughly 66 cents and the highest level since late May. Where prices go from here will depend on several factors.

The maturity of the crop appears overall to be near normal. The mid-South crop is actually ahead of normal whereas Georgia and Texas are just slightly behind schedule. Given the lateness of planting and emergence in Georgia, the crop has caught up rapidly. While the crop is not "late" from a physiological standpoint, it is generally not in good condition and seems to be deteriorating weekly. Weather in October and November will be important to the success of being able to gave a good yield and harvest on the part of the crop that is late.

For the past 3-4 weeks the sentiment in the market seems to have been that the crop is likely going to get smaller as USDA reports are issued in the fall months. I'm not at all comfortable with this assessment. Although the 19.2 number caught the market by surprise, this may be an indication that future reports will not show as much decline as once thought. Also, I firmly believe the market (mid 60's December futures) is already hedging it's bets for a smaller crop.

Should weather prove favorable and the size of the crop stay at the current estimate or actually increase to say 19.5 million bales or more, this would surely drop prices below 60 cents. Should the crop drop to less than 19 million bales to say 18.5 or less, we should be able to hold above 60 cents. If exports remain strong, I expect prices to challenge the mid 60's or better after harvest and into 2001.

I think there is reason to guard against the likelihood that a smaller crop may not happen. It might be prudent for growers to have at least 1/3 and maybe up to ½ their crop priced going into harvest. Use rallies the remainder of the summer and early fall to get caught up to that level.

Don Shurley
Professor/Economist- Cotton
University of Georgia

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