• Prices have been helped by China building stocks (by importing) but then also by largely not using those stocks to-date.
• The bottom will hold only if buying continues to take place there.
As we expected, USDA’s September crop production and supply/demand report reduced the size of the domestic cotton crop.
The crop reduction was actually a less than some anticipated, because the report showed an increase in planted acres.
U.S. average yield is estimated at 796 pounds per acre, compared to 813 in the August report. Acres planted, however, was increased by 86,000 and acres harvested increased 78,000.
The U.S. crop declined slightly by 150,000 bales — from 13.05 million bales in August to 12.9 this month.
Yield prospects declined in 8 states but acreage planted was revised up in 8 states compared to USDA’s June estimate.
Texas acreage abandonment is now forecast at 43 percent. The yield forecast remained the same as the August estimate.
In addition to the reduction in crop size, projected 2013 crop year exports were lowered 200,000 bales. This was likely in response to the somewhat smaller crop and less available supply.
Looking at the world numbers, 2013-14 projected ending stocks continue to grow. Ending stocks were increased by roughly another 1 million bales. This was due primarily to an increase in production (in India) and a slight reduction in use (demand).
China’s numbers were largely unchanged from the August report. China’s ending stocks are now forecast at 58.31 million bales — 61.5 percent of the world total, but essentially unchanged from the August estimate.
Prices continue to find support around the 83-cent area. This has been challenged, but has held several times. It is worth noting, however, that with exception of the “spikes” to 90 cents or better, the trend in the market seems to be slowly downward ..... the “bottom” has held but the “top” shows evidence of eroding.
Some further price improvement is possible BUT it will depend partially on the U.S. crop getting even smaller.
There are some concerns on the demand side and continued uncertainty about China’s stocks policy and/or farmer subsidies. Prices have been helped by China building stocks (by importing) but then also by largely not using those stocks to-date. The bottom will hold only if buying continues to take place there.