August 14, 2008
A Service Provided by Plains Cotton Cooperative Association

Losses in outside markets, along with a strong U.S. dollar, negatively influenced cotton futures on the New York Board of Trade at the end of the week despite a bullish supply/demand report from USDA that buoyed the market on Tuesday.

 

In its August supply/demand report, USDA reduced its U.S. production estimate by 200,000 bales to 13.8 million for the 2008-09 marketing year based on information gathered from the department's first crop production survey of the season. Additionally, the U.S. export estimate was raised by three percent, or 500,000 bales from its previous figure, to 15 million bales, and domestic use remained unchanged while ending stocks were reduced by 700,000 bales. The indicated stocks-to-use ratio was 24 percent, the lowest in five years.

The department lowered its U.S. cotton production figure by 28 percent from last year's 19.2 million bales, and yield was estimated at 842 pounds per harvested acre, down 37 pounds from the record average yields in 2007. USDA reported that Southeast producers were expecting marginally higher yields over last year while Texas growers were expected to have lower yields when compared with record production in 2007.

In fact, total Texas acreage was estimated at 5.22 million acres, down from 8.29 million one year ago. Many observers believe the Texas number will eventually need to be lowered as problems persist on the Texas High and Rolling Plains where most of the state's crop is grown.

"On the Texas High Plains, the 'drive-by' opinion of the cotton which has survived a difficult first half of the growing season is that the 2008 crop will fall far short of the record production levels seen in the past three or four years," a local source said. "Many around here feel High Plains growers will not reach the 3.7-million-bale estimate for the area and will need a perfect fall to come near the threemillion bale mark."

Meanwhile, USDA's world cotton estimates for 2008-09 show lower supplies, use, and ending stocks relative to the department's July estimate. World cotton production was lowered 2.4 percent to 112.2 million bales due to reductions for India, Australia, and Turkey, in addition to the United States.

The decline in world production was partially offset by a decrease in world consumption which is based on both the slowing world economy and more limited world cotton supplies. Consumption estimates were lowered for China, India, Turkey, and Pakistan. Forecast world stocks were reduced to 51 million bales, a four-percent decline from last month and 9.4 million below the beginning level.

The department made no changes to the U.S. balance sheet for 2007-08. While final U.S. export sales data indicate lower exports, further adjustments are pending release of final estimates of exports and stocks by the U.S. Census Bureau.

In other news, the government's weekly export sales report added little support to the market as a net 389,900 bales were sold in the week ended August 7. The sales to China, Turkey, Indonesia, and Thailand were partially offset by cancellations by Singapore.

Export shipments of 222,500 bales were down 37 percent from the previous week and 21 percent from the four-week average. Primary destinations were China, Turkey, Mexico, and Colombia.

Meanwhile, spot cotton sales were slower in the week ended August 14 as online trading by producers in Texas, Oklahoma, and Kansas totaled 274 bales compared to 1,194 bales the previous week. Average prices ranged from 59.00 to 61.27 cents per pound.