September 04, 2003

According to traders, it is rare for the market to rally at this time of year unless there are major weather developments; however, cotton futures on the New York Cotton Exchange rallied to a five-week high Thursday on fund, trade, and options-related buying. The market also has been rallying on anxiety over the size of the U.S. cotton crop.

"This is a tough time of year," David Stanford, PCCA's vice president of marketing, explained. "Weather is a topic of conversation for everyone in the cotton industry since it is a pivotal factor in the direction of prices in the cotton market, especially when the market is almost void of substantial news. Analysts will continue to monitor the weather and crop conditions for the next few months until we know the size of the U.S. crop," he continued.

Most of the U.S. crop still looks promising, and crop prospects in the Southeast are better than they have been in several years. The crops there have received excellent rain this growing season, and if weather conditions continue to cooperate through harvest time, Georgia could produce 2.0 million bales, considerably higher than the norm for the state. In the Far West, there are encouraging prospects for the crops in California and Arizona as well where less pima and more upland cotton was planted this season.

"The cotton crop was planted late all the way from the East Coast to the Southwest," said Stanford. "The crop is highly subject to weather damage around harvest time, and there is a possibility of both yield and quality loss if adverse weather hits the crop in the fall."

Cotton production in the southwestern cotton producing states poses the greatest concern to analysts. The region has suffered substantial weather-related difficulties this season. In fact, a sizeable amount of cotton planted in Kansas, Oklahoma, and Texas was considerably later than usual, and much of the crop was further hindered by a lack of rainfall during peak growing periods.

Although there are bright spots in parts of the Texas High Plains, the state's largest cotton producing area is expected to produce less cotton than it has in past years. Meanwhile, the South Texas crop, the first off the stalk in the United States, is of excellent quality.

"The South Texas cotton we've handled this year has been of superior quality and strength," Stanford explained. "It certainly will meet the demand in the present marketplace and will - not be difficult to move. Conversely, we expect the average quality of West Texas cotton to fall below last year's standards due to a combination of drought conditions and losses in irrigated production which will result in a much higher percentage of this year's harvest coming from dryland acreage," he concluded.

In other news, USDA's weekly export report was at the lower end of analysts' expectations and was construed as neutral to the market. According to the department, net upland sales of 77,400 bales in the week ended Aug. 28 were 22 percent less than the previous week. Mexico, Thailand, and Colombia were featured buyers. Exports of 129,300 bales equaled the volume of a week earlier but were 48 percent less than the four-week average.

Meanwhile, activity increased considerably on the spot cotton scene. Online sales by Texas, Oklahoma and Kansas producers in the four trading days ended Sept. 4 totaled 55,784 bales compared to 27,504 bales the previous week. Prices received by producers selling their cotton online ranged from 47.70 to 48.98 cents per pound versus the previous week's range of 47.54 to 49.28 cents per pound.