February 9, 2006

Cotton futures on the New York Board of Trade closed higher Thursday as strong weekly export sales figures trumped a bearish world supply/demand report from USDA. The market also saw some position rolling as traders exited the March contract ahead of its expiration in a couple of weeks.

Net export sales of U.S. cotton reached a marketing year high of 463,200 bales in the week ended Feb. 2, according to USDA. The figure was four percent more than the previous week and 55 percent more than the four-week average. China was the largest customer for the week with purchases totaling 293,700 bales. Smaller sales were made to Turkey, Brazil, Mexico and Pakistan.

Export shipments of 335,800 bales were 20 percent more than the previous week and 47 percent more than the four-week average. Primary destinations included China, Mexico, Turkey, and Indonesia.

On the spot cotton scene, online trading by producers in Texas, Oklahoma and Kansas in the week ended Feb. 9 totaled 33,208 bales compared to the previous week when 40,616 bales were traded. Average prices received by producers in the most recent week ranged from 45.09 to 49.48 cents per pound compared to 45.19 to 48.89 cents per pound the previous week.

Trading in New York began on a more bearish note Thursday when USDA also released its February world agricultural supply/demand estimates. The department surprised many in the market by raising China’s 2005-06 beginning stocks by 2.5 million bales to a total of 13.06 million. It also raised China’s production to 26.20 million bales from 24.5 million in January and bumped up China’s imports by half a million bales to 17.0 million. China’s consumption also was raised by 2.0 million bales to 45.0 million. Largely as a result of the changes to China’s balance sheet, world ending stocks in February increased by 2.16 million bales to 52.93 million.

The U.S. data, by contrast, saw little change. Domestic mill use was lowered slightly, resulting in slightly higher ending stocks at 7.0 million bales. U.S. production and exports remained unchanged from USDA’s January report at 23.72 million and 16.4 million bales, respectively.

Meanwhile, mild and dry weather prevailed from Texas to the Far West this week. According to USDA’s Drought Monitor data for the week ended Feb. 7, soil conditions remain dire. Moisture levels for most of the Texas High and Rolling Plains were downgraded to severe drought, and almost all of the Lower Rio Grande Valley (LRGV) was categorized as extreme drought.

Although planting has begun on a small scale in the LRGV, most farmers still are busy preparing their fields, and widespread planting is unlikely to commence for another week or two. In the meantime, producers will continue to hope for a slow, soaking rain to reduce the need to irrigate prior to planting.