The cotton bubble we mentioned last week burst as expected, but one should not feel all is lost. While I am one to believe that the 68.80 cent high made in the December 2007 contract this week will actually be contract high, Mother Nature could allow the market to challenge that level again.
However, there will be massive resistance to any attempt at climbing above that level for the remainder of the growing season. The lower to mid 60's should be the dominant trading range for most of the remainder of the production season.
Too, the July 1-July 15 pricing rule I have fed on over the past thirty years is now just a part of history. More specifically, it is not a pricing rule that will likely be relevant again.
The advent of a global cotton industry, coupled with eighty percent of textile consumption now consolidated in China and the Sub-continent, the rise of India as the second largest cotton producing country in the world, and the near total loss of the domestic textile industry in the U.S., all cemented the nails the coffin of that once accurate pricing tool.
Another way to grasp the momentous change in the global cotton industry is to realize that Mississippi, rightly or wrongly considered King of the cotton industry, planted only 666,000 acres in 2007 (Boll Weevil Eradication Sign-Up). That is lowest recorded plantings in the history of the state according to USDA records that date back to the War Between the States and 1866.
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