2009-02-18 / Farm & Ranch

Cotton Market Weekly

February 12, 2009
A Service Provided by Plains Cotton Cooperative Association

Widespread selling on shaky economic sentiment pushed cotton futures prices on the Intercontinental Exchange (ICE) to sixweek lows Thursday. Cotton watched the broader market for trading cues, though traders said the fundamental underpinning for weakness was heightened by USDA's supply/demand report.

In its February report, USDA's 2008/09 U.S. cotton estimates included sharply lower domestic mill use and exports compared with last month, raising ending stocks nearly 12 percent to 7.7 million bales. The department left its U. S. cotton production estimate unchanged while domestic mill use was reduced seven percent to 3.9 million bales based on recent activity. A lower projection for exports, especially to China, resulted in a 500,000-bale reduction in U.S. exports bringing the estimate to 11.5 million bales.

Globally, the 2008/09 world cotton supply and demand estimates showed marginally lower production and sharply lower consumption and trade relative to last month. Production was reduced in Pakistan, Argentina, and Mexico. Consumption was cut more than two percent from last month's estimate as the world economy continues to perform below previous expectations, resulting in a buildup of textile inventories and idling of spinning capacity. Consumption was reduced in China, Turkey, the United States, Pakistan, Russia, India, Indonesia, and other countries, but it was raised in Thailand. If realized, the forecast year-toyear decline of 8.2 percent would be the largest since 1937/3 8. With lower consumption, world stocks were raised almost four percent from last month to 61.7 million bales.

USDA lowered its estimate for world trade in 2008/09 nearly six percent from last month due to fewer projected imports by China and others. The reduction of 1 million bales in exports to China was indicated by lower consumption and the potential availability of surplus stocks from the government's reserve. Exports also were reduced for most of the world's other major suppliers, especially the Central Asian countries and India.

Meanwhile, traders spent most of the week anticipating the National Cotton Council's (NCC) planted acreage survey data due for release after the market closes on Feb. 13. Most expect U.S. plantings to fall in the range of 8.0 to 9.0 million acres as compared with a 25-year-low of 9.4 million planted last year. However, any excitement created by NCC's report might have been diminished by USDA's revisions to world cotton demand figures.

"While traders have believed the outlook for lower planted area this year could spark extremely tight world ending stocks for the coming season, these 'tightness' expectations have diminished dramatically in the past several months due to downward revisions in demand and higher stocks," a trader said.

In other news, USDA reported net export sales of U. S. cotton totaled 109,400 bales in the week ended Feb. 5. The figure was 18 percent higher than the previous week but 45 percent lower than the four-week average. Turkey, Indonesia, Thailand, and China were the featured buyers. Net sales of 3,000 bales for delivery in 2009/ 10 were for Mexico and South Korea.

As of Feb. 5, cumulative cotton sales stood at 81.8 percent of USDA's forecast for the 2008/09 marketing year versus a five year average of 71.9 percent, traders said. Sales of 78,000 bales now are needed each week to reach the department's estimate.

Export shipments of 162,000 bales for the week were down 17 percent from the previous week and six percent from the fourweek average. Primary destinations included China, Mexico, Indonesia, and Bangladesh.

On the spot cotton scene, sales in the week ended Feb. 12 were higher as producers in Texas, Oklahoma, and Kansas sold 3,757 bales online compared to 2,062 bales the previous week. Average prices received by producers ranged from 35.01 to 43.78 cents per pound versus 30.05 to 44.37 cents per pound one week earlier.

Return to top

Click here for digital edition
2009-02-18 digital edition