Cotton: Get Positive, Hang On – Joe Nicosia Tells Cotton Growers – AgFax
There was a surprising amount of positive attitude floating around the 2016 Midsouth Farm & Gin Show in Memphis, Tennessee this week. I always get a warm and fuzzy feeling when I see the hugs and meetups with old friends that happen at this 64-year-old event. Attendance looks to be record breaking. Exhibit spaces were sold out with more than 400 booths/displays in 6 different locations of the Memphis Cook County Convention Center. Parking spots were hard to come by even for those arriving early.
Anyone who has followed the cotton market in the last few months is well aware that cotton growers are taking a hit from every direction. The bears are growling loudly at the Chicago Board of Trade, so loud that many producers are wondering how to grow an acre of cotton and still make a profit with prices looming in the 55-65 cent range. And let’s not forget the companies, both small and large, banking on the sale of seed, chemical and the other inputs necessary to make the 2016 crop.
The Ag Updates meeting room at the Cook County Convention Center in Memphis was packed tight for the Ag Update event on Friday (2/27) morning. Although the meeting featured speakers talking about other commodities, the headliner for the cotton crowd was Joe Nicosia, Louis Dreyfus Commodities, giving an overview of the market. And, he didn’t disappoint.
Nicosia underlined the need for the cotton industry to look to the future rather than the past. He emphasized that though times are tough, 2016 is a new beginning for the world cotton market.
”After 5 consecutive years of global cotton surpluses we will use more cotton than we grow in 2015/16. The tide is turning, said Nicosia. He pointed out that the drop in prices has propelled planted cotton acres to drop 9% worldwide.
Nicosia presented data showing that although cotton may be the least profitable crop to grow this year it’s still on the planning board for many growers. And, he gave them hope in his discussion about expanding markets that are making up for some of the losses to China, such as large-scale imports needed by Pakistan due to its recent crop disaster, which USDA estimates at a 3 million bale loss.
Lack of demand for cotton by U.S. products has been a hot topic of late. Nicosia pointed out that cotton is a great fit with the U.S. consumer’s mindset. He emphasized that potential customers are looking to buy products that have a reputation for sustainability, environmental friendliness and socially responsible reputations, plus a traceable production history. And, most importantly, these consumers are willing to pay for these attributes.
Finally, Nicosia offered a practical list of points for 2016 growers:
- Conserve your capital.
- Consider all planting options.
- 58 cents for December cotton is cheap.
- If you want cotton in your marketing plan think about buying December calls.
- If we have a small cotton crop it could be under-valued today.
- Hunker down.
After a strong start for the week, the ICE Dec contract encountered weakness following the dissemination of strong US export sales data, ultimately giving up 150 points on the week,