U.S. growers with unsold 2007/08 cotton stocks are now facing two costly developments. First is the deterioration of the 2007/08 crop basis by 400 to 500 points in the Delta/Southeast and 900 to 1,000 points in the West Texas region. Second, is the fact that U.S. growers with cotton in the loan will have to confront mounting storage costs. Growers holding cotton in the loan for the full ten-month maturity will face payment of approximately 800 points; and on top of this, the CCC loan cotton will have to pay warehouse charges. In the Delta region, the cost could be as great as 500 points, while it would be less in other areas.

For West Texas growers, the current basis of 1,400 points off plus storage, interest and warehouse charges, a July futures of 83.50 actually only nets approximately 62.50 if the farmer sells way before loan maturity. These conditions are impacting grower income and also serving to make cotton a less attractive crop.

Source: Globecotnews