The cotton market is on fire, taking a 180 degree turn from just two years ago. Cotton futures are seeing a big boost in recent days. The July contract was trading above three-year highs, nearing the $85 per cwt mark on Monday. Even the new crop December contract topped $75 per cwt during the first trading day of the week before the market traded down on Tuesday.
“If you look back at 2010, [cotton] rallied for months after an event like this occurred and we saw major movements,” said John Payne, a grain analyst with Daniels Trading. “There’s a little bit of a supply problem in the U.S. again.This is more of a global problem and more of a transportation issue.”
Like the cotton market, much has changed at the Bogue Chitto Gin in Macon, Miss. since the fall of 2015, when the outlook for cotton acreage, prices and exports was bleak.
Jack Huerkamp, the Bogue Chitto Gin president, said cotton was the exception in the area. The gin started construction in 2012, rare for the industry at the time.
“We were without a cotton gin,” said Huerkamp. “We had to haul at least two counties away. The only way we could increase cotton acreage for the area.”
The new facility isn’t done growing just yet. Now, it’s in the process of a near $2 million expansion which would increase the facility by a third to make more room.
Huerkamp says the stockholders are forecasting a 40 percent increase in acreage for 2017 in that area. This means between 110 to 120 thousand bales have the potential to move through the gin, depending on yield.
“We're seeing the big run in old crop contracts and not as much in the new crop contracts,” said Gary Adams, president and CEO of the National Cotton Council (NCC). “That shows some of the tightness that we're seeing in current supply and demand balance sheet for the 2016 crop compared to what the market may look ahead and say is the situation in 2017.”
According to USDA, the 2017/2018 U.S. cotton crop could top 19 million bales. That would be a ‘sharp increase’ in the next season’s ending stocks. However, the export forecast is set to increase on higher-than-expected export sales.
“We'll continue to see strong shipments, but we are going to see sales slow because most of the crop, , has already been sold at this point,” said Adams. “We are seeing some wheat export crop sales. That will give us a good gauge of what demand may look like into the next marketing year.”
The cotton market may have changed over the past few years, but the mentality shared by Huerkamp and other cotton growers is staying the same.
“One thing about cotton growers is that we love to raise cotton,” said Huerkamp. “It’s something about it. We love to do it. It’s in our blood.”
Now growers just have more of an incentive to plant it while they see better profits.
Adams believes the run in cotton prices won’t swing a ton of acres this late in the game because most farmers are set on their seed and input purchases. However, Huerkamp says producers are moving some soybean acres to cotton in his area.