October 10, 2002

USDA's October supply/demand report, released this week, surprised many cotton market participants that were expecting a 200,000- to 300,000-bale cut in the U.S. crop estimate. The department, however, lowered the production figure only 60,000 bales from its September estimate, and analysts' reactions were mostly bearish.

Perhaps the greatest surprise was an increase in USDA's estimates for the Mississippi and Louisiana cotton crops despite two recent tropical storms that moved through the region. Most observers believe the storms and this week's continued wet weather have taken a toll on both yields and lint quality. It now appears another month will pass before USDA fully accounts for the anticipated crop losses that, according to early reports, could range from 25 to 75 pounds per acre in areas hardest hit by Isidore and Lili.

USDA, on the other hand, aggressively cut its production estimates for Alabama, Georgia, North Carolina and South Carolina but pegged the Texas crop at 5 million bales, up 200,000 from a month ago. The department left the domestic consumption estimate unchanged but slashed 200,000 bales from its export projection for 2002-03. The net result is a 100,000-bale increase in USDA's estimate for ending stocks. However, there remains a discrepancy between USDA's beginning stocks figure and that of the Census Bureau. Once it is resolved, further revisions that will affect 2002-03 ending stocks may be forthcoming.

In other news, USDA reported net export sales of 2002-03 crop U.S. cotton in the week ended October 3 totaled 37,600 bales, down 31 percent from the previous week and a staggering 81 percent less than the four-week average. China and Mexico were the featured buyers. Export shipments of 101,300 bales were only 7 percent less than the prior week, and Mexico was the primary destination.

Some market observers had been concerned about the potential impact of the West Coast dock strike on U.S. cotton export shipments. Although no formal agreement between the Pacific Maritime Association and dock workers has been reached, for the first time in more that 20 years the President of the United States this week invoked the Taft-Hartley Act directing workers to return to their jobs. Almost all shipping activity at 29 West Coast ports had been at a standstill since Sept. 29.

However, cotton shippers reported the 11-day work stoppage did not seriously affect exports since a relatively small volume had been scheduled for movement from West Coast ports during the period. On the other hand, transportation of cotton from interior warehouses to Pacific coast ports for consolidation and shipment later in the month had slowed appreciably.

Harvest of the U.S. cotton crop has fallen behind the pace of a year ago. Beltwide, 24 percent of the crop was off the stalk as of Oct. 6, according to the National Agricultural Statistics Service, compared to 29 percent at the same time last year and the five-year average of 32 percent. The most notable delays were reported in Mississippi where only 28 percent was harvested. Likewise, the Arkansas harvest stood at 18 percent, and 43 percent of the Louisiana crop had been picked.

Activity in the spot cotton market declined significantly as Texas, Oklahoma and Kansas producers sold 3,585 bales in the week ended Oct. 10 compared to 10,282 bales traded the previous week. The average price received by producers selling their cotton online ranged from 36.59 to 43.15 cents per pound compared to the previous week's range of 34.91 to 36.21 cents per pound.