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Dark horse

Cotton futures have trended upwards since May, but still remain at a long-term low price level. The problem plaguing cotton prices is over-supply, as world inventories ballooned two years ago.

However, with the U.S. and, for that matter, the world expecting to plant less cotton in the year ahead, cotton could be the dark horse of the commodity complex for a bull market into 2008. Cotton acreage will be lost to corn, soybeans and wheat unless prices rally enough to encourage farmers to plant more cotton.

Technically, the long-term monthly chart indicates a bottom in 2001 at just under 30 cents and a high in 1996 at $1.17. Current front month October is trading near 63 cents. A move above 67 cents could lead to a rally to 84 cents, the 2003 high. A breakout above this level and a move to $1 is likely.

In addition to an acreage battle, cotton could rally if speculative money looks for a low price commodity market. Cotton appears that it could be a prominent choice among row crops for speculators to move into. In addition, if energy markets continue to trade at or near record high prices, cotton fabric could become a strong substitute for polyesters. Current world stocks-to-usage are at ten-year low levels. Do not be surprised in 2008 if cotton becomes the dark horse or darling of bull markets.

If you have any questions or comments, please contact Bryan Doherty at Top Farmer: 1-800-TOP-FARM.

Cotton futures have trended upwards since May, but still remain at a long-term low price level. The problem plaguing cotton prices is over-supply, as world inventories ballooned two years ago.

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