July 28, 2005
After a string of five consecutive higher closes, cotton futures prices on the New York Board of Trade faltered Wednesday under the weight of a disappointing close the previous day and beneficial rains in Texas. However, the market closed firmer Thursday as news of a new governmental trade agreement and healthy export sales were considered positive factors.
The U.S. House of Representatives early Thursday passed the Central America Free Trade Agreement (CAFTA). The trade agreement will reduce trade barriers among the United States, Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. The agreement now moves to President Bush’s desk where it will be signed.
“Congress’ approval of CAFTA is great news for the cotton and textile industry and agriculture in general,” said Woods Eastland, chairman of the National Cotton Council. “Preserving these markets will enhance the competitiveness of our cotton and textile industries and preserves textile jobs in this country.”
In other news, the National Cotton Council (NCC) reported U.S. textile mills used cotton at a seasonally adjusted annualized rate of 6.2 million bales in May, down from the 6.3 million bale figure reported at the same time last year. The figure was in line with most expectations and had little effect on the market.
“Even though it’s the best rate in four months, albeit not by much, the domestic report will receive little if any attention since it’s in line with USDA figures,” explained a market observer. “However, if by some chance the U.S. holds this rate for another four months it would be a whole different matter because USDA expects next marketing year’s rate to drop to 5.8 million bales,” he added.
Meanwhile, net export sales of 2004-05 crop U.S. cotton for the week ended July 21 totaled 38,700 bales, down 85 percent from the previous week and the four-week average. China was the featured buyer, and smaller quantities were sold to Pakistan, Taiwan, and Bangladesh. Sales of cotton for the 2005-06 marketing year totaled a net 230,500 bales and went primarily to unknown destinations.
However, export shipments were strong at 694,400 bales for the week, of which 460,600 bales went to China. This brings total shipments for the 2004-05 marketing year to 12.108 million bales.
“All we needed were 320,000 bales of shipments in this report and next week to meet USDA’s projection,” one analyst said. “We now have exceeded USDA’s estimate, so next week’s report will be gravy, making an increase in the August supply/demand report a possibility.”
In the spot cotton market, online trading by producers in Texas, Oklahoma and Kansas in the week ended July 28 totaled 1,795 bales, more than the previous week when 920 bales were traded. Average prices received by producers in the most recent week ranged from 39.20 to 43.83 cents per pound compared to 39.42 to 44.00 cents per pound the previous week.
Hot and mostly dry conditions persisted across most of the Cotton Belt, but some producers on the Texas High and Rolling Plains received moderate to heavy rainfall this week. Late-planted dryland cotton in southern parts of the area had begun to bloom out of the top of the plant as a result of the recent heat wave. However, plants have not stopped growing, and the additional moisture was highly beneficial. Irrigated fields throughout the region still are in excellent condition for the most part. Some in the area are calling the recent precipitation a “money making rain” as the moisture will ease irrigation costs and boost production.
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