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Cotton facing price crunch
31 Aug 2004
Cotton prices remain near $400 a bale and planting is just around the corner. Toowoomba-based Namoi Cotton Co-operative's Steve Jones put much of a recent futures market price rally down to spec buyers buying back existing short contracts, rather than a change in the crop supply and demand situation. He said at this stage a large world crop is likely, including substantial crops in the US and China. Supplies will still outstrip demand and there will be additional carry-over stocks.
Another factor contributing to the weaker trend has been the mills' day-to-day buying behaviour, which has taken the edge off demand. And earlier this year merchants sold cotton to China at much higher prices than are currently offered. Now that prices have dropped the Chinese have abandoned the contracts without paying, so even bigger supplies of cotton are coming onto the market unexpectedly for this time of year.
But cotton merchants remain optimistic the market will still offer attractive price spikes. Mr Jones recommended that growers take advantage of good prices when they're offered, as such spikes often don't last long.
The Land, 26/8/04.
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