June 26, 2008
Cotton pulled higher Thursday as futures prices on the New York Board of Trade drifted upward in concert with strong gains in outside commodities. Analysts pointed to continued weather concerns in West Texas and the anticipation of Monday’s acreage report from USDA as influencing factors in recent market gains even though the survey will not reflect recent abandonment.
Adverse weather in West Texas over the past month added support to the market, as observers watch with interest to see what will happen next. One-third of the projected 9.38-million-acre crop is expected to be grown in West Texas, and continued concern over cotton development in the state hinges on the need for additional precipitation and no further damage from heavy storms, hail, or sand and high winds.
Given the varied interpretations of how beneficial the hit-and-miss West Texas thunderstorms have been, it is difficult to assess the condition of the crop there. After many days of temperatures over the 100-degree mark, the rain had to bring much needed relief to the crop despite all the hail and high winds that accompanied it, an observer explained.
Meanwhile, net export sales of U.S. cotton fell to a marketing year low in the week ended June 19 as only 19,100 bales were sold. The figure was down 54 percent from the previous week and 93 percent from the four-week average. Indonesia purchased 9,200 bales, with Vietnam and Thailand rounding out the list of top three buyers for the week.
Export shipments of 282,200 bales were down three percent from the previous week but up four percent from the four-week average. Primary destinations were China, Turkey, Mexico, and Indonesia.
On the spot cotton scene, online trading by producers in Texas, Oklahoma, and Kansas totaled 2,821 bales in the week ended June 26 compared to 15,861 bales the previous week. Prices received by producers ranged from 61.59 to 68.10 cents per pound versus 63.59 to 68.45 cents per pound one week ago.
In other news, the National Cotton Council reported domestic cotton consumption in May was pegged by the National Agricultural Statistics Service at a seasonally adjusted annualized rate of 4.52 million bales. The figure was down from the previous month’s 4.59 million and last year’s 4.92 million bales.
“While those that remain standing seem relatively healthy, collectively, the American Spinning Mill industry continues to find the path to world expansion elusive, even with a lower U.S. dollar,” one analyst said. “Given the opposing views for future U.S. import/export trade regulations expressed by the two presidential candidates, one can only wonder if the business barometer is rising or falling for the American textile industry.”
A world-wide container shortage still is making it difficult to ship U.S. cotton from any port in the nation. As the value of the dollar falls overseas, making U.S. products cheaper, the export industry in the U.S. is surging. The growing demand for containers, coupled with rising fuel costs, mean exporters are paying more to ship overseas. The situation is biting into the profit margins of exporters across the country, when they can secure containers, of course. Due to the size and weight of bales, cotton exporters have difficulties other industries do not encounter.
“Merchants continue to battle the hellish logistics of trying to ship cotton when a weak U.S. dollar is keeping all outgoing containers stuffed with anything that has a higher per-pound or per-cubic foot value than cotton; that offers a lot of choices,” a trader said. “Cancellations and forward-shifted delivery dates are becoming increasingly common.”