Cotton Rally to End in 2011 as Record Prices Spur Output, Economists Say

Cotton’s rally will end before next year’s harvest, and farmers should sell their 2011 supplies at any price above 90 cents a pound, according to agricultural economists at Texas A&M University in College Station.

“We are not expecting December 2011 to be close to or above $1 a pound for very long given the potential we have for increased production,” Carl Anderson, a cotton economist and Texas A&M professor emeritus, said today on a conference call. “We’re going to be looking at a downward pressure.”

Cotton prices as much as doubled in the past year to a record $1.5195 yesterday in New York on concern that demand from China, the world’s biggest user, will erode dwindling global stockpiles. Cotton for March delivery declined 3.19 cents, or 2.3 percent, to $1.3792 at 11:18 a.m. on ICE Futures U.S.

Planting in the U.S., the largest exporter of the fiber, will rise 21 percent in the season that began Aug. 1 to 11.04 million acres, compared with a year earlier, the U.S. Department of Agriculture said Nov. 9.

“Ninety cents is a pretty dang strong price that covers a lot of input costs,” said John Robinson, a professor and extension economist at Texas A&M University. Cotton futures for delivery in December 2011 fell 2.4 percent to 94.6 cents today in New York.

Supply disruptions next year are unlikely to be of the same scope as this year, when adverse weather in China, Pakistan and Texas combined with export restrictions in India to create the “perfect storm,” said Mike Stevens, an independent trader in Mandeville, Louisiana.

World demand for cotton will total 116.82 million bales for the season that ends July 31, down 3.3 percent from last month’s estimate of 120.77 million, the USDA said. The department said China’s usage will drop to 47 million bales, 6 percent less than the October forecast. A bale weighs 480 pounds, or 218 kilograms.

“We’re going to see world demand for the use of cotton at least stabilize,” Texas A&M’s Anderson said. “We can play catch-up very quickly.”

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.

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