Once again I must focus on high cotton prices. I can’t help myself! So many adjectives have been swirling with respect to this topic; epic, astonishing, unprecedented, remarkable and probably most common . . . . . unbelievable. While the unbelievable prices have brought some retired tractors and farmers back into the business and have forced considerable thought about crop rotations and planting, my thoughts, however, have switched to the consumer side of the business.
U.S. markets are seeing the ramifications of a high cotton price that inevitably transfer to the consumer. Cotton was selling for less than $0.80 cents per pound a year ago and peaked over $2.10 per pound in March. This translates into the price of a youth’s cotton T-shirt that was $6 a year ago now priced at $10. The price of jeans has increased by an average of 10% over the past six months.
Much of the demand for more cotton is a result of China, the world’s largest cotton producer, having cold, wet weather as well as widespread flooding in Pakistan. India also contributed to this increased demand by imposing strict limits on its exports.
Meanwhile, the world economy is improving.
Kurt Salmon Associates reports a 1.7% increase in retail spending in March 2011. How (and if) this trend will continue with the rising price of gasoline is yet to be seen.
It’s also important to mention that the high price of cotton has attracted many farmers to put inactive farmland back into production. This additional increase in the production of cotton would in theory cause the price of cotton to return to historic levels come harvest time. But if demand continues to rise and production from world markets is somehow reduced, prices will most likely stay high. The year 2011 looks to be a wild ride no matter how you look at it and an unbelievable cotton year that is sure to be talked about for years to come!
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