Cotton Reaches 15 Year High
As cold weather threatens the crop in China, cotton has reached a new 15 year high in prices. At the beginning of 2009, cotton prices were approximately 50 cents a pound. As of today, the price is well over 95 cents a pound and if the adverse weather in China continues, the price may go even higher.
Global inventories fell to 45.4 million bales in the 12 months ended July 31, 2010, the lowest levels in 14 years. A bale weighs 480 pounds. O.A. Cleveland, a professor emeritus in agricultural economics at Mississippi State University indicates that prices may rise to $1.25 per pound by January as supplies dwindle.
Brazil, the world’s fifth largest exporter, cut the tariff on imports of the fiber to zero from 10% from October to May as domestic supplies fell well short of demand.
India, the world’s second largest exporter, plans to delay registration of export contracts by two weeks until October 1. The nation, estimated by the USDA to account for 18% of global cotton exports in 2009, is limiting overseas sales to 5.5 million bales in the year starting October 1 and impose “prohibitive” duties on an shipments over that amount.
As the world adds more and more people and we lose arable land, I believe these types of pricing structures will become more the norm than the exception.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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