• The price outlook will depend on U.S. and world production, export sales, and China’s stocks and policies for purchasing cotton and use of stocks.
USDA has released the much anticipated August cotton production and supply/demand estimate numbers.
This one carries extra weight because it contains the first grower-survey numbers for the crop and because of the uncertainty in the two largest cotton states. The uncertainty stems from heavy rainfall in Georgia and drought in Texax.
Monday’s report estimates the 2013 U.S. cotton crop at 13.05 million bales — almost one half million bales less than the July estimate. U.S. exports were lowered, likely due to the smaller crop and further tightening of U.S. supply.
U.S. yield was lowered from 831 to 813 pounds per acre; Texas acreage abandonment is estimated at 42 percent and a yield of 597 pounds per acre compared to 624 last year.
Georgia yield is estimated at 941 pounds per acre — a respectable number given the challenges we’ve faced so far.
The world crop was reduced 1.64 million bales from the July estimate — 1 million bales of the cut in China (dropped from 34 to 33 million bales expected production).
Usage held steady, increasing just slightly. On net, world carry-over or ending stocks was reduced by almost 600,000 bales. Estimated Chinese crop year ending stocks were lowered slightly by 67,000 bales.
These are not really real significant changes in the grand scheme of things, but should be bullish enough to be supportive of prices in the near-term. The U.S. crop got smaller, the Chinese crop got smaller, demand seems to be stable, and stocks got a little smaller.
Prices surged to near 90 cents last week and Aug. 12 were again at 90 cents — the highest level since mid- June.
Longer-term, the outlook could again turn more cautious. Production is expected to outpace demand by 61⁄2 million bales, we still face record world stocks held mostly by China and demand, while mostly good, still appears fragile.
On the potentially bullish side, the U.S. crop may still face challenges with both yield and quality. The price outlook will depend on U.S. and world production, export sales, and China’s stocks and policies for purchasing cotton and use of stocks.
Another run at 90 cents at this time seems a little hard to believe, but here we are.
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