February 8, 2001

Despite beginning the week on February 5 with a slight upturn, a cautious cotton market seemed to languish with pre-supply/demand report jitters. Further irritating the nerves of many traders was a void of any credible or noteworthy fundamental news.

Ahead of the U.S. Department of Agriculture's February supply/demand reports, analysts and traders were anticipating bearish data. The weight of such pessimism at first seemed to cause cotton futures prices to plunge one day prior to the USDA reports; however, some observers believed the move may have been more technically oriented than fundamental.

When the reports were released on February 8, the U.S. data contained some mild surprises but were not considered as bearish as many had expected. As anticipated, USDA left its estimate of the U.S. cotton crop unchanged from its January report at 17.22 million bales. However, the department lowered its estimate of domestic consumption by 100,000 bales to 9.7 million for the 2000-01 marketing year which raised a few eyebrows among the trade.

Perhaps less surprising was USDA's cut in projected U.S. cotton exports to 7.0 million bales, down 300,000 from the January report and a reduction of about 100,000 bales more than was expected by the trade. Less than optimum weekly export sales in recent weeks had prepared many traders and analysts for the reduced figure. USDA now projects U.S. ending stocks this marketing year at 4.5 million bales, up from 4.1 million last month.

Relatively tight world supply and demand may have helped limit bearish reaction to the U.S. data. USDA lowered its estimate of world production by 370,000 bales to 88.06 million and cut world ending stocks by 120,000 bales. Most notable among the department's world numbers was a 400,000 bale reduction in India's crop to 11.5 million bales and no change in the estimate for Chinese production.

India's declining production was forecast earlier in the week in a U.S. attache report and only confirmed what the cotton trade already knew. Thus, USDA's reduction was not considered fresh news. Concerns that the recent, devastating earthquake in India had disrupted denim textile production proved to be short-lived. Mills there resumed normal operations this week as employees began returning to work.

Even talk about damaging rain in parts of Australia's cotton-growing region this week offered little, if any, support as some analysts considered the moisture to be beneficial in the country's drier regions. The conflicting opinions leave it unclear what the net results will be come harvest time.

Like the futures market, spot cotton sales languished this week due to a lack of qualities preferred by buyers and producer reluctance to sell at prevailing prices. Online cotton sales by producers in Texas/Oklahoma/Kansas during the week ending February 8 totaled 5,354 bales compared to 24,412 for the week ending February 1, a 79 percent decline. Average daily prices received by producers in the most recent week ranged from 44.44 to 46.77 cents per pound compared to a range of 44.63 to 49.80 cents per pound the previous week.

USDA reported U.S. cotton export sales during the week ended February 1 increased a net 84,400 running bales, six percent less than the week before and 16 percent less than the four-week average. Mexico again was the featured buyer with purchases totaling 20,600 bales. U.S. export shipments totaled 139,400 running bales. The figure was four percent more than the previous week and 18 percent more than the four-week average. Mexico, Turkey, Taiwan and Indonesia were primary destinations.