August 21, 1997

The market enjoyed a livelier session Thursday upon the release of promising U.S. consumption data and a solid U.S. export report. Nonetheless, cotton continues to trade listlessly, for the most part as traders wait for any new developments in the crop situation.

According to the National Cotton Council (NCC), U.S. textile mills in July used cotton on a seasonally adjusted annual rate of 11.2 million bales, up from a revised June figure of 10.5 million. Cotton analysts considered the July usage rate very favorable to the market.

Apparel manufacturing for fall and winter, and especially for the holiday season, has kept most mills busy. However, the July usage rate is impressive considering most mills were closed for a week in observance of the Independence Day Holiday and to make scheduled repairs.

Looking forward to August, the council expects consumption to be slightly lower. NCC already has estimated annualized mill use for that month at 10.5 million bales, lower than the rate for July, but still considered normal by most in the industry.

NCC also revised its estimate of consumption for the entire 1996-97 marketing year. The council now estimates mill use at 10.9 million bales, higher than its previous estimate and USDA's figure of 10.8 million. The higher consumption figure may lead to much lower U.S. 1996-97 ending stocks, possibly placing the figure at 3.8 million to 3.9 million bales, though some analysts say stocks may be trimmed to only 4.0 million. Currently, U.S. ending stocks are pegged at 4.1 million bales by USDA.

USDA's export sales report was also helpful to cotton futures on Thursday. Despite expectations of sales in the 100,000-bale range, market observers were content with the department's relatively strong figure. USDA reported a net increase of 78,000 bales for the week ended August 14, up from the previous week's total of 65,400 bales. Featured buyers were China, Mexico and Canada.

Meanwhile expectations remain high for an exceptional U.S. crop. As of August 15, the overall condition of the U.S. crop continued to show improvement, according to USDA. Sixty-two percent of the crop was rated good to excellent, compared with 59 percent a week earlier. Bolls had been set on 95 percent of the U.S. crop against the five-year average of 92 percent. Boll opening remained slightly behind schedule at 10 percent compared with the 13 percent average.