January 6, 2012

 

Cotton pricing concern of US farmers grow

 

 

Farmers in America are thinking whether to price or sell their 2012/13 cotton harvest early to secure historically high fiber prices.

 

Some are hesitant to commit this early, remembering that most growers missed out in reaping huge gains when fiber prices soared to a record price in 2011.

 

Cotton prices rallied from around 60 cents in August 2010 to a record high in March 2011 at US$2.27/lb. Since cotton had traded over US$1 only once in the preceding 50 years, most farmers missed the boat on the rally and sold their cotton at US$0.80 or lower.

 

Now, they are closely watching the new-crop December cotton contract on ICE Futures US, which settled Wednesday (Jan 4) at US$0.9169/lb.

 

The dilemma again for American farmers is whether to sell now at a guaranteed price of US$0.90 plus per lb, or hold off in hopes for a price of a US$1 a lb or higher if the cotton market rallies anew.

 

"Without a doubt, we can make money at US$0.90 cotton," Kendall Devault, a farmer in Farwell, Texas, said. He plants 6,000 acres, of which 2,000 is in cotton, and the rest in corn and wheat.

 

Rickey Bearden, who plants almost all of his 9,000 acres to cotton in Plains, Texas, was more cautious about pricing or selling his upcoming cotton crop now .

 

"We'll probably not price it all at once," he said.

 

Last year, cotton merchants said many farmers priced in at a level just below US$0.80 because they wrongly guessed that after years of low prices, cotton would not rise much beyond US$0.90.

 

The merchants said some farmers managed to sell US$1 cotton, but that very few managed to price their cotton near the end-2010 price of US$1.4481.

 

Charles Parker, a 69-year-old farmer in Senath, Missouri, said pricing his crop at 90 cents may be the prudent thing to do instead of holding out, literally, for one dollar cotton.

 

"A lot of things can happen between now and planting time," he said.