Plenty of cotton in the world
Oct 14, 2009 10:29 AM, By Elton Robinson, Farm Press Editorial Staff
Extremes of weather throughout the growing and harvest seasons have prompted USDA to lower projections for the 2009 U.S. cotton crop. This could buoy cotton prices a bit this fall and next spring, although ample world supplies still hang over the market.
USDA lowered 2009 U.S. cotton production by 3.3 percent, to 13 million bales in its Oct. 9 Crop Production Report. Texas accounts for most of the decline, although production in the Mid-South was reduced 85,000 bales.
The big news was the reduction of the Texas cotton crop by 400,000 bales, noted Carl Anderson, Extension professor emeritus, Texas A&M University, speaking with a panel of analysts at the Ag Market Network’s October teleconference. “We’ve pointed out for a long time that the Texas crop is subject to dry, hot weather and early freezes.
“There is a lot of uncertainty on how small this crop is going to be. Everything points to it being somewhat smaller than 13 million bales, perhaps to 12.8 million bales.”
“USDA tends to do things incrementally,” added John Robinson, Extension economist at Texas A&M. “It makes me wonder if there is some more trimming coming. I don’t think USDA has touched the yield impact from the deluges we’ve seen in the Mid-South.”
Anderson noted that while world carryover continues to decline, “as of today, we’re still going to carry over about six months of use worldwide, which is fully adequate, a little on the surplus side. About four and a half months would give the market some upside.”
USDA raised crop production for India, another big competitor of the United States, to 24.25 million bales. India’s domestic use is estimated to be around 18.5 million bales, “which leaves them with plenty of cotton to export, and a carryover of 10 million bales,” Anderson said. “All in all, we are decreasing in carryover supplies, but we still have plenty of cotton that is available to the market.”
While the 2009-10 Chinese crop was reduced a million bales, USDA is still estimating Chinese ending stocks of 17 million bales.
Anderson said marketing alternatives for growers “are heavily dominated by going to the loan and waiting for market moves to pick up some equities along the way. Farmers will have to pay storage and handling costs.
“As we move into a new market with lots of volatility, we’re seeing a lot of producers opting to go with marketing association pools and using the futures market to enhance their market. That’s worked well, and we have a lot of producers holding calls out into July 2010.”
The bottom for cotton has moved higher in recent months, noted Mike Stevens, with Swiss Financial Services. “Back in July, we were talking about 55-cent bottoms. The next month, we were talking about 57-cent bottoms. Last month, we were talking about 60-cent bottoms. Now looking at the charts, you could easily see a 62-cent bottom.”
