March 28, 2002

After a week of sluggish trading interest, cotton futures on the New York Cotton Exchange closed sharply lower Thursday. The downside move came in advance of a three-day holiday weekend on persistent speculative selling and followed a somewhat bearishly construed U.S. planting intentions report from USDA.

The department's 2002 cotton planting intentions report released Thursday morning was deemed mostly neutral to mildly bearish, according to market participants. The report, which was based on surveys conducted through the mail or via telephone between late February and mid-March, showed U.S. cotton plantings this spring are expected to total 14.7 million acres. The figure is six percent below last year's level and was in line with analysts' pre-report estimates of 14.6 million acres.

Most in the cotton industry realize the planting intentions number is not etched in stone. The new farm bill, still being debated in Congress, remains a crucial factor for growers.

"We can still have a major shift in acres depending on what happens with the farm bill," a cotton analyst said. "The limitation of this report is that it's the end of March. If it were April, we could have a clearer picture because farmers can switch their plantings in the blink of an eye," he explained.

Analysts had widely anticipated a reduction in acreage based on stricter policies from insurance companies and lending banks as well as lower cotton prices and the likelihood of growers shifting to more profitable agricultural products.

In addition to the plantings estimate, the market also was impacted by two other reports released early Thursday concerning U.S. exports and domestic consumption.

According to the National Cotton Council (NCC), U.S. textile mills used cotton at an annualized rate of 7.58 million bales in February, up from 7.40 million reported in January but well below 8.65 million bales reported in February 2001. Market expectations ranged between an annualized 7.6 and 7.7 million bales for the month.

Some in the market viewed the consumption figure as slightly supportive as it somewhat confirms ideas that the worst is over for the domestic textile industry. "February's number is better than last month's and we're probably going to see better consumption figures as we go forward," a market observer commented.

In USDA's cotton export sales report, government data showed 136,700 bales were sold for export in the week ended March 21. The figure is 77 percent higher than the previous week and is equal to the four-week average. In addition, USDA reported net sales of 55,100 bales for delivery in 2002-03. Shipments were slightly lower for the week at 230,600 bales, a three- percent decrease from the previous week and 11 percent below the four-week average.

U.S. export sales and shipment figures were considered surprisingly constructive and may have offset some of the bearishness carried in the other reports, market observers said Thursday.

Meanwhile, the spot market also was a bit sluggish as online sales of cotton by Texas, Oklahoma and Kansas producers in the week ended March 28 totaled only 12,480 bales compared to the previous week's 20,307 bale total. Prices received by growers selling their cotton online ranged from 29.44 to 31.50 cents per pound compared to a range 27.08 to 30.68 cents per pound the prior week.