Milling & Baking News - November 16, 2010 - 7

Editorial



Cotton price moves still affecting flour costs

oaring prices for cotton on world markets this deficit has been encouraging mills to avoid
this year, and especially in recent weeks, speculative purchases and to do whatever is posprobably attracted scant attention from sible to stabilize the market. Also threatened are
grain-based foods. That neglect would be a mis- government steps "to boost management of the intake for several reasons. None is more important dustry," a promise of stern steps in China.
than the way that cotton does compete for acreage
For grain-based foods, cotton advancing the daiwith wheat and other grains. That cotton has risen ly limit in New York signals once again the power
to the highest levels in recorded history, at least of global developments to prompt dramatic moves
in futures trading for the past century and half, in seemingly domestic markets. Cotton at $1.4711
means that it has gained a competitive advantage, a pound, the highest in 140 years, in New York,
regardless of the strength also displayed by wheat. and at an all-time high of 33,000 yuan per tonne
Cotton prices have climbed more than 70 per cent on the Zhengzhou Commodity Exchange, do not
this year, which is nearly five
directly have a role in wheat.
Supply-demand factors
times the sizable percentage
Yet, this is the sort of developinfluencing skyrocketing
gain posted in wheat. The rement that can be a powerful
cotton prices are not all that
sult of these soaring prices is
influence on prices for basic
different from forces at work food ingredients as well as in
reflected in this year 's cotton
in wheat.
crop, estimated at nearly 19
making textiles.
million bales, contrasted with 12 million last year.
Not having to worry about the cost of cotton
That outturn originates with the 19 per cent in- and cotton textiles also reminds of how shipping
crease in plantings to 11 million acres.
wheat flour has changed in a short period of hisSupply-demand factors influencing skyrocket- tory. It was only 50 years ago that bulk transportaing cotton prices are not all that different from tion of flour became a reality with the introduction
forces at work in wheat. Both are crops with pro- of the first rail cars equipped to handle flour in
duction influenced by weather variations. This bulk. Prior to that, flour was shipped in multiprovides another reason for awareness of what wall paper bags. For the period from World War I
is driving cotton to historic highs. Even someone to the end of World War II, cotton bags served as
untutored in the workings of the global textile the mode of transporting flour from mills to retail
business should not be surprised that a sudden and commercial users. Thus, reporting on cotton
expansion in cotton demand in China combined markets as determining the cost of bags to carry
with concern about the status of that country's flour and of burlap (jute) bags for millfeed was an
crop size to spur price gains. Cotton mills in China important service of this magazine until bulk behave been described as in "a near-constant panic" came dominant. Cotton upturns similar to those of
for fear of shortages of this raw material.
recent weeks would have caused upsets matching
That China is the world's largest user of cotton anything attributed to what happened recently to
textiles, like it similarly ranks as the global leader wheat prices.
in wheat consumption, is expected. What is imporMany flour milling efficiencies reflect the fundatant, though, is the way that demand has grown mental shift in transforming the industry to bulk
exponentially as the country's standard of living shipping from paper and cotton bags. Yet, as rerises. Without allowing for poor weather and its cent events have shown all too well, it is still unnegative effect, China's cotton crop already was wise to neglect cotton developments which may
believed to be nearly 19 million bales smaller than seriously impact prices and costs of wheat and
likely domestic use. China's only answer so far to wheat flour. MBN
MORTON SOSLAND, EDITOR-IN-CHIEF
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Milling & Baking News - November 16, 2010

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