2009-03-25 / Farm & Ranch

Cotton Market Weekly

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

Cotton futures on the Intercontinental Exchange (ICE) appeared to be unable to make a firm commitment this week and closed basically unchanged. The market has stayed in a relatively tight range this month despite active movement in other commodity markets and a shift in tone on general economic conditions.

While traders say there has been a shift in the economy's tone from one of serious doom and gloom to one of more optimism that the deflationary cycle can be stopped, the cotton market has remained in consolidation. For the most part, cotton like most commodities, recently has been strongly influenced by outside markets and particularly the U. S. stock market. Any influence from traditional fundamental reports has been fleeting at best since December.

"Uncertainty about the macroeconomic situation kept speculators from dealing heavily in cotton while even cash trade was quiet, leaving little futures business," an analyst said.

Cotton is expected to remain in a holding pattern until the March 31 release of USDA's prospective plantings projection which will give traders their first glance at the 2009-10 U. S. supply outlook. Analysts expect the department to estimate 2009-10 U. S. cotton acreage at 8.0 to 8.5 million acres, down from the 9.47 million planted the previous season.

"We are at the time of year when the price relationship between cotton and the corn and soybean complex certainly plays a roll in the market's perception of producers' planting intentions," an observer said. "However, it seems for the most part, prices of all row crops have generally followed the same market path so the decisions may wind up coming from other factors such as input costs, water needs, and the availability of cash contracts," he concluded.

Meanwhile, in the face of statewide drought, farmers on the High Plains may have an advantage over some other regions of Texas. A pre-plant soil moisture survey found the amount of water trapped below the surface is up from 2008, encouraging news for farmers expecting to spend more money on irrigation just to get their crops planted this year.

"The soil moisture was stored up last fall when above average rainfall hit the region," an area soil scientist said. "The water stayed put as most crops had matured by the fall and no longer drew as much water from the ground." High Plains farmers were not quick to count on the advantage, however, with rainfall totals almost non-existent and planting season just around the corner. They still hope for a soaking rain in the next few weeks.

In other news, USDA's weekly export sales report showed evidence of continued demand for U. S. cotton. At 204,200 bales, net export sales of 2008-09 U. S. cotton for the week ended March 12 were 31 percent lower than the previous week and 48 percent less than the four-week average. Major buyers were China, Turkey, Vietnam, and Bangladesh. Net sales of 5,400 bales for delivery in 2009-10 were for Indonesia and Thailand.

Export shipments of 165,800 bales were down 30 percent from the previous week and 18 percent from the four-week average. Primary destinations were China, Turkey, Mexico, and Indonesia.

"The department's export shipment figure continues to lag, as credit issues, while improved, still are far from optimal," a trader explained.

Higher sales were seen in the spot cotton market for the week ended March 19 as producers in Texas, Oklahoma, and Kansas sold 18,529 bales online compared to 14,850 bales the previous week. Average prices received by producers ranged from 30.91 to 36.45 cents per pound versus 31.59 to 35.35 cents per pound one week earlier.

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