Surging cotton prices luck or risk?

Farmers’ unions and commodity exchange officials have varying reactions to the surging cotton prices in the global markets. While the Adana Farmers’ Union says the price increases will affect an expansion of cultivation areas, the substitute chairman of the commodity exchange in the Aegean province of İzmir says the surging cotton prices will cause inflation and have negative impacts on demand in developing countries

Cotton for March delivery climbed 2.56 cents, or 1.5 percent, to settle at $1.6939 a pound on ICE Future U.S. at 2:58 p.m. in New York. Earlier, prices jumped by the 6-cent exchange limit to a record $1.7283 a pound. AA photo

Farmers’ unions and commodity exchange officials radically disagree on the effects of the surging cotton prices in the global markets.

The Antalya Cotton and Citrus Agriculture Sales Union, or Antbirlik, based in the Mediterranean province of Antalya, announced it has registered profit the first time in 10 years, Anatolia news agency reported Thursday.

Speaking to the news agency, the union’s General Manager Atila Diniz said the union’s profit reached 755,568 Turkish Liras in the 2009-2010 period.

According to the prices announced by the commodity exchange in the Mediterranean province of Adana, cotton was traded at 5.45 liras per kilogram on Thursday.

Evaluating the increase in the commodity’s price from 2.43 liras in the same term of last year, the Adana Farmers’ Union said no other commodity had doubled its price over the course of a year, Anatolia reported in a separate story. Cotton’s price increase is expected to continue according to the course of the global commodity markets.

“The cotton cultivation areas will expand at least by 40 percent due to the present prices but the farmers who are on the verge of making a cultivation decision need to be encouraged by a governmental announcement about support premiums,” Diniz said.

“The support premiums were announced as we entered 2010 but this year there has been much delay.”

In the meantime, cotton futures in New York jumped to a record as growers struggled to meet surging demand from China, the world’s biggest consumer, Bloomberg reported Thursday.

Prices have more than doubled in the past year as China’s imports climbed to the highest level since 2006 and adverse weather slashed global crops. Hennes & Mauritz AB, Europe’s second-largest clothing retailer, recently reported a steeper drop in fourth-quarter profit than analysts estimated, partly as rising cotton costs eroded margins.

Cotton for March delivery climbed 2.56 cents, or 1.5 percent, to settle at $1.6939 a pound on ICE Future U.S. at 2:58 p.m. in New York on Thursday. Earlier, prices jumped by the 6-cent exchange limit to a record $1.7283 a pound.

China’s imports totaled 2.84 million metric tons last year, according to customs data. That’s the most since 2006, when purchases were a record 3.47 million tons, Bloomberg data show.

A delegation of Chinese buyers signed agreements on Jan. 21 to buy commodities including soybeans and cotton from Cargill Inc., Louis Dreyfus Corp. and Allenberg Cotton Co. during the U.S.-China Trade and Economic Cooperation Forum. The U.S. is the biggest shipper of the fiber.

Barış Kocagöz, substitute chairman of the commodity exchange in the Aegean province of İzmir, said that the surging cotton prices would affect inflation and have negative impacts on demand in developing countries, Anatolia news agency reported in a separate story.

Kocagöz underlined that Turkey’s costs were increasing as the cotton prices increased due to the country’s position as the second biggest cotton importer in the world.

“The amount we pay for cotton imports is equivalent to 82 percent of our total agricultural exports,” he said. He called for cotton to be announced as a strategic commodity and the government authorities to come up with a cotton policy to prevent the consequences of surging prices.

(Source: http://www.hurriyetdailynews.com/n.php?n=0127120510772-2011-01-27)