August 24, 2006

Cotton futures on the New York Board of Trade settled modestly higher Thursday, but within the recent trading range in a lackluster day of trading.

“The market probably is buying time until the release of USDA’s September supply/demand report,” said one analyst. “Poor export sales and mill-use figures offer no encouragement to the market, and prices probably will remain within the recent range.”

U.S. textile mills used cotton at a seasonally adjusted annual rate of 5.6 million bales in July, down from last year’s adjusted figure of 6.74 million, according to data gathered by the U.S. Census Bureau and compiled by the National Cotton Council (NCC).

The NCC also adjusted its June 2006 figure to 5.69 million bales from 5.84 million. According to the U.S. Census Bureau, the total monthly U.S. consumption of cotton during July was 389,816 bales compared to 465,485 bales at the same time one year ago.

Meanwhile, USDA reported net export sales of U.S. cotton totaled 91,800 bales in the week ended August 17, a 16 percent increase from the previous week. Major buyers were China, Turkey, Japan, and Peru. At 189,000 bales, export shipments were 23 percent below the previous week’s total. Primary destinations included China, Indonesia, and Mexico.

On the spot cotton scene, sales increased considerably this week as online trading by producers in Texas, Oklahoma, and Kansas in the week ended August 24 totaled 3,114 bales compared to the previous week when 1,794 bales were traded. Average prices received by producers in the most recent week ranged from 38.05 to 49.72 cents per pound compared to 46.35 to 52.99 cents per pound the previous week.

In other news, widespread thunderstorms moved across the Texas High and Rolling Plains early this week bringing much-needed rain. Precipitation accumulations varied, but growers appreciated the moisture. Elsewhere in the state, outside activities progressed nicely with little interruption. Harvesting began on a small scale in Central Texas, and widespread work is expected to commence in a week to 10 days. Picking is expanding rapidly in the Upper Coastal Bend while the season is nearing an end in the Coastal Bend and Rio Grande Valley.

Even with the scattered rainfall throughout large portions of the Cotton Belt in the last few weeks, USDA reported weather conditions have contributed to a slight decline in some of the crop. The department placed an average of 36 percent of the crop in very poor to poor condition as of August 20 compared to the previous week’s 35 percent and last year’s 11 percent. An average of 38 percent of the crop is rated in good to excellent condition, compared to 39 percent the prior week and last year’s 63 percent.

“Due to current weather conditions, there’s still a lot of uncertainty in the market over how large both the U.S. and the world cotton crop really is,” a cotton trader said. “This uncertainty is forcing many participants to remain on the sidelines so the market may not move substantially in either direction unless something major happens,” he concluded.