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Producer Price for Cotton Qualities Vague

Carl G. Anderson, Carl Shafer, Matthew S. Haberer


Producers are concerned that the price paid to them for different cotton qualities does not sufficiently reflect the spinning value. Spot price quotes reported usually include some inter-merchant transactions and sales to mills beyond the producer level. Because of basis variations and the narrow quali-ties represented, the futures price is limited in accurately representing produc-er prices. Further, Commodity Credit Corporation (CCC) loan schedules are updated by averaging with the past season's USDA spot quotations. Thus, forward price contracts that adjust price based on loan value for quality may not fully reflect the market price. Pricing disparities can encourage produc-tion of lower cotton qualities. Textile use of cotton would likely increase with producer price incentives for qualities that improve mill performance

Reprinted from Proceedings of the 1996 Beltwide Cotton Conferences pp. 502 - 508
©National Cotton Council, Memphis TN

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Document last modified Sunday, Dec 6 1998