June 6, 2002

Market orders on the close buying caused cotton futures on the New York Cotton Exchange to soar Friday with most deliveries ending at their highest level since April 11. Speculative short-covering and trade buying, coupled with weather concerns on the Texas High Plains, lent support to the market for the remainder of the week.

In fact, the market's focus remains on weather developments in the U.S. and their impact across the Cotton Belt. As of June 2, Texas lagged behind most of the U.S. in percentage of cotton planted. Only 74 percent of the state's estimated cotton crop was in the ground, compared to an average of 92 percent planted in the Southeast, and nearly 98 percent planted throughout the remaining fields in the Delta, Oklahoma and California.

In all, 88 percent of the nation's cotton was in the ground by June 2, compared with 87 percent one year earlier. Squaring rates were slightly ahead of schedule at 10 percent, up one percentage point from average. Plant health, however, remains variable. USDA rated 43 percent of U.S. cotton in good to excellent condition and 19 percent was ranked poor to very poor.

"There are a few problems in West Texas, but overall I think we're going to see an improvement in the crop conditions next Monday," a cotton market observer said, referring to the weekly crop progress report released by USDA. "In order to hold on to current market gains, you've got to keep feeding the bull, and we don't have a lot of new bullish news around. Everybody is trying to chew up the old," she concluded.

According to recent estimates compiled by Plains Cotton Growers, approximately 125,000 acres, mostly irrigated land, are expected to be declared a disaster on the Texas High Plains from hail and wind damage over the past two weeks. An estimated 3,500,000 acres have been planted to cotton on the High Plains this season, down approximately 200,000 acres from last year's plantings.

Cotton producers with damaged cotton crops now must wait 15 days after the final insurance planting deadline for their respective county to see if the crop recovers. Deadlines range from May 31 in northern counties to June 20 in the southern portion of the High Plains. If no recovery has occurred during the required period, the insurance adjusters will declare the field a loss and a producer can plow up the damaged stands. Depending upon the insurance deadlines for alternative crops and the length of growing season, some growers may attempt to plant soybeans or grain sorghum.

Although to some traders, USDA's weekly cotton export sales figures were a disappointment, others said the figures were within the range of market expectations and had little impact on the market.

Net export sales of 2002/03 U.S. cotton slipped to a new marketing year low in the week ended May 30. Net registrations of 36,600 bales were 26 percent lower than the previous week and a staggering 70 percent below the four-week average. Mexico, India and Bangladesh were featured buyers for the week. Export shipments, however, continued to be high at 209,800 bales. Primary destinations included Mexico, Turkey and Indonesia.

"Thursday's export sales were relatively light for old crop and new crop, perhaps reflecting the long Memorial Day holiday," a market analyst said. "Shipments were about 40,000 bales better than needed to reach the current USDA projections for 2001-02 export sales," he added.

In the week ended June 6, spot cotton sales also were lower. Texas, Oklahoma and Kansas producers sold just 4,864 bales of cotton online, a considerable decrease from the previous week's sales of 11,185 bales. Prices received by growers selling their cotton online ranged from 31.18 to 33.86 cents per pound compared to a range of 30.63 to 33.35 cents per pound the prior week.