We are in the Bottom side of the donut hole. WHICH IS ACTUALLY A GOOD THING
11-12-2025
Don't Panic, don't give up, and think twice before you sell your cotton right now. This is the best time for the market to drop. Let me explain: Many of you are old enough to remember the last time we had really low cotton prices which made cotton one of the most profitable commodities we could plant.
- The reason is when prices are high then of course, we can make money with good yield.
- Then there is a middle area where we might pay the bills but the price is not low enought to trigger any saftey net payments and its not high enough to invest in capital. This middle area is what I call the donut hole and 2024 was the year that we were in this donut hole.
- Once cotton drops lower from this middle point (like right now), the safty nets get triggered. ??There are three safty net triggers:
- The first one is the PLC payment. Now that they have raised the reference price, we actually get a payment on our cotton base when prices drop below 80 cent so at least on your cotton base, cotton is profitable.
- The second safty net payment is usually crop insurance which includes STAX or SCO payments now for the first time. This trigger occurs when the market drops below the mid to upper 60's for 2025 depending on your yield.
- The Third payment is beginning to trigger now and it is the POP payment. When the market drops below 64 cents for 2025. To see current pop payment calculations, click on this link. Ultimately there are some stratagies to implement called "playing the POP".
- After POPPING your cotton, some actually can add a fourth element of making money which is using futures moves.
The main thing to keep in mind now is don't worry and don't loose beneficial interest in the bales. This might be tempting as the premiums are good and there is some slight demand from local mills that need to buy cotton to keep things rolling. Plus they want to take advantage of these low prices buy buying cotton.
The bottom line is that the lower the market goes at this point, the better cotton is. don't be discouraged because the good thing can happen. (The most recent time this happened was the 2020 crop, and we hit a low in the mid-50's. Things worked out well.)
DISCLAIMER: The data contained herein is for informational, conversational, and philosophical thinking and is for general purposes only. Ideas expressed apply to the Uppter Southeast growing region. Although the information was obtained from various sources, which we believe to be reliable, we do not in any way guarantee its accuracy or completeness. Comments are influenced by past experiences, personal bias and hypothetical speculation by the writer and are not always accurate predictors of future events. Specific references to Agricultural Products and Rates are used for examples and do not reflect specific endorsement or recommendations for use. Always read and follow all label directions and precautions for use. We disclaim any responsibility for any errors or omissions contained herein. FULL DISCLOSURE: There is no compensation received by Johnny to promote any product referenced with in this blog. Johnny is a paid employee of Commonwealth Gin
