Economic Crisis Affects Commodity Markets

Over the last three weeks or so we’ve seen the Chinese economy in a serious downward slide.  Mike Quinn, President and CEO of Cotton Growers Cooperative based in Garner, North Carolina outlines the impact to US cotton:

“Our concern with cotton is one several levels. One, is there going to be contagion on other levels, other types of financial uncertainty. We know that markets generally don’t like uncertainty and when one thing makes waves on one side of the globe it has effects all over. For cotton, its all about consumption for price stability and the possibility of price increases.”

The second issue could have to do with market traders themselves:

“When their economy slows, it affects all commodities, so the effect is that the speculators, who are on a net long cotton, if they decide it should be risk off commodities because of China, they it could have the effect of selling the cotton market for no other reason.”

We’ve been hearing since planting season that it was going to take a really sharp pencil to show a profit growing cotton this season, and with an outstanding growing season on the east coast this year, Quinn speculates as to the profitability of the crop this year:

“I think it will take yield. No question, especially with prices in a zone that we don’t like to see. It’s the beginnings of triggering a marketing loan gain, but not enough to really want to take it and try to arbitrage the futures. With the farm program we have, the market moves down and is being offset by the market loan gain. You have the potential with lower prices to increase the demand for cotton.”

However:

“We would want the market to move up instead of just hovering in the mid 60s. It will take record yields with that price to really put a profit on this crop.”

President and CEO of Cotton Growers Cooperative, Mike Quinn.

 


A native of the Texas Panhandle, Rhonda was born and raised on a cotton farm where she saw cotton farming evolve from ditch irrigation to center pivot irrigation and harvest trailers to modules. After graduating from Texas Tech University, she got her start in radio with KGNC News Talk 710 in Amarillo, Texas.

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