August 19, 2004
Cotton futures on the New York Cotton Exchange closed higher five consecutive days this week including up the 300 point limit on Tuesday as prices finished the day by posting three and a half week highs. It was the first limit up close since April 14, 2004.
“The market was up five days in a row, a most unusual feature in any bear market,” one analyst said. “Having a limit up is a normal feature in any market that has traveled a long way, pretty much in the manner of a rubber band snapping back after being pulled too far out of shape. But, being up five days in a row showed a bit of persistence,” he concluded.
In other news, USDA reported healthy export sales for the week ended August 13. Net export sales of 232,100 bales were 12 percent lower than one week earlier. By far, the major buyer for the week was Mexico with purchases totaling 75,200 bales. Indonesia and China rounded out the list of top three buyers of U.S. cotton for the week with acquisitions of 24,900 and 23,600 bales, respectively. Sales of 14,200 bales for delivery in 2005-06 primarily were to Mexico.
“We’ve started off the first two weeks of the season with excellent export sales,” a market observer noted. “Perhaps it’s a meaningless observation, but we’ve never started off the season with back-to-back sales of over 200,000 bales.”
Export shipments of 244,500 bales for the week were 22 percent below the previous week and 11 percent lower than the previous four-week average. Primary destinations were Turkey, Thailand and Indonesia.
On the spot cotton scene, trading skyrocketed in the week ended Aug. 19 as Texas, Oklahoma and Kansas producers sold 10,609 bales online compared to the previous week when 1,769 bales were sold. Prices received by producers selling their cotton online ranged from 39.99 to 42.05 cents per pound versus the previous week’s range of 39.43 to 45.00 cents per pound.
Meanwhile, heat unit accumulations continued to lag behind normal in many portions of the Cotton Belt, contributing to nagging concerns about yield potential. Scattered showers fell this week on the Texas High and Rolling Plains with heaviest amounts recorded in non-irrigated areas. Daytime highs were unusually low for this time of year, and the prolonged period of cool weather is having an adverse effect on the crop. Hot, sunny conditions are needed soon to ensure average yields.
According to the National Agricultural Statistics Service (NASS), boll set nationwide reached 92 percent in the week ended Aug. 16, 17 percentage points ahead of last year and equal to the five-year average. The number of bolls open advanced to 12 percent, one point better than last year but two percentage points lower than the five-year average. Ten of the major cotton producing states were behind the average.
The condition of the crop continued to improve, according to the NASS weekly report. Plants rated good to excellent accounted for 73 percent of the crop versus 71 percent one week earlier and just 55 percent one year ago. The entire California crop is rated good to excellent. Deterioration was noted mostly in the Southeast and Memphis Territory.
High winds and flooding associated with Hurricane Charley, which caused loss of life and extensive property damage in Florida last Friday, skirted Southeastern cotton areas, and very little damage is expected as a direct result of the storm. The hurricane passed over the central Florida peninsula and into the Atlantic before making its second landfall near the South and North Carolina state line. Regional observers report the high winds twisted cotton plants in some areas but otherwise did little damage since the percentage of open bolls still is small.