"FatterDumber& Happier Moe" wrote in message news:4cb8332a$0$14789$ snipped-for-privacy@news.suddenlink.net...
Speculators usually drive that sort of sharp increase, but there are underlying forces that have attracted the interest of speculators. There is an increased demand for US cotton becasue China is expected to increase imports. The US is not the lowest cost producer of cotton, but we the producing nation with the most cotton available for export. Floods in Pakistan (a supplier of cotton to China) wiped out hundreds of thousands of acres devoted to cotton. So if China needs to import more cotton, they will likely have to get it from the US. Other countries that have the potential for supplying China (say Brazil) may be devoting more acerage to soybeans. While soybeans may ultimately pay less per acre than cotton, soybeans cost much less to raise and are a more dependable crop. So while the ultimate rewards may be higher for cotton, the risks are much lower for soybeans. I don't grow cotton myself, but I do rent out some land to another farmer who does. Over the last 20 years, the rent per acre from the land I rent to the cotton farmer has been better than my profit per acre from corn. If I was not worried about the long term negative effects of constantly planting cotton on the same land, I'd rent everything to the cotton farmer.
If I was in the cotton buisness, I'd be locking in the current high prices. My best guess is that prices will fall steadily once the US cotton harvest really gets going. In my area the cotton harvest is probably half done (this is early). Further south they are just getting started. I think the conditions in most of the cotton belt have been good this year, so I expect a strong crop (although the USDA doesn't).
In my opinion, options and futures on commodities like cotton and corn are another form of gambling that I am bad at. When my Father was alive he almost never contracted his crops (i.e., sold the crop ahead of time for a guaranteed price). I occasionally do so, but the rewards have been small. Last year I made maybe an extra $0.20 per bushel on soybeans becasue I sold them in August for Novemeber deliver. This year, I pre-sold half my soybean crop for $10 a bushel (delivered to the local elevator, the corresponding price in Chicago would be around $10.65). This morning Novemeber soybeans are selling for almost $12 in Chicago (which would translate to around $11.35 locally). Oh well, I never win at Poker either.
Ed