The higher beginning stocks — almost 500,000 bales — in USDA’s September assessment is due to some tweaking of last year’s supply/demand figures.
State by state, in September, USDA raised its estimate of the California cotton crop by 120,000 bales, while cutting Arkansas by 90,000 bales, Louisiana by 80,000 and Mississippi, by 30,000. The report also raised the North Carolina crop by 60,000 bales and left the Texas crop size unchanged.
The report reflects field conditions as of Sept. 1 before the Southwest and Mid-South crops began to show signs of significant declines in yield.
Texas A&M University Extension economist Carl Anderson, speaking at an Ag Marketing Network teleconference, said that wet, humid conditions plaguing the lower Mid-South have not spared parts of Texas.
“Prolonged rains have caused some problems with our central Texas cotton, which amounts to affecting 200,000 to 300,000 bales. The continuing rain has lowered our yield, our quality of lint and seed and we have really strong regrowth on the plant. It’s going to be very difficult to defoliate.
“We have a great deal of cotton with germinated seed, so that’s going to be very difficult to gin. If it’s going to be ginned, we’re going to have much lower grades and some below grade cotton.”
Anderson said the sale value of the below-grade cotton might be around 12 cents per pound after about 40 cents in discounts are applied. “It puts our producers here in Texas in a very severe bind. We don’t think the cotton will offset the cost of harvesting and ginning.”
Jim Quinn, with the Mississippi Farm Bureau said Mid-South cotton production will end up being far less than this month’s USDA estimate. “South of Mississippi Highway 8 is where we have most of the (rain) damage. North of Highway 8, you have some lower boll rot, but you have a fantastic top crop. So there will be good yields in the north Delta.”
Quinn said he visited one field where two-thirds of the yield was lost due to boll rot, seed germination and other related maladies. “It’s not uncommon to see one-third of the crop lost. I’ve seen a lot of sprouted seed.”
Unfortunately, the field losses, even if they turn out to be significant, will not offset the fact that there is still too much cotton in the world, noted Anderson.
Worldwide, “the supply of cotton in the world is climbing. Unfortunately, last year, we carried over about 37 million bales. We thought we would be able to reduce that this coming year, but we are not. Now we expect that 37 million bales to climb as much as 4 million bales.
“Even if it climbs only 2 million bales, it doesn’t matter. We still have too much cotton. The stocks-to-use ratio, which is now in the 46-48 percent range needs to be less than 40 percent to get support on the world market and get our prices turning upward.”
All this means more difficulty for the United States to reach its export goals, according to Anderson. “The only thing that will turn the cotton market will be consumer demand. Where we are at this point is that it is tending to be weaker, not only in the United States but overseas as the economy is slowing down,” Anderson said.
USDA also cut domestic consumption by 200,000 bales in the report, to 8.3 million bales. That raises projected ending stocks for this year by 600,000 bales to 8.7 million bales.
The big change in the world numbers in the report is an increase in beginning stocks to 850,000 bales. USDA also forecast slightly higher production and slightly smaller domestic use. The result is an increase in world ending stocks of 1.2 million bales to 42.73 million bales.
No changes in the production forecast were made in Pakistan or India, while Chinese production was raised 500,000 bales to 23 million bales. USDA cut Chinese imports by 300,000 bales to 700,000 bales.
“Those numbers just reinforce a bearish market for cotton,” said Anderson.
The report, which was delayed for two days due to the attack at the World Trade Center, reflects field conditions as of Sept. 1 before the Southwest and Mid-South crops began to show signs of significant declines in yield.