April 29, 1999
A volatile trading session on Friday, April 23, caused a dramatic turnaround in the cotton market resulting in higher closes four out of five days this week. Despite somewhat disappointing mill consumption data, the combination of fund short-covering coupled with a positive export report boosted the market higher.
Wednesday's release of cotton consumption data for the month of March was somewhat disappointing to the bulls, with mill use annualizing to 10.37 million bales. The lower figure put slight pressure on prices following the report's release, but technical fund buying led to the market's recovery soon after. Many analysts had expected an annualized mill use figure above 10.5 million bales based on March consumption. Nonetheless, mill use for the 1998-99 season is expected to reach USDA's goal of 10.4 million bales. Consumption data from the two previous months have indicated surprisingly strong mill use, and expectations are for usage to improve in the coming months.
The market reacted favorably this week to a better-than-expected export sales report from USDA. The market jumped higher in response to the department's data which revealed export sales had reached the highest level since the second week of February. New sales of U.S. cotton amounted to 76,600 bales in the week ended April 22, but cancellations of 4,200 bales brought the net sales total to 72,400. The new figure was 52,700 bales higher than that of the previous week.
Mexico, a major U.S. trade partner, was the largest buyer of U.S cotton with purchases totaling 21,600 bales. Taiwan's acquisition of 14,600 bales put the country in the top three buyers of U.S. cotton once again, and Hong Kong rounded out the week's buyer list with 13,600 bales.
Spot cotton sales soared higher this week as a rise in prices prompted producers to sell. In the five trading days ended April 29, sales on TELCOT's electronic marketing system totaled 10,628 bales, a considerable increase from the previous week's sales of only 1,545 bales. Average daily prices received by producers utilizing TELCOT ranged from 42.48 to 45.83 cents per pound, compared to a range of 38.39 to 42.48 cents per pound the prior week.
Meanwhile, cotton planting in the United States is slightly behind schedule, according to USDA's weekly crop progress report. Fourteen percent of the nation's prospective cotton acreage had been planted by April 25, compared to 15 percent a year earlier and the 19 percent five-year average. Texas cotton plantings now are 13 percent complete, a two percent increase from the previous week. The state was 17 percent planted at the same time the previous year. Oklahoma, where planting has recently begun, was three percent complete at the time of the report.
As of this writing, prospects for Texas and Oklahoma cotton are favorable. Widespread precipitation has been recorded this week in both states. Beneficial rainfall was received in areas of the High and Rolling Plains of Texas improving pre-planting moisture conditions where fields have been extremely dry for quite some time. The Texas Upper Coastal Bend area, where cotton planting now is complete, also received rain this week. Stands have been established in most fields in the area and precipitation has been beneficial for their growth.