September 28, 2000

The cotton market experienced minor pressure from meager weekly export sales. The U.S. Census Bureau's monthly cotton consumption report was slightly higher than expected but failed to offset pressure from the weakening technical outlook.

In August, U.S. textile mills used cotton at a seasonally adjusted annual rate of 10.09 million bales, an increase from the upwardly revised July figure of 10.00 million, the National Cotton Council said. July consumption previously was reported at 9.94 million bales.

NCC's calculations were based on the August cotton consumption report from the U.S. Census Bureau issued on September 28. The annual figure was slightly higher than most analysts were expecting. In fact, several analysts had pegged annual mill use below 10.00 million bales as expectations ranged from 9.70 million to 9.90 million bales.

The council noted that mills had taken additional downtime during the month of August, but it was not enough to affect overall cotton demand. A NCC spokesperson tied the steady rate of mill use to the resurgence in denim and apparel demand.

"Denim continues to be popular," the NCC economist commented. "Home furnishings have taken a beating lately, but apparel is making up for that and we are seeing benefits from the Caribbean Basin Initiative."

While the general perception has been that the Caribbean Basin Initiative, which takes effect on October 1, 2000, has not generated a sharp increase in mill use, the economist said it was contributing to mill activity.

"We are seeing some benefits of the initiative as mills are spinning yarn and making fabric to ship out to the Caribbean," she said.

The outlook for domestic consumption is optimistic as a sales increase in the home furnishings segment is expected ahead of the Christmas holidays and the Caribbean Basin Initiative is foreseen to have a positive effect on the textile sector for the rest of the year.

Sunshine, warming temperatures and a break from rain allowed producers to harvest throughout the Cotton Belt this week. In the Texas Panhandle and South Plains, defoliants are being applied to the crop, while harvesting is beginning in the Rolling Plains and east Texas, according to the state's agricultural extension service.

As expected, the weekly USDA crop rating as of September 24 rose one point to 35 percent in the good to excellent category. Additionally, the condition index was near steady at 82.7 with 100 considered normal.

Traders said anecdotal reports of short-staple cotton in Mississippi and Louisiana were old news but still mildly supportive to the market. In Georgia, samples revealed discoloration from untimely moisture, and only half of the harvested cotton in Mississippi and Louisiana has been of tenderable quality. Drought is the reason for the short fibers, market observers said, while recent rain has added discoloration to cotton coming from the Southeast.

Meanwhile, export demand has been sluggish with the strong U.S. dollar discouraging overseas buyers. Europe has been slow to purchase U.S. cotton, and Asian buyers are focused on origins other than the United States. For the week ended September 21, net export sales of U.S. cotton were 88 percent lower than the previous week at just 5,400 bales. Turkey and Vietnam were featured buyers for the week.

Trading was more brisk on the spot cotton scene as 2,102 bales were sold on TELCOT in the five trading days ended September 28. The figure was considerably higher than the 519 bales sold the week before. Average daily prices received by producers utilizing the electronic marketing system ranged from 44.83 to 55.16 cents per pound, versus a range of 46.00 to 54.59 cents the previous week.