You've all seen it. The last place team pulls ahead of the first place team and the baseball crowd at the city league field is wild. By the 8th inning, nobody doubts that these kids are going to do what last night seemed impossible. The shock on the faces of those on the first place team is easy to read.

But then the kids on the last place team suddenly lose it. They drop balls. They swing bats at wild pitches. Ultimately, they lose.

It's almost as though they suddenly realized where they were and didn't know what to do. As a parent, you want to put your hands on each side of their grimy cheeks, lock eyes and say: "Fundamentals. Play like this is practice."

Today, that's what cotton producers who are working the futures market need to remember: fundamentals. Sell cotton according to your plan, even though prices are in the cotton stratosphere.

University of Georgia Ag Economist DOn Shurley figures a lot of people are nervous right now.

"I don’t think anybody foresaw prices going to these levels," Shurley says. "Producers sold (fixed) a lot of cotton when prices were back in the 70’s. Over the past 6 weeks, more has been sold (fixed) or producers have used Options. A Call Option, at the time, didn’t seem like a reasonable risk to take because prices were already in the 80’s. So, some producers instead purchased Puts hoping to profit from a “correction” down while still leaving the upside open. As it turns out, a Put in the 80’s will be worthless because prices have increased, but now the producer can fix price at 90 or higher. Not a bad tradeoff."

Fundamentals.

The prices also right now are backed by fundamentals: supply and demand.

"One thing is now pretty clear — the supply side is “short enough” to generate higher prices," Shurley says. "Second, so far demand does not appear to be backing off at these prices."

Shurley says these numbers from this month's USDA supply/demand report also lend further credence to the market's fear of short supply:

U.S. exports of the 2010 crop raised ½ million bales to 15.5 mb
This drops the U.S. stocks-use ratio to only 14%
The 2010 China crop was lowered ½ mb, imports raised ¼ mb, and stocks lowered ½ mb
Pakistan crop was dropped another 200K bales
India exports were lowered 1.5 mb
Reports from Texas are for a stellar crop with low abandonment this year. The Southeast, however, is not faring as well. High heat and humidity took their toll early in the year and returned this month just as harvest nears. The supply side still is short - and could get shorter.

Cotton producers are playing for the championship in the futures market. We haven't been here in a long time. Stick to fundamentals. That's how we win.