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Cotton Overview Contracts | Quote-board

Cotton is a worldwide crop grown in more than 75 countries throughout the world. The two largest producers of Cotton in the world today are the People's Republic of China and the United States. Other major Cotton producing countries are Russia, India, Brazil, Pakistan, Turkey, Egypt, Mexico and Australia.

Supply / Production Considerations
In the United States Cotton is grown primarily south of the 36th parallel in Texas and the irrigated valleys of California and Arizona. Most Cotton in the United States is grown on an annual basis from seed, as opposed to the foreign tropical producers who grow Cotton on a perennial basis. Upland Cotton, with staple lengths of 1 to 1 1⁄4 inches, is the most common form of Cotton grown, though American Pima is gaining in popularity in recent years due to its longer staple length of 1 1⁄2 or more. Pima Cotton is more commonly found in California and Arizona.

The bulk of the Cotton crop is typically planted late April and May, though planting in Texas has been known to start as early as March, under unusual circumstances. Like other crops, ideal planting conditions for Cotton is moist soil and warm temperatures. Too much rain can cause the fields to be too muddy to plant, while too little precipitation or heat can cause damage to the crop while it is still a seedling. Cotton planting is typically completed by the end of May, though in some years this can be dr&agged out through June. This is sometimes the case in Texas, especially if Corn and/or Soybean planting has been delayed. Normally, during planting and early maturing, the crop is most susceptible to damage; and, therefore, prices tend to rise based on the greatest potential for damage. Typically in late May, seasonal highs are put in based upon this great potential for damage.

With the completion of planting, the Cotton plant begins to grow. When a small triangular leaf-like structure begins to appear on the main growing stem of the plant, the Cotton crop is considered “squaring”. After the crop has gone through the “squaring” process, they now begin to flower, or set bolls. Bolls are the blooms that eventually open into the white fluffy balls we all recognize. During the boll setting phase of development, the Cotton plant is almost impervious to damage, with the exception of flooding or severe drought. Therefore, Cotton prices tend to decline from the early stages of growth in late June through squaring, setting bolls, to the beginning of bolls opening in late August and early September.

The Cotton crop is typically harvested in late September through to early December, depending upon where and when the crop was planted. Texas, the largest Cotton producing state, typically harvests its crop from October 1st through December 2nd, though in years where planting was done very early, like in the beginning of March, Texans have been known to begin harvest as early as August. Normally, the bulk of the Cotton crop is harvested from Early October to mid November. Excessive rain or snow can slow the Cotton harvest down precipitously. Though harvest delays seldom affect yields much, delay scares have usually been labeled as the cause of many a late September or early October rally in Cotton. Another problem that can occur with Cotton harvest is reserving ginning space after the harvest. Shortages of gin capacity in a local area often delay harvest, as Cotton farmers prefer to have little lag time between harvest and ginning. This tends to come at a time when domestic Cotton supplies tend to be tight; and, therefore, can be a major contributing factor to the firmer bias. Higher Cotton prices tend to occur from late September through December.

Demand / Consumption Considerations
Cotton represents approximately 30 percent of the United States fiber market. The bulk of the Cotton produced in the world is used in the manufacturing of clothing, followed by household goods such as linen, upholstery, drapery and carpeting. The demand for Cotton is greatly influenced by consumer's tastes. The general public's attitude towards competing fibers, such as polyester and rayon, greatly affect the demand for Cotton.

World Wide Cotton Considerations
The United States government introduced procedures in the 1985 Farm Bill to make U.S. Cotton more competitive worldwide by allowing Cotton farmers to borrow against crops and repay the loans at a discount to the average world price at the time they market their product. Changes to this legislation could have dramatic effects on the available supply as well as the demand for worldwide Cotton. The United States is the second largest producing nation, behind China. China, though a major producer of Cotton, tends to consume most of its Cotton domestically. In fact, in most years China is a net importer of Cotton due to its blossoming textile industry..

 

To learn more, contact USIG today: 1- 800-974-8744

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