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U.S. Cotton Prices and the World Cotton Market; Forecasting and Structural Change

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  • Isengildina-Massa, Olga
  • MacDonald, Stephen

Abstract

This report analyzes recent structural changes in the world cotton industry and develops a statistical model that reflects current drivers of U.S. cotton prices. Legislative changes in 2008 authorized USDA to resume publishing cotton price forecasts for the first time in nearly 80 years. Systematic problems have become apparent in the forecasting models used by USDA and elsewhere, highlighting the need for an updated review of price relationships. A structural break in the U.S. cotton industry occurred in 1999, and world cotton supply has become an important determinant of U.S. cotton prices, along with China’s trade and production policy. The model developed here forecasts changes in the U.S. upland cotton farm price based on changes in U.S. cotton supply, the U.S. stocks-to-use ratio (S/U), China’s net imports as a share of world consumption, the foreign supply of cotton, and selected farm policy parameters.

Suggested Citation

  • Isengildina-Massa, Olga & MacDonald, Stephen, 2009. "U.S. Cotton Prices and the World Cotton Market; Forecasting and Structural Change," Economic Research Report 55950, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uersrr:55950
    DOI: 10.22004/ag.econ.55950
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    References listed on IDEAS

    as
    1. Hansen, Bruce E, 1997. "Approximate Asymptotic P Values for Structural-Change Tests," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(1), pages 60-67, January.
    2. Barry Goodwin & Randy Schnepf & Erik Dohlman, 2005. "Modelling soybean prices in a changing policy environment," Applied Economics, Taylor & Francis Journals, vol. 37(3), pages 253-263.
    3. Marie Diron, 2008. "Short-term forecasts of euro area real GDP growth: an assessment of real-time performance based on vintage data," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 27(5), pages 371-390.
    4. Diron, Marie, 2006. "Short-term forecasts of euro area real GDP growth: an assessment of real-time performance based on vintage data," Working Paper Series 622, European Central Bank.
    5. MacDonald, Stephen, 2006. "Cotton Price Forecasting and Structural Change," MPRA Paper 70910, University Library of Munich, Germany.
    6. Olmstead, Alan L. & Rhode, Paul W., 2003. "Hog-Round Marketing, Seed Quality, and Government Policy: Institutional Change in U.S. Cotton Production, 1920–1960," The Journal of Economic History, Cambridge University Press, vol. 63(2), pages 447-488, June.
    7. Adusei Jumah & Robert M. Kunst, 2008. "Seasonal prediction of European cereal prices: good forecasts using bad models?," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 27(5), pages 391-406.
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    Cited by:

    1. Nazif Durmaz, 2014. "Inventories of Asian Textile Producers, US Cotton Exports, and the Exchange Rate," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(4), pages 397-413, September.
    2. Yuanlong Ge & Holly H. Wang & Sung K. Ahn, 2010. "Cotton market integration and the impact of China's new exchange rate regime," Agricultural Economics, International Association of Agricultural Economists, vol. 41(5), pages 443-451, September.
    3. repec:ags:jrapmc:122314 is not listed on IDEAS
    4. MacDonald, Stephen & Meyer, Leslie, 2009. "Trends in U.S. Cotton Basis Since 2001," MPRA Paper 70909, University Library of Munich, Germany.
    5. Isengildina-Massa, Olga & MacDonald, Stephen & Xie, Ran, 2012. "A Comprehensive Evaluation of USDA Cotton Forecasts," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 37(1), pages 1-16, April.

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