Cotton prices (Dec14 futures) are currently threatening to return to the levels we saw a month ago. Since the low back on Feb. 3, prices rallied and peaked back over 78 cents on February 11. Prices moved sideways for a while in a band between 77 ½ and 78 ½.
Dec14 closed back over 78 cents Feb. 24 but then had 3 consecutive wild days (the week of Feb. 24). Prices closed at 76.77 Wednesday (down 74 points) then back up to 77.78 Thursday (up 101 points) and then Friday around 77 ½.
The rally (recovery) was impressive and gave us hope of even better things to come. The week of Feb. 24 puts a bit of cautiousness in that optimism. The only newsworthy items that could possibly have triggered this decline were reports that China may lower its selling price in order to attempt to move its stocks to mills and profit-taking by folks that got in at the bottom close to 76.
I have advocated and still think that most growers are waiting for an opportunity to lock in 80 cents. This decline and volatility, admittedly, seems to make that strategy a bit more risky. Contract basis has been very good. If you’re concerned about the risk and if it helps you sleep at night, you could consider taking advantage of the good basis and lock in a small percentage of expected 2014 production on advances back to the 78 to 79-cent area.