Cotton prices erratic amid world surplus

Cotton futures are proving a real gamble at present, with prices spiking and plummeting from one day to the next.

Last week wild price swings were the norm as future prices jumped 12.5 percent in a one-week period before falling back.

Spot December cotton futures hit a five-month high of more than 79 cents a pound last Thursday amid growing concerns about “tight nearby supplies of tenderable qualities and low stocks in deliverable position,” according to the Lubbock (Texas) Avalanche-Journal.

March futures were up nearly 6 percent for the week, closing at 75.43 cents, the publication added.

The upturn in prices is somewhat surprising given the lackluster export sales of cotton due to decreased production worldwide and enormous world stocks in countries such as China, according to Southeast Farm Press.

“Large world stocks translate into intense competition among cotton sellers and lower consumption in key textile regions,” the publication reported. “Many mills have switched to more affordable synthetic fibers.”

The trend over the past two years has not been kind to cotton growers. Two years ago, cotton futures topped the $2-per-pound mark – a record – while last year it was still nearly $1. Current prices are in the mid-70-cent range, by comparison.

Prices have been beaten down by swollen world stocks.

The latest US Department of Agriculture cotton projections for 2012-13 indicate that foreign stocks are expected to reach a record 73.5 million bales, 11 percent above 2011-12, Southeast Farm Press reported.

“Stocks have risen considerably over the last two years as a result of recent record cotton prices that encouraged increased production but reduced demand,” the publication added.

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