Cotton prices (March futures) appear locked in a tug of war in the 35 to 39 cent range. New crop prices (December 2002 futures) appear locked in the 40 to 44 cent range. Demand news remains fairly optimistic but is a mixed bag. Recent cotton consumption by US mills has been at an annual rate of about 7.5 million bales compared to USDA's latest projection of 7.7. K-Mart's recent decision to file for bankruptcy may further erode US mill business. Exports, however, continue to do well and the US should meet or exceed USDA's 9.8 million bale projection.

Most expectations are that US acreage will decline this year-- early industry survey estimates seem to indicate so. USDA's official number will be released on March 28^th. Even with a decline in plantings, with average weather the 2002 crop could still reach 17.5 million bales. That would be a sharp reduction from this year's crop but still enough to keep downward pressure on prices. Given the decline in the US mill industry, large exports would again be needed.

At present, prices appear happy to stay in their near-term trading ranges and provided exports remain brisk, not much is expected to change until 2002 plantings are confirmed. Is there a possibility prices could dip to the 30-cent level again? Perhaps. But unlike last season we already have several things working to support the market- (1) we are already 10-12 cents below last years level at this time of year, (2) we have already tested the bottom and have since recovered, and (3) expectations for a smaller US and world acreage in 2002 are likely already factored in to the prices we now see.

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