Recent Price Spike Encourages Farmers: Cotton Futures

American farmers are reconsidering other crops to sow for good reason.  The recent cotton futures rally – the biggest in four years – and drought conditions that won’t seem to go away in the Southern Great Plains are making cotton look more lucrative.

A cotton exporter in South Carolina claims cotton planting can total 11M acres, which is 10% more than what the USDA claimed this time last month.  Since a 2.5 year cotton futures low last June, cotton prices have soared 31% and have experienced a five consecutive monthly gain – the longest since the summer of 2009.

Kevin Riordan, director of research at Capital Trading Group in Chicago, had this to say regarding the current cotton futures situation, “In light of the fact that December Cotton (futures) prices are not looking firm, many farmers identify the recent rally in cotton (futures) prices as the main reason they are switching back to cotton.”  Riordan adds, “…the expected drop in (cotton) acreage announced earlier this year could be exaggerated.”

Cotton futures have backed off recent highs and are in the process of a significant pull-back.  I am looking for a lower-risk way into the long side of cotton futures at this time.


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