The world's cotton industry is riding rough seas that have seen prices ebb and flow, according to published reports.
Not since the Civil War has the soft fiber endured so sizable a price spike, agricultural economics professor John Robinson of Texas A&M University told Reuters. Robinson, who operates a cotton marketing website, noted several global events that were isolated yet occurred concurrently to cause that price hike.
As many as four billion cotton bales went to waste in Pakistan following flooding that started in July 2010. The following month, Russia prohibited the export of wheat, yet only temporarily. Nonetheless, that pushed speculators to buy other commodities including cotton.
India had a monsoon and China's cotton harvest was wetter than normal, both of which also were factors.
A significant role was played by officials from the U.S Agriculture Department, Robinson said.
"But the real kicker was that, some time in about October, the official analysts concluded that because prices in China were rising so much, it must be – they just made this big inference – that they had less cotton on hand," he told the wire service, noting the advent of "an honest-to-gosh panic on the part of commercial buyers – textile mills, mainly – and they bought up everything in sight at whatever price."
The soft fiber set record prices on March 7 of $2.197 per pound.
Issues with cotton coming from India are continuing, Bloomberg reports. As a result of concerns about the globe's second-biggest producer of the soft fiber not adhering to its plan to increase shipments, cotton futures notched their highest prices in 14 days.
Rahul Khullar, commerce secretary of India, said in a statement that the nation has relaxed limits on shipments of raw cotton. In turn, that prompted traders to purchase as they believed supplies of the fiber would slow down, independent trader Mike Stevens told Bloomberg.
The website of Cotlook, an English trade association for the soft fiber, noted the Indian Supreme Court ordered a stay on shipments.
"This Indian pattern of an on-again, off-again export policy has made most international traders quite wary, and rightfully so," Stevens told Bloomberg.
China, the globe's top producer and importer of the soft fiber, is likely to step up and purchase additional cotton, according to agrimoney.com.
Abah Ofon, an analyst with Standard Chartered, told agrimoney that cotton's falling prices since setting the all-time high in early March might be set to change course.
He predicted near-term contracts in New York will run an average of about $1.10 per pound during this quarter while increasing to $1.15 per pound during the final quarter of the year.
"We see limited downside for cotton prices from current levels," Ofon said. "We expect current market prices to generate significant buying interest from China."
Troubles in Texas also will play a significant role.
Analyst Sudakshina Unnikrishnan with Barclays Capital predicted the U.S. Agriculture Department will reduce its estimate of the cotton crop for the harvest 2011-2012, telling agrimoney that the Texas drought will offset mass planting. Output in Texas, which is under the most severe drought since at least 1895, accounts for half of the U.S.' production.
Yet the 2011-2012 harvest is projected to yield very high amounts of cotton in most countries, according to commodityonline.
Though the U.S. is not among those nations, two countries – India and Australia – are likely to flirt with record amounts, according to the International Cotton Advisory Committee.
The ICAC projected a year-over-year rise in global production of 8 percent, which would boost the total to 26.9 tons.
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