January 29, 2004

Despite a better-than-expected mill use figure from the National Cotton Council (NCC), March cotton futures on the New York Cotton Exchange were sharply lower on Thursday in massive fund liquidation spurred on by poor U.S. export sales data.

USDA’s export sales report, released early Thursday, painted a glum picture for cotton futures as market sources called the data “disappointing.” One observer said the export sales pace has been more “cautious” lately.

China started celebrating the Lunar New Year last week, and the festivities lasted until Jan. 28. Most cotton players did not return to their desks until Thursday of this week.

“With China on holiday, the buying activity over the period covered in the recent export sales report didn’t satisfy the need for fresh demand,” an analyst said. “We thought they would come in and nibble over the holiday, and they didn’t.”

According to USDA, net export sales of 59,300 bales for the week ended Jan. 22 were 64 percent lower than the previous week and a 52 percent decline from the four-week average. The primary buyers of U.S. cotton for the week included Mexico, and Pakistan.

Shipments of 196,200 bales were 45 percent lower than the prior week, when shipments hit a marketing year peak of 354,600 bales, and 19 percent less than the four-week average. Primary destinations included China, Turkey and Mexico.

Meanwhile, the NCC reported textile mills used cotton on a seasonally-adjusted annual rate of 6.62 million bales in December, a higher figure than most analysts had expected. Additionally, NCC revised its November figure to 6.57 million bales from the previous estimate of 6.64 million bales.

After digesting USDA’s export sales report and NCC’s mill use figures, market focus quickly shifted to NCC’s survey of prospective U.S. cotton plantings for 2004. The report will be released on Jan. 30 at the council’s annual meeting in New Orleans.

Most analysts expect NCC’s annual survey to show potential U.S. cotton plantings averaging between 14.18 million and 14.23 million acres. Last year, U.S. cotton plantings reached 13.48 million acres. However, several cotton analysts said they do not expect an increase in cotton acreage because of higher corn and soybean prices.

Cotton plantings in Texas, the top cotton producing state in the country, also are expected to rise in 2004. One analyst said plantings could range from 5.8 million to 5.9 million acres compared to total plantings last year of 5.6 million acres.

This week on the spot cotton scene, online sales by Texas, Oklahoma and Kansas producers in the five trading days ended Jan. 29 totaled 13,374 bales, down considerably from the previous week’s sales of 46,333 bales. Prices received by producers selling their cotton online ranged from 61.58 to 67.09 cents per pound versus the prior week’s 64.66 to 67.05 cents per pound range.

As field preparations soon will begin in Texas for the 2004 cotton crop, drizzly conditions were reported across most of the Lower Rio Grande Valley and the Coastal Bend area this week, but no significant accumulation was expected. An adequate planting rain is needed to ensure sufficient topsoil moisture levels. Meanwhile, dry and seasonable weather persists in West Texas, and no precipitation is in the near-term forecast. A slow-soaking rain urgently is needed to help ease drought-like conditions there.