August 28, 2003

After an early downturn in prices Thursday, cotton futures on the New York Cotton Exchange rebounded to close at a three-week high.

The domestic mill consumption figure for July, released by the National Cotton Council (NCC) on Thursday morning, was said to have initially offered some underlying support to the market. Based on the analysis of government figures, NCC reported U.S. textile mills used cotton at a seasonally adjusted annual rate of 7.05 million bales in July.

Although the monthly figure was slightly above market expectations, traders said it suggested domestic mill use for the 2002-03 season probably will be closer to 7.4 million bales rather than USDA's August supply/demand report estimate of 7.3 million bales.

Also released Thursday was USDA's weekly export report, which met the expectations of most industry observers. For the week ended Aug. 21, net upland sales of U.S. cotton totaled 99,600 bales, 29 percent lower than the previous week. The figure also is lower than the 114,500 bales sold at the same time last year. Export shipments of 128,400 bales for the same week were 47 percent lower than the week earlier and a 57 percent decline from the four-week average.

In other news, activity increased considerably on the spot cotton scene. Online sales by Texas, Oklahoma and Kansas producers in the five trading days ending Aug. 28 totaled 27,504 bales, compared to 15,218 bales the previous week. Prices received by producers selling their cotton online ranged from 47.54 to 49.28 cents per pound versus the previous week's 45.12 to 48.50 cents per pound range.

Meanwhile, the National Agricultural Statistics Service reported the condition of the U.S. cotton crop deteriorated in the week ended Aug. 24 when 51 percent of the nation's cotton was rated good to excellent condition, compared with 55 percent one week earlier.

Cotton conditions worsened in six of the 14 primary cotton growing states and remained unchanged in five. The sharpest downturn was registered in Texas, where only 25 percent of the crop was ranked good to excellent, compared with 30 percent the previous week. In the meantime, boll opening was witnessed on 16 percent of the U.S. cotton crop, 11 percentage points lower than the same time last year and the five-year average.

Weather is expected to become a major factor in the market in the next few weeks as the U.S. cotton crop nears harvest. Attention primarily will be focused on crops in the Delta, Southeast and Texas.

Rain is forecast for cotton growing areas of West Texas over the coming weekend, however, traders believe the moisture will be too little or too late for a crop that has been stressed by hot, dry conditions. Therefore, the forecast has had little affect on the market.

The long awaited precipitation in West Texas will improve soil moisture levels in the region, but much more rain will be needed before drought conditions are alleviated. Analysts in the area say some younger stands will benefit from the precipitation, but most of the crop already has reached the "cutout" stage. Thus, the moisture will arrive too late to benefit more mature plants.