November 4, 2004

Cotton futures settled sharply lower Thursday on the New York Board of Trade as market players continued to roll their December positions into March. Additionally, the weight of the inevitably large U.S. and world crop, coupled with a somewhat disappointing export sales report, weighed on the market.

According to USDA, net export sales of U.S. cotton totaled 79,500 bales in the week ended Oct. 28, a 10 percent increase from the previous week, but 35 percent lower than the four-week average. Primary buyers included South Korea, Ireland, Turkey and Colombia.

Export shipments of 89,900 bales were 15 percent lower than the previous week and nine percent lower than the four-week average. Major destinations were Mexico, Turkey, China and Indonesia.

Traders said the resumption of Step 2 payments to exporters and domestic users should prompt a higher shipment figure in USDA’s next weekly report. Some analysts also are optimistic about overall exports for the year.

“A variety of growths and styles of cotton from really good to ‘not so great’ will be available from the U.S. for the export market this year,” one market observer said. “This variety could allow us to meet everyone’s needs and keep export sales up in spite of sizeable competition.”

In spot cotton news, sales were slower in the week ended Nov. 4 as Texas, Oklahoma and Kansas producers sold 14,200 bales online compared to the previous week when 30,913 bales were traded. Prices received by producers selling their cotton online ranged from 39.15 to 40.21 cents per pound versus the previous week’s range of 40.16 to 41.42 cents per pound.

The National Agricultural Statistics Service (NASS) reported cotton plant health improved in the week ended Oct. 31. Sixty-eight percent of the U.S. crop was ranked good to excellent, a two percentage point improvement from the week earlier. Only three of the 14 main cotton producing states registered a downturn, while improvement was witnessed in five states. Overall harvesting remained behind normal as work was complete on 53 percent of the crop, equal to the same time last year, but still seven percentage points lower than the five-year average.

Next week’s NASS crop condition report may reflect crop damage and further harvesting delays as inclement weather prevailed most of the week from West Texas to the Memphis Territory due to a slow-moving storm system. Additionally, snow fell over most of the High and Rolling Plains.

The combination of snow and cold temperatures is highly unfavorable for mature cotton and delays the cotton harvest. There is a chance that some cotton plants could be knocked over by the weight of the snow, making it more difficult to harvest.

Slightly warmer temperatures returned to the High and Rolling Plains of Texas on Wednesday, but readings for the remainder of the week were forecast to remain well below normal for this time of year. Sunny, dry weather is urgently needed to bleach any discolored lint in open bolls and to help prevent any stringing of fibers from picker varieties. Soils are heavily saturated, and harvesting is unlikely to resume before next week. The transportation of modules from fields also has been hampered, but ginning likely will continue without interruption for a few days since many gins have backlogs of seed cotton on their yards.