December 7, 2000

Lackluster trading characterized the market this week as somewhat bullish figures from the International Cotton Advisory Committee (ICAC) and confirmation of crop losses in several key cotton growing areas of the world were offset by technical considerations and a lower-than-expected export sales report.

The ICAC lowered its world cotton production and consumption estimate for 2000-01 while raising its estimate for the average Cotlook A Index price to 66.00 cents per pound, up two cents from the previous month's estimate.

ICAC lowered world production to 85.5 million bales due to crop losses in India, Pakistan, Uzbekistan and Turkey; four of the six top cotton-producing countries in the world. However, the committee estimates consumption should remain robust enough to drive world cotton stocks down to 34.7 million bales. As a result, international cotton prices as measured by the Cotlook A Index should rally because of the tightened stocks situation, ICAC noted.

Meanwhile, reports of smaller crops in Australia and Turkey confirmed talk circulating in the market this month, and all-time-high cotton prices in Pakistan underscored tight supplies there. Additionally, the USDA attaché in India lowered its production estimate for the country and raised its export projection as drought lowered yields in western India.

Uzbekistan reported it has harvested 13.9 million bales of raw cotton this season, down from an earlier estimate of 17.9 million. Drought cut yields during the growing season there, while rain during the harvest added to quality and yield losses. As harvest reaches an end, estimates are beginning to solidify. To improve production next season, the Uzbek government plans to double the number of acres planted under plastic, which speeds the plants' growth.

Traders said crop estimates from overseas have seesawed this fall as weather conditions fluctuated. The most recent estimates have been mixed with some forecasts higher than earlier cuts and others far below previous ideas. All in all, most analysts expect world output to slide and cotton use to drop slightly while ending stocks stay fairly tight.

Meanwhile, USDA's weekly export figure showed lower than expected sales. Despite a weaker U.S. dollar overseas in the week ended November 30, most importers moved back to the sidelines. Current crop export registrations dropped to the lowest level in 10 weeks, and Asian countries were responsible for the majority of cancellations. Therefore, net sales of 38,700 bales of U.S. cotton were 78 percent below the week before. Mexico remained the primary export recipient, with 35,300 bales. Other destinations included Turkey at 12,100 bales and Taiwan with 6,200 bales.

As expected, export shipments increased approximately 50 percent to the highest level in 15 weeks. However, traders said if the shipment pace did not pick up, USDA might be forced to lower its export estimate for 2000-01 by 100,000 to 200,000 bales.

Additionally, a decline in spot cotton sales was reported for the week ended December 7 as only 16,693 bales were sold online. The previous week, 28,170 bales were traded. Average daily prices received by producers utilizing the online marketing system ranged from 51.52 to 54.17 cents per pound compared to a range of 50.60 to 55.77 cents the previous week.