A Texas AgriLife Extension Service economist advised Texas cotton producers to consider selling sooner rather than later – assuming they have a decent offer.
"The market is saying not to wait for higher prices," said Dr. John Robinson, AgriLife Extension cotton economist. "I would say that if somebody has a fairly decent contract, I would be looking to sell on any rally."
Most Texas cotton has been harvested, and much is sitting in warehouses waiting to be sold, Robinson said.
"Growers I have been talking to are not seeing many inquiries from buyers for their product," he said. "As a matter of fact, that doesn’t surprise me as the market is shrinking down, and buyers want to wait and see how low it’s going to go."
A number of things contributed to this situation, Robinson said. World supply uncertainties, which had been driving prices up, were pretty much resolved during December. And though the U.S. Department of Agriculture "whittled away" at its estimate of Texas yields and production, markets continued to be depressed from sluggish global economic growth.
Much of U.S. cotton is exported to Europe, which is having a recession of its own. Sluggish economic growth both here and abroad mean weak demand for consumer goods, which in turn reduces demand for raw cotton, he said.
"Also, high prices have led mills to switch to more man-made fibers," Robinson said.
Robinson noted there was a rally in future prices on Jan. 3, but that was in the context of a higher stock and commodity markets across the board.
"Basically, it was what we call a risk-on day, with the money going back into the riskier assets. So that’s helping to boost from the outside market standpoint, and that’s boosting ag commodity futures and cotton in particular."
There may be more rallies in the coming months, but Robinson questioned if they would be high enough to be worth paying to store cotton while waiting. "I see a slightly weaker picture for next year than for now. If you’ve got cotton now, I sure wouldn’t hold it a long period of time," he said.
Robinson writes a monthly cotton marketing newsletter and provides daily news and commentary on cotton on AgriLife Extension's Master Marketer Facebook page at http://www.facebook.com/AgriLifeMasterMarketer .
More information on the current Texas drought and wildfire alerts can be found on the AgriLife Extension Agricultural Drought Task Force website at http://agrilife.tamu.edu/drought/ .