Maybe our most lasting influence...

Centuries from now what marks will America have left on the globe? One of the more surprising suggestions is pants.  More specifically, jeans.

But why of all things denim - blue jeans? Denim is clearly a global presence, it not only exists in every country in the world, but in many of these it has become the single most common form of everyday attire. In preparing this paper we counted the proportion of persons wearing denim blue jeans out of the first hundred to pass by, on random streets in sites ranging from Istanbul, London, Rio, Manila, Seoul and San Francisco. This ranged from 34% to 68%. This suggests that soon, at any given moment, more than half the world will be wearing this single textile. Although there are many other global forms ranging from foods such as Coca-Cola, through to car brands, we will argue that denim is special, being as much a refusal, as an acceptance, of capitalist pressures such as fashion. Also, a major part of the explanation of its growth is that it connects intimacy and personalisation to ubiquity in a manner that is perhaps unique, even within the genre of clothing....The ubiquity of blue denim as a global clothing is precisely such a blindingly obvious presence in the world. No-one today is going to be surprised by the fact shamans or hunters wear blue jeans. Anthropologists have bored themselves silly with such anecdotes for the last thirty years. Furthermore, denim seems to rule not just in breadth but in depth. In heartlands such as the United States the average American woman owns 8.3 pairs of jeans (Cotton Incorporated, 2005) and over half of adults in the UK ‘usually’ wearing jeans (Mintel, 2005). So this paper will not waste time demonstrating the ubiquity of denim. These figures are all that we need to make clear our starting point. [More very serious talk about jeans]

The US has spun off many global norms without planning or thinking. This one and the outlook suggested in the article certainly bodes well for cotton farmers.

A new kind of bullying...

I was struck by the characterization of the cotton market in this recent article in the Delta Press:

Investors with little idea of cotton fundamentals continued to bully the cotton market into unheard of volatility and the biggest price swings in recent memory. The question for panelists at the Ag Market Network’s March 13 teleconference, is when supply and demand will calm the tempest.

Right now, it’s not happening, according to Carl Anderson, professor Extension specialist emeritus, Texas A&M University. “If it was, then why are cash prices well below futures prices. I still believe in market fundamentals. I do not think it’s possible to change the economics of supply and demand over the long run.

“However, over the short-run, a lot of things can happen and we hope they’re not severe enough to damage the entire marketing section of the U.S. cotton industry.”

Anderson noted fundamentals point to lower prices, especially for old crop cotton. Lagging export shipments led to USDA reducing U.S. raw cotton exports by a significant 1.2 million bales in its March 11 World Agricultural and Supply Estimates. That reduced expected exports from 15.7 million bales to 14.5 million bales, “and I wouldn’t be surprised to see that decrease another 500,000 bales.”

Declining exports would push carryover to 9.4 million bales, or about six months of cotton offtake for the United States.

Fundamentally, “this means there is no shortage whatsoever of U.S. cotton,” Anderson said. “The world surplus is not much better, with USDA raising world carryover almost 2 million bales from February to March. Textile demand is weak and getting weaker. World stocks are also close to six months use.”

Anderson says the United States still appears ready to produce less cotton than last year, even with the run up in prices. “I doubt that 90-cent futures last week (March 3-7) bought many acres because not many people could lock in that 90 cents with a reasonably-priced option or contracts just dried up.”

Texas A&M Extension specialist John Robinson says usually one would expect the market to calm down after the spike in prices like the one that occurred in early March. But the market continued to have volatile aftershocks for several days. [More]

To be sure, cotton may be undergoing a simple chain reaction from acreage battle which began with corn and has now rippled into any crop that needs acres. The last few days have been tough for "fundamentalists" but not without happy opportunities for producers. If we decided to close markets to just investors who know what the fundamentals are we would definitely not like the outcome. And many of us may not be able to pass the test.

Besides how do we really know those "bullies" don't know something about future production that others don't?

It's an odd bully that forces you to take his lunch money.

This explains the single term, maybe...

Former President Jimmy Carter, whose accomplishments after his presidency dwarf the actual tenure in office (much like Herbert Hoover, whom I also admire), demonstrates why his grasp of economics didn't help him in office.

In an editorial in the WaPo this week, he concludes with this astonishing bit of illogic.

I am still a cotton farmer, and I have been in the fields in Mali, where all the work is done by families with small land holdings. Cotton production costs 73 cents per pound in the United States and only 21 cents per pound in West Africa, so American farmers do need protection in the international marketplace. But Congress has a moral obligation to protect American agriculture with legislation that will serve our national interests, that will feed hungry people and that does not suppress the ability of the poor to work their way out of poverty. [My emphasis]

Mr. President, the fact that your production costs are way above your competitors does not automatically create an entitlement. Otherwise there would be no reason to control costs. What is does mean is you should not be in the cotton business.

I know, I know- "This will mean the end of all cotton farming in the US!!!". I think not. We grow about 16% of the world's cotton and use a quarter of it here, exporting the rest. In fact, the US ships 40% of the world's exports. If we stopped subsidizing cotton today, where would cotton futures open tomorrow? I'm guessing significantly lower than the current US supported price, but high enough to get the acres needed to supply the world.

Oddly, this seems to be the case for other commodities.