July 2, 2009
Cotton futures on the Intercontinental Exchange (ICE) shot to the 300-point limit on the first day of July, spurred higher by technical buying, active options, and strength in outside markets. The excitement cooled somewhat on Thursday but the market still closed on the upside. The big news of the week was the release of USDA’s June 30 acreage report which showed U.S. cotton acreage toward the top end of most expectations. USDA’s National Agricultural Statistics Service (NASS), pegged 2009-10 cotton acreage at 9.0 million acres, a four percent decline from the previous year and the lowest number of acres planted to cotton since 1983. Interestingly, the figure was three percent higher than the 8.8 million acres estimated in the March planting intentions report.
Cotton plantings in Mississippi and Louisiana are expected by NASS to be the lowest on record, and California’s upland cotton acreage is expected to drop 46 percent from 2008-09 to just 65,000 acres. The bulk of the U.S. cotton crop again will be planted in Texas, where producers are projected to plant 4.9 million acres, which is 54 percent of the total cotton acreage in the United States. Last season, growers from the state farmed 53 percent of the nation’s cotton acreage.
USDA said although the 2009 acreage figure is larger than the March planting intentions estimate, it still is the smallest amount of acreage dedicated to cotton since 1983. However, some in the industry feel that upon close examination, the data revealed increased acres were in areas of lower yielding ground, while reduction of acreage was in the higher yielding ground that typically does not get abandoned.
“It’s easy to see where all the acreage that once went to cotton has gone,” an analyst said. “While cotton acreage is vanishing, soybean farmers will plant the largest acreage on record and corn farmers have planted the second largest acreage since 1946, other than for 2007.” The weekly crop conditions report showed only 28 percent of the Texas crop was rated in good to excellent condition compared to 30 percent last week and the 40 percent 10-year average. Traders will be watching the West Texas weather as the chance of scattered rains and a break from temperatures in the 90-degree range is in the short-term forecast.
USDA’s crop progress report confirmed a late start to the U.S. crop as well as a crop that was declining in quality. The department reported squaring at 32 percent versus a 46 percent norm for the date, and boll setting was at eight percent compared to the usual 11. Week-on-week, the crop’s condition has deteriorated in every single category, a market observer explained. “It is very early in the season, and as is always the case, the absolute levels are not as telling as the prevailing trend,” an analyst noted.
Meanwhile, USDA reported net export sales of 156,200 bales for the week ended June 25 were down one percent from the previous week, but 10 percent higher than the four-week average. China, Turkey, and Taiwan were the primary buyers. Net sales of 82,500 bales for delivery in 2009-10 were mainly for Turkey, Vietnam, and Thailand.
Export shipments of 333,600 bales were up 21 percent from the previous week and six percent higher than the four-week average. Major destinations included China, Turkey, and Mexico. Closer to home, spot cotton sales were significantly higher as producers in Texas, Oklahoma, and Kansas sold an impressive 2,036 bales online in the week ended July 2 compared to just 48 bales the previous week. The average price received by producers ranged from 44.35 to 46.54 cents per pound.