Which hat is the government wearing?

There is the general consensus that in the fall the government is worried about how much the farmer receives for his seed cotton while at the turn of the new year the textile mills get their wish for additional quota allocation. The system works like clockwork—usually. This year, however, the reserves has stepped in first to take cotton off the market, thereby buffeting the farmers price he received for seed cotton. Then, as the market shortage took effect the reserves began releasing stock from the 2003/05 and 2008/09 marketing years. Due diligence was conducted but not from what the mills actually needed or for that matter wanted. Rather, it came from what was determined best for the market. In this case, the reserves wanted supply and to get rid of old stock at a likely profit. Smart move on both accounts. However, mills, particularly vertical ones and further up the value chain, remained in the same condition—short of high grades and no quota. We continually have pointed this out so the recent revelation that high grades are still in short supply and that the reserves is now likely to issue additional import quota really should come as no surprise. Current estimates being considered by the government range from 100 to 500k.