May 6, 1999

The cotton market drifted mostly lower this week under pressure from waves of fund and trade selling. "With no particular news, except the beneficial precipitation across parts of the U.S. cotton belt, traders couldn't help but be biased to the downside," one trader commented after the New York Cotton Exchange suffered four consecutive days of major losses and ended the week mixed in a day of choppy trade.

The market found little in the news to lead it higher. USDA's export sales report was considered a "non-event" by the market. Although export shipments were higher, actual sales still were lower than the figures of previous weeks. USDA reported net U.S. export sales reached only 21,300 bales for the week ended April 29, versus 72,600 the previous week.

Mexico, a major U.S. trade partner, once again was the largest buyer of U.S. cotton with purchases totaling 9,200 bales. Taiwan's 4,500 bale purchase placed the country in the top three buyers of U.S. cotton, and Turkey completed the week's premier buyer list with 2,200 bales. Sales were 71 percent below the previous week's figure. Nevertheless, the small sales have added to U.S. total commitments for the current season, which are well above USDA's export target of 4.2 million bales.

U.S. export shipments improved to 41,300 bales for the week, 37 percent above the previous report's figure. The United States currently has shipped a little more than 80 percent of USDA's target.

According to the department, new-crop export sales totaled 32,900 bales, versus 45,a900 the previous week. Although sales of 1999-2000 crop cotton remain relatively steady, some analysts have noted that the sales pace now is slightly slower than the pace at the same time last year.

On the spot cotton scene, sales also were lower this week as a decrease in prices caused most producers to retain possession of their cotton. In the five trading days ended May 6, sales on TELCOT's electronic marketing system totaled just 4,384 bales, a considerable decrease from the previous week's sales of 10,628 bales. Average daily prices received by producers utilizing TELCOT ranged from 41.35 to 45.93 cents per pound, compared to a range of 42.48 to 45.83 cents per pound the prior week.

Meanwhile, the U.S. planting situation continues to be mostly worry-free, with rains saturating a large portion of the cotton growing areas of the country and planting proceeding as expected. USDA's May 2 planting report showed U.S. cotton planting was complete on 22 percent of the prospective 1999-00 crop, which is equal to the same time a year ago. Planting still is slightly behind the five-year average of 28 percent. Texas and Oklahoma are slightly behind average, but rains received this week should advance planting activities as soon as fields dry.

Welcome rainfall in the Texas High Plains has improved soil moisture and eased most worries about dryness and overuse of irrigation systems ahead of cotton planting for the 1999-00 season, according to sources in the area. The area's topsoil, especially, lacked the moisture to support seed germination. Precipitation could not have come at a better time for producers there.

In world news, production losses in the Argentine cotton crop may be sizable due to rain, lack of sunshine and an early freeze. Traders there are estimating losses of 25 percent or higher, while mills fear they may have to raise imports if the quality of the crop is low. Argentine production estimates ranged from 1.3 million to 1.5 million bales early in the season, but the crop may drop to 910,000 bales after the rains. Market observers in the U.S. will be paying close attention to the Argentine situation in anticipation of possible U.S. exports to the country.