Planting continues for the U.S. crop, and demand continues weak. Projected carryover stocks for the 2001 crop are the highest in several years. But the real problem lies on the demand side. Higher fuel prices could favor demand in the longer term, but for now the market seems content to accept the current demand situation as a given. However, if prices increase above the call strike price sold, you would have to meet margin calls.
Fences do have significant risk involved.
Aside from assuming some price risk, cotton producers may be looking at the loan rate plus some world price equity payments this year as a price objective. In a volatile trading week, prices rallied Thursday off of Wednesday's contract lows. Whether we have made a low in the July market probably depends on the weather over the next 6 weeks. If we do get a weather rally this spring, watch for opportunities to sell as prices approach technical resistance points in the November contract. Even though dry weather stories are beginning to give some strength to this market, if you will sell at harvest, consider selling some of your expected production at current price levels.