May 12, 2006
Business in the cotton market was quiet this week as traders awaited USDA’s latest monthly supply/demand report. As a result, cotton futures prices remained locked in a narrow, two-cent range. Volume at the New York Board of Trade was mostly light throughout the week despite an erratic start for the 2006-07 U.S. crop due to unfavorable weather conditions.
Ahead of the report, a Dow Jones newswire survey of cotton traders indicated they expected little change other than a few modest adjustments from last month’s 2005-06 crop figures. For the 2006-07 crop, traders were expecting a U.S. crop of 21.08 million bales and domestic consumption of 5.96 million.
Released early Friday morning, initial reaction among some analysts was bullish. USDA’s May supply/demand report showed China’s consumption for the coming year was projected to reach 51 million bales, up 4.5 million from the 2005-06 estimate. The department further projected China’s cotton imports at 20 million bales, an increase of 1 million bales from the current year’s estimate.
World production was pegged at 115 million bales, an increase of almost 1.6 million from the estimated 2005-06 crop. However, world consumption was projected at 122 million bales, up 4.8 million from the 2005-06 estimate; therefore, world ending stocks would decline by 5 million bales.
U.S. ending stocks also would decline in the coming year, according to USDA. The department projected the 2006-07 crop at 20.7 million bales, a decline of almost 3.2 million bales from the estimated 2005-06 crop. Domestic consumption was placed at 5.8 million bales, and exports were estimated at 16.5 million leaving ending stocks of 4.9 million bales on July 31, 2007.
Meanwhile, weekly export shipments continue to exceed the volume needed to reach USDA’s projection for the 2005-06 marketing year. According to the department, shipments of U.S. upland cotton in the week ended May 4 totaled 450,800 running bales, up 8 percent from the previous week and 6 percent better than the previous four-week average. The primary destinations were China, Mexico and Turkey.
As of May 10, shipments needed to average approximately 400,000 bales per week to meet USDA’s latest export projection of 17 million bales for the current season. Export sales also continue to stay on pace. The latest report showed net upland sales of 166,100 running bales, down 39 percent from the previous week and 28 percent less than the previous four-week average.
However, the sales volume was better than some analysts had expected. China, despite a week-long national holiday, was the featured buyer followed by Turkey, Mexico, Indonesia, and Colombia.
Concerns about the erratic start for the 2006-07 U.S. crop eased somewhat this week. Varying amounts of rainfall throughout the Texas High and Rolling Plains last weekend provided some relief to dry conditions.
Parts of South Texas, where severe drought conditions have persisted, reported widely scattered showers. However, accumulations were virtually immeasurable, and the combination of above-average daytime high temperatures and lack of moisture is taking a toll on the region’s dryland fields.
Elsewhere, favorable conditions were noted in California’s San Joaquin Valley where cotton planting advanced without interruption. Conditions in China were much less favorable for cotton production. A sandstorm in one province and a storm in another last weekend will require thousands of hectares to be replanted, according to reports.
In the spot market, online sales by producers in Texas, Oklahoma and Kansas totaled 13,172 bales in the week ended May 11 compared to 11,529 bales traded the previous week. Average prices received by producers this week ranged from 43.30 to 46.84 cents per pound compared to 43.28 to 46.40 cents per pound the previous week.