February 7, 2002

The cotton market was ambivalent this week, erratically trading within a tight range. No radical moves were expected, however, as participants said the market likely will remain in a holding pattern until traders have a better indication of the size of the coming crop.

The National Cotton Council (NCC) will offer the first glimpse of the expected 2002-03 U.S. cotton acreage. The result of the council's planting intention survey is scheduled for release at the NCC annual convention in Dallas, Texas, on Feb. 8. NCC's estimate is the first number to be released before USDA's March acreage report.

U.S. cotton plantings in the spring of 2002 are expected to show a decline from the year before, according to cotton market observers. Many cotton experts are projecting plantings to range between 14.5 million and 14.7 million acres compared with USDA's 15.8 million acres estimated for the 2001-02 season.

Besides the unpredictability of weather during the spring months, which will be the key to either stimulate or discourage cotton plantings, market observers noted banks' and insurance companies' increasing reluctance to lend money and offer insurance policies to farmers.

"We continue to hear that banks have become extremely reluctant to lend money to cotton farmers who were only marginally profitable last year when growing a crop that was worth 40 percent more than it is this season," said one analyst.

Based on current estimates for the 2002 cotton acreage, participants are estimating a U.S crop at between 16.0 million to 18.5 million bales compared with the 2001-02 season's record crop of just over 20.0 million bales. However, participants agreed that even with a considerable drop in domestic production, the price impact would be relatively limited. "The problem is that we have a massive surplus of cotton," an analyst explained.

In other news, while details remain sketchy, the Bush administration is creating an emergency task force intended to help revitalize the beleaguered domestic textile industry. Secretary of Commerce Donald Evans announced plans for the Textile Working Group during visits to mills in North Carolina. The move fulfills promises made last year to members of Congress from textile-producing states.

The group will be composed of officials from such agencies as Commerce, Treasury, Justice and the U.S. Trade Representative. Lawmakers from textile states have pressed the administration to do a better job at cracking down on imports that circumvent quotas and tariffs and to negotiate trade deals focusing more on opening up foreign markets to U.S. textile exports.

Evans said the administration understands the textile industry is a cornerstone of American manufacturing. He promised the battered industry now will "get results" and will see a "level playing field."

"These aren't just words," the commerce secretary declared. "You'll see through our deeds and works that we will deliver." Textile and cotton people alike will be watching.

Meanwhile, net export sales of 2001-02 U.S. cotton totaled 145,500 bales for the week ended Jan. 24. The figure is 47 percent greater than the previous week's sales and 36 percent higher than the four-week average. For the third consecutive week, Turkey was the primary buyer of U.S. cotton, raising that country's total commitments for the season to 1.07 million bales. Mexico and Taiwan also were featured buyers.

Additionally, the week's cotton shipments reached a new marketing year high of 253,800 bales, a five-percent increase from the week before and 21 percent higher than the four-week average. Primary destinations included Mexico, Pakistan and Turkey.

On the spot cotton scene, online sales of Texas, Oklahoma and Kansas cotton dropped in the week ended Jan. 31 as producers sold 8,614 bales compared with 13,847 bales the previous week. Prices received by growers selling their cotton online ranged from 26.31 to 27.17 cents per pound compared to a range of 26.20 to 27.89 cents per pound the prior week.