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Continuing drought conditions may result in South Texas cotton fields being abandoned

Cotton futures on the Intercontinental Exchange (ICE) tumbled to a two-month low Monday in reaction to weekend rains in Texas growing areas with further pressure coming from the general slide in commodity prices across the board. The remainder of the week, the cotton market closed higher as strength in the stock market gave traders more confidence that the global economy is on a recovery path.

Cotton prices also responded this week to the slow start of the Indian monsoon season. Crop conditions in India, the world's second largest cotton producer behind China, definitely will affect market conditions in the United States this season. India's competition for cotton export sales in the world market was a significant factor last year, and a short crop in the country this year could open the door for increased U.S. exports.

According to Indian sources, if annual monsoon rains do not advance over key growing areas in the next 10 to 15 days, the country's cotton acreage and yields are likely to decrease significantly. Monsoonal rains already are expected at just 93 percent of normal this season.

Traders now await next week's critical USDA Planted Acreage report for direction and also will continue to monitor the weather in Texas. Analysts are concerned over possible abandoned acres in Texas.

Although cotton planting in the U.S. is almost complete, all eyes still remain on the weather conditions in Texas. Scattered thunderstorms moved across the Texas Rio Grande Valley this week where cotton bolls are developing rapidly. Hot weather following the showers will help spur maturation.

Elsewhere in South Texas, hot and dry weather prevails. Drought conditions persist and are taking a toll on the crop. Some farmers in the Coastal Bend area report a 12-inch rainfall deficit from the norm, and an observer there says the remaining dryland acres are "clinging to life by a thread." As the drought continues, most in the industry now expect significant abandonment rates in virtually all of the South Texas cotton growing areas.

A slight improvement in soil moisture levels was reported in West Texas this week with most of the High and Rolling Plans categorized as abnormally dry to normal on USDA's drought monitor map. However, above average temperatures in the area for this time of year will boost cumulative heat units but will increase soil evaporation rates. The irrigated crop is developing normally on the High Plains and the number of squares is increasing. Slowsoaking rains would be welcome to help reduce the need for water.

In other news, the National Cotton Council reported that U.S. textile mills used cotton at a seasonally adjusted annualized rate of 3.34 million bales in May, down from 4.41 million bales in the comparable year-ago period but up from 3.06 million bales in April.

Meanwhile, USDA reported net export sales of U. S. cotton for the week ended June 18 totaled 157,500 bales, up four percent from the previous week and 22 percent from the four-week average. Turkey, China, Thailand, and Vietnam were the week's top buyers. As of June 18, cumulative U.S. cotton sales stood at 109.4 percent of the USDA's forecast for the 2008-09 marketing year versus a five-year average of 108.7 percent.

Export shipments came in at 276,800 bales. The figure was up six percent from the previous week but down 23 percent from the four-week average. Major destinations were Pakistan, Turkey, Mexico, and China.

Closer to home, spot cotton sales were higher as producers in Texas, Oklahoma, and Kansas sold just 48 bales online in the week ended June 18 compared to 22 bales the previous week. The average price received by producers was 45.00 cents per pound.