February 1, 2001
By most indications, the cotton market should be entering or in the middle of a bullish rally. However, the most obvious indicator, price, for the most part this week did not support a bullish sentiment as January 31 was the seventh consecutive day that cotton prices reversed themselves from the previous session.
General commodity and stock market weakness, a soft tone in the textile sector and reports of improving crop conditions in Australia maintained a grip on the cotton market this week, overriding positive fundamental news and technical factors. Yet, there appears to be a growing consensus that cotton futures are poised to begin a significant rally that could last into 2003 before hitting new, all-time highs, BridgeNews reported.
Although they had little or no impact on cotton prices this week, traders found supportive data in estimates issued by the National Cotton Council (NCC) during its 62nd Annual Meeting this week in San Diego. Leading the way was the council's much-anticipated acreage estimate for the 2001 U.S. crop.
NCC pegged U.S. cotton plantings this spring at 15.89 million acres, up only two percent from last year and well below many private estimates that ranged from 16.0 to 16.5 million acres. Based on the acreage figure, average yields and normal abandonment rates, NCC economists put the U.S. crop at 18.5 million bales versus 17.22 million this season. One market analyst noted, however, the council's acreage estimate has been low eight out of the past 10 years.
The NCC economists projected domestic mill use to remain steady at 9.8 million bales and exports possibly climbing 1.2 million bales from the 2000-01 marketing year to 8.5 million in the coming season. The combined offtake would result in ending stocks of 4.3 million bales, up 200,000 from the expected carryout for this year.
Steady mill use is anticipated despite pressures that are as severe as those the industry experienced in the early 1980s when annual consumption plunged to only 5.2 million bales. The council cited the Caribbean Basin Initiative as an offset to continuing pressure from imported textiles and apparel, adding effective trade policy is crucial to the ultimate survival of the U.S. textile industry.
NCC also projected a 2001-02 world crop of 90 million bales, up from 88.43 million USDA has estimated for this season. However, world mill use should continue to increase but at a slower pace than during the past two years. The council pegged world consumption at 93 million bales, a 790,000 bale increase from 2000-01, resulting in a nearly 300,000 bale decline in world carryover stocks.
Talk of China also dominated many conversations at the NCC meeting, especially questions regarding how much cotton the country will import in the coming year. The council's economists noted some analysts have placed Chinese imports at 2.5 to 3.0 million bales in 2001-02. NCC's Mark Lange stated the United States, with adequate supplies, could fill as much as 50 percent of China's cotton import needs.
USDA reported U.S. cotton export sales during the week ended January 25 increased a net 89,500 running bales, two percent above the week before but 6 percent less than the four-week average. Mexico was the featured buyer with purchases totaling 39,100 bales.
U.S. export shipments reached a marketing year high during the same week at 133,900 running bales. The figure was 13 percent above the previous week and 32 percent more than the four-week average. Mexico, Turkey and South Korea were primary destinations.
Online cotton sales by producers in Texas/Oklahoma/Kansas during the week ending February 1 totaled 24,412 bales compared to 22,158 for the week ending January 25. Average daily prices received by producers in the most recent week ranged from 44.63 to 49.80 cents per pound compared to a range of 45.58 to 47.82 cents per pound the previous week.