Factors Affecting the U.S. Farm Price of Upland Cotton

Abstract: An annual model that explains the U.S. upland cotton farm price includes various market components, as well as government loan and storage programs in selected years. With the declining role of government agricultural programs, however, market supply and demand conditions, both in the United States and around the world, are now more influential in deter-mining U.S. cotton prices. An overall measure of supply and demand is provided by the stocks-to-use ratio, which is a useful tool in explaining inter-year price movements. The regression model presented explains 92 percent of the variation in upland cotton prices dur-ing the 1978 to 1996 marketing years. In addition, the effect of shifting one variable at a time and its impact on upland farm prices is highlighted for each explanatory variable