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U.S. farmers see demand for cotton skyrocket

Tuesday, December 14, 2010

As global demand continues to climb, cotton farmers should see rising profits from the fiber.
As global demand continues to climb, cotton farmers should see rising profits from the fiber.

As farm life in the U.S. continues its trend toward increasing profits and rising farm income, a new report issued by the U.S. Department of Agriculture affirmed that cotton farmers should expect a surge in demand for their crops as global supply falls.

Yesterday in trading, cotton prices jumped by the most allowed by ICE Futures U.S. That rise was fueled by speculation that supplies will not meet the mounting demand from the world's biggest consumer of the fiber, China. U.S. inventories of the good fell to a 14-year low.

Farmers awaited for moves from China's Central Bank to rein in its rising inflation, but it decided to keep interest rates at their current levels and that decision will most likely keep demand high for the U.S. crop. Farmers should take note of China's monetary moves, Sid Love, the president of Joe Kropf & Sid Love Consulting Services, told Bloomberg. "There is a lot of bullishness in the market," which can translate into cotton farmers reaping higher profits.

This year alone, cotton prices have soared 86 percent as the seemingly insatiable demand from China continues to climb and U.S. stockpiles decline. Cotton stockpiles held in warehouses monitored by ICE have plunged by 72 percent this year. Moreover, damaged crops in Texas will put extra pressure on U.S. farmers to produce more cotton. Farmers may need to purchase John Deere tractors to keep up with the demand they are facing. 

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