COTTON prices continue to defy the record books in a volatile market that has seen the price return to about $1000/bale earlier this week after slipping back dramatically last week.
Namoi Cotton Cooperative trading manager Clinton Uebergang, Toowoomba, said price volatility had been a hallmark of the market with prices "changing by the minute" and fluctuating by as much as $100 a day.
"We have seen futures prices pull back last week after the March 2011 contract entered the first notice period," he said.
"There has been a squeeze on mills on the March contract, but the market pulled back sharply once that squeeze had passed.
"Late last week and at the beginning of this week we saw prices rally strongly again as mills looked to lock in their pricing on the May contract."
Mr Uebergang said price volatility would continue in the short term, but the outlook was still positive for the 2012 crop with forward prices for cotton to be planted in September/November around $660 a bale earlier this week.
He said growers forward sold very aggressively last year when pricing for the current crop was about $500 to $550/bale, only to see the market continue to rally to present high levels.
"They are playing it a little more cautiously this year and not selling it as aggressively," he said.
"Historically anything over $500 is a very good price. That’s why we saw so much sold at those levels."
Australian Cotton Shippers Association president, Phil Sloan, said forward prices for 2012 cotton of around $660 a bale represented a substantial rise on forward prices at the same time last year for the current crop of about $450 to $550.
Queensland Cotton general manager cotton Bob Dall’Alba said India had cut its crop estimate by five percent from 32.9 million bales to 31.2 million bales and China’s production over the past year was six percent lower than the forecast 6.36 million metric tonnes to now be 5.97 million metric tonnes.
Plus he said when the market was down late last week there was a belief that there were very strong sales out of the US and that they would show up this week.
"So you have a combination of India and China cutting their crop estimates and expected strong US sales numbers which have kicked the market up again," he said.
"The belief is that this will continue. The only negative is that some mills are trying to see if they can replace cotton with polyester, plus a higher oil price in the longer term could impact on what consumers do with their disposable income."