Bumper Cotton Crop Pummels Prices

Good weather in Texas and California signals an even bigger cotton crop than the record harvest forecast a month ago, compounding a cotton glut that’s sent prices to 15-year lows, analysts said.

The crop will total 20.01 million bales, up from 19.99 million forecast last month and 17.2 million last year, according to the average estimate of six analysts surveyed by Bloomberg News. Cotton prices are down 50% in the last year because supplies are growing in the face of shrinking world demand worsened by the Sept. 11 terrorist attacks, analysts said.

“We all know the U.S. crop is big, and probably getting bigger,” said Frank Weathersby, an analyst at Affinity Trading in Destin, Fla. “What we don’t know is how much demand has been hurt since Sept. 11.”

Cotton for December delivery rose 0.67 cent, or 2.1%, to 32.32 cents a pound on the New York Cotton Exchange, rebounding from Tuesday’s lowest close since July 1986. The U.S. Agriculture Department report on the cotton crop is scheduled for release Friday.

Farmers in Texas, the nation’s biggest grower, are just starting to collect this year’s crop even though they still haven’t sold all of last year’s harvest. Prices in Lubbock are as low as 22 cents a pound for last year’s crop and 28 cents a pound for this year’s, said Kenny Thiel, a Lubbock farmer.

Government support programs, including a guaranteed minimum price of 51.92 cents a pound for cotton, encourage farmers to grow cotton over other crops such as corn and soybeans, analysts said.

A crop of 20.01 million bales would be the biggest since the government began tracking the cotton crop in 1866. The previous record was 19.7 million in 1994. A bale of cotton weighs about 480 pounds.

Gains in Texas and California in the last month probably more than offset production declines in the Mississippi Delta caused by too much rain and insect damage, analysts said.

“The crop in California looks very good,” said Joe Bruce, president of Bruce Cotton Co. in Bakersfield. “We couldn’t have asked for better weather.”

The estimate for world cotton demand, which was forecast at 92.55 million bales last month, will probably be cut because the Sept. 11 terrorist attacks on the U.S. may have pushed some economies into recession, analysts said.