Cotton Prices Continue to Improve

Don Shurley
Department of Agricultural and Applied Economics
University of Georgia

The National Cotton Council has estimated that U.S. farmers will plant 14.05 million acres of cotton for 2003. USDA's Prospective Plantings report will be released the end of March. Acreage of around 14 million acres planted, could produce a 2003 crop of around 17.5 million bales depending on weather and growing conditions. If a crop this size is realized, prices should remain above 2002 levels provided that exports are good.

World cotton production was down significantly in 2002 as most major producing and exporting counties had reduced acres and/or yield. The largest production declines were seen in the US and China. This decline in 2002 came after a record world crop in 2001 that increased stocks tremendously and help drive US prices to the lowest level in over 15 years.

The world-wide demand for cotton continues strong. For 4 consecutive years 1999-2002, mill use of cotton has increased an average of about 2 percent per year. Increased use of cotton has been lead by China and other countries in southeast Asia. Expected a rebound in world cotton production in 2003. Even if production increases, if world demand remains strong, world stocks will again decline and should be supportive of higher prices than 2002.

There is already preliminary talk of 70-cent cotton. Caution- this is premature. December 2003 futures prices are already toying at the 60-cent level. Further increase too soon will (a) encourage additional acres to be planted and (b) negatively impact exports. Either or both of which will act to send prices back down. For the next few months, futures prices for the 2003 crop are likely to remain in the 57 to 62 cent level. Prices could eventually move higher but at this point (prices at or near 60 cents), the risk seems more downward rather than upward.

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