Consumption to the rescue

Cotton prices have risen faster and farther than most would have, or did, predict late in 1999. For a variety of reasons, the market literally turned on a dime and is now (as of March 7) roughly 12 cents above the lows seen in late December. Of course the milliondollar question is, "Will it go higher?"

The first shot fired across the bow of the bear's seemingly unsinkable cruiser came from China. On Dec 29th, the Chinese announced a 1999 crop of 17.6 million bales, which was 1.4 million below USDA's estimate. The announcement, perhaps not entirely shocking, was nonetheless disturbing to cotton bears. That day, the March contract opened at just under 49 cents and closed just under 50 cents. The next day prices left behind the 40s for the last time this season. On January 5th, Cotlook's "A" Index of world prices followed suit, rising 13 consecutive days. The second shot had been fired - it was lethal.

The sudden and persistent rise in world prices put the scramble on to secure supplies. For the first time in months, textile mills decided enough was enough. Waiting for lower prices before purchasing may not be the wisest choice. Between the week ended January 6 and February 24th, the U.S. sold 1.019 million running bales of cotton, which was the third largest volume of cotton sold during that time period according to records going back to 1975.