A Service Provided by Plains Cotton Cooperative Association June 10, 2010 Cotton prices on the Intercontinental Exchange moved higher for the fourth consecutive session Thursday with bullish fundamentals and technical influences engulfing the market. On the fundamental side, the global balance sheet continued to tighten as highlighted in USDA’s June supply/demand report while weekly export sales and shipments continue to be extremely impressive, traders explained.

“As if a stellar export sales report was not enough, USDA’s June supply/demand report showed the fundamentals are only getting tighter with U.S. and world ending stocks declining,” a trader said. “There was so much news to digest that analysts didn’t know where to begin.”

USDA’s newest projections for 2010-11 cotton showed slightly lower beginning and ending stocks compared with last month. Beginning stocks in the U.S. were reduced 200,000 bales due to an increase in the export forecast for 2009-10 while projections for production, domestic mill use, and exports were un- changed. Accordingly, U.S. ending stocks were revised down to 2.8 million bales, equal to 17 percent of total use and the smallest stocks level since 1995-96.

World projections for 2010- 11 also included lower beginning and ending stocks compared to USDA’s May figures. Beginning stocks were reduced approximately 550,000 bales as a higher stocks forecast for China was more than offset by reductions in Turkey, India, the United States, Pakistan, Brazil, and others.

Cotton production estimates were raised in Australia, Sudan, and Mexico while consumption was increased in Pakistan and Turkey. The resulting global stocks level of 49.6 million bales is 41.5 percent of total use which, if realized, would be the smallest stocks-to-use ratio in 15 years.

Meanwhile, USDA’s weekly report created even more market excitement as U.S. export sales in the week ended June 3 registered a marketing-year high with China buying almost 80 percent of the 624,200 bales of cotton sold. Other featured buyers were Mexico, Turkey, and Taiwan.

Export shipments of 225,700 bales were down 31 percent from the previous week and 21 percent from the four-week average. Primary destinations were China, Turkey, and Mexico.

“A steep price decline, combined with anecdotal evidence that textile mills remained starved for cotton, led to the largest export report of the season,” an industry observer said.

Sales on the spot cotton market also increased as growers in Texas, Oklahoma, and Kansas sold 279 bales online in the week ended June 10 compared to the previous week when 110 bales were traded.

In other news, cotton traders are keeping a close watch on the development of the 2010 U.S. cotton crop that now is almost 100 percent planted. Because USDA estimates U.S. farmers will produce 36 percent more cotton than in 2009 and world demand is expected to quickly gobble up those supplies, any damage to the crop could send prices higher.