May 4, 2006

While world consumption, U.S. exports and U.S. consumption continue to surprise market analysts, cotton prices lost ground this week, according to traders.

The International Cotton Advisory Committee (ICAC) moved closer to USDA’s data in its latest assessment of China’s increasing cotton consumption. ICAC estimates have been approximately 3.0 million bales less than USDA’s since February. In its latest figure, the committee pegged China’s mill use at 45.0 million bales, only about 500,000 bales less than USDA.

In other news, net sales of U.S. upland cotton for the week ended April 27, 2006, were 271,700 running bales, well above market expectations and an indication of the strong demand with cotton futures prices below 53 cents per pound. The sales figure was 19 percent less than the previous week but 24 percent more than the four-week average. Major buyers were China, Turkey, Taiwan, and Indonesia.

Export shipments climbed to 416,200 bales, a level more than supportive of the USDA estimate of 17.0 million bales for the 2005-06 marketing year. A continuation of this pace should ensure U.S. exports will exceed the USDA estimate. Primary destinations included China, Mexico, Turkey, and Indonesia.

Sales were healthy on the spot cotton scene as well. Online trading by producers in Texas, Oklahoma and Kansas in the week ended May 4 totaled 11,529 bales compared to the previous week when 7,252 bales were traded. Average prices received by producers in the most recent week ranged from 43.28 to 46.40 cents per pound compared to 45.31 to 49.74 cents per pound the previous week.

Meanwhile, analysts continued to keep an eye on the weather situation in parts of the Cotton Belt. Recently, some parts of Texas, Oklahoma, and Kansas have been battling severe to exceptional drought conditions. Therefore, it was big news when strong thunderstorms entered the Texas High and Rolling Plains this week producing small to large hail stones and gusty winds of up to 70 mph in northern irrigated areas.

Light to moderate rain was received across most of Texas, Oklahoma and Kansas with locally heavy precipitation recorded on parts of the Texas Rolling Plains. Although the precipitation will hamper outside activities, it will help improve topsoil moisture levels. According to USDA’s Drought Monitor data for the week ended May 2, most of the region still remains in a moderate to severe drought.

Planting has begun on a small scale on the High Plains, but the optimum planting period for the area usually begins around May 5 and extends through May 25. Water tables remain extremely low, and timely precipitation will be needed during the season to ensure healthy stands.

Stormy conditions were reported in central parts of Texas while hot, dry weather prevailed in the Coastal Bend and Rio Grande Valley. Water table supplies continue to deteriorate across South Texas, and an extreme to exceptional drought prevails throughout the region. A slow, soaking rain is urgently needed to sustain young plants in non-irrigated fields.

The National Agricultural Statistics Service reported planting progress had increased in the week ended April 30. Across the Cotton Belt, planting is ahead of the five-year average. Thirty-two percent of the prospective crop was planted compared to 26 percent one year earlier and the average of 27 percent. Nine of the 15 principal cotton producing states were ahead of schedule. Missouri made the greatest progress followed by California and Arizona.