September 22, 2005

Cotton futures on the New York Board of Trade dropped at the open Thursday on trade selling but gradually recovered on speculative and fund buying to settle slightly higher as the market continued to watch Hurricane Rita.

“The stronger Hurricane Rita got, the more volatile the cotton market became,” said one observer. “Throughout the week, as the storm intensified and became more focused on the upper Texas coast, the wilder prices acted. By Thursday evening, the path of Rita looked like it would spare an awful lot of cotton the fate of quality or quantity deterioration, much like her predecessor Katrina.”

Hurricane Rita grew into a monster storm this week with 175-mph sustained winds as it swirled toward the U.S. coast, prompting more than 1.3 million residents in Texas and Louisiana to flee in hopes of avoiding a deadly repeat of Hurricane Katrina. Forecasters originally said Rita could be the strongest hurricane on record to ever hit Texas. By the end of the week, however, the storm was being downgraded from a category five to a category three hurricane, but the economic impact of the hurricane still could be massive.

“The impact on energy has a direct effect on agriculture,” said one analyst, echoing concerns of a potential spike in oil prices due to oil refinery disruptions. In addition, Louisiana is expected to get up to four inches of rainfall where virtually all of the cotton is open and vulnerable.

Most cotton is harvested in the Texas Upper Coastal Bend and eastern districts, but the movement of modules from the field to the gin might be hampered, and water damage to moduled seed cotton also may become an issue. Hurricane Rita is expected to move in a northerly direction shortly after it crosses the coastline which raises the possibility of light to moderate rains on the Texas High and Rolling Plains next week.

Moisture in the High and Rolling Plains areas could help fill out some bolls, and the lower temperatures associated with the storm’s passage would be welcome to cut water usage. Bolls in the oldest fields are beginning to open, and some defoliation could start by next week, weather permitting.

The National Agricultural Statistics Service reported this week that 21 percent of the Texas crop had been harvested by Sept. 18 compared with the five-year average of 20 percent, and a sizeable jump is anticipated next week as producers work quickly in advance of Hurricane Rita and the resulting thunderstorms. No rain was forecast before the hurricane’s arrival which helped producers work with out impediment.

In other news, net export sales of U.S. cotton totaled 157,400 bales in the week ended Sept. 15. The figure was 43 percent more than the previous week but 45 percent less than the four-week average. Major buyers included China, Turkey, Japan, and Mexico.

Export shipments of 192,700 bales for the week were six percent more than the prior week but 22 percent less than the four-week average. Primary destinations were China, Turkey, Mexico, and Hong Kong.

In the spot cotton market, online trading by producers in Texas, Oklahoma and Kansas in the week ended September 22 totaled 2,976 bales compared to the previous week when 1,439 bales were traded. Average prices received by producers in the most recent week ranged from 37.34 to 44.39 cents per pound compared to 34.00 to 41.24 cents per pound the previous week.