Understanding the Factors That Determine Cotton Prices
There are many factors that determine cotton prices throughout the season, both directly and indirectly. With the help of a cotton harvester parts company, take a look at a couple of the factors that are sure to have an impact on prices this year.
Projections for production
Before each season, projections are made about what types of production the key players in the market expect to yield, with these numbers prone to fluctuate and adjust once the season begins and production gets underway. The expected weather during the growing season also plays a large role in these projections. For example, some areas in the Atlantic region of the United States are projected to see lower yields this year due to post-hurricane conditions, while other areas farther west are expected to have amenable growing seasons due to some early favorable weather.
As with any commodity that is offered in the worldwide marketplace, the demand will be a key determinant of market prices. If the global demand for cotton is up, there could be a call for increased exports from the U.S., as the quality of cotton that the U.S. crops are able to produce has been undisputedly the best available on the market for many years. World events can also have an effect on cotton’s global demand. One such world event that could lead to increased US exports is the reduction that is expected from two of the top three cotton producers in the world, China and India. With these countries expected to have fewer exports this season, there is a large gap in the market that U.S. farmers may be able to take advantage of. In fact, the American cotton industry is projected to support 86 percent of total exports this year, up from 72 percent at this time last year.
The cost and demand for other commodities could have a direct correlation as well. Crude oil is one such commodity whose price could directly impact cotton’s success. Gasoline is needed for the transportation of cotton from the farm to the gin, and then again when the cotton travels on to be exported, milled or stored. If the price of this oil is exceedingly high, it could manifest itself in the price of cotton due to high transportation costs. The importance of crude oil and its effects on prices could also manifest itself in a more indirect way. Some crude oil is converted into components that are used as oil-based raw material to create polyester. If the price of this oil goes down, polyester would then be cheaper to make, making polyester clothing more competitive in the marketplace, which could also have an effect on cotton prices.
Despite all of these complex factors, at the end of the day, all that farmers can control is their own land and production, and their readiness for the season. To make sure you are ready for each season, you will need suitable cotton harvester parts that are in good condition, and Certi-Pik, USA is ready to offer you the highest quality fabricated and manufactured parts for the top harvester brands. Contact us today to learn more about how we can help you!