What is in this article?:
- Despite wild swings in estimates, cotton market remains steady
- Alabama estimate lowered
• Just in the yield calculations alone, there were changes in 16 of 17 states.
• The market’s failure to move back toward carrying charges has got everybody really antsy because of the lack of deliverable supplies.
Alabama estimate lowered
Losses in the Alabama crop were due to the cumulative effects of heat and drought working on the crop, according to Cleveland.
“In Georgia, I think the fruit was probably there, but the crop was so late, it may not have time to develop, so they had to take the crop down.”
Robinson added that the effects of Hurricane Irene on Southeast cotton explain significant declines in estimated yield for Virginia, North Carolina and South Carolina.
Changes in the world supply and demand estimates were also noteworthy, according to Carl Anderson, Extension professor emeritus, Texas A&M University. “The Chinese crop was increased by 1 million bales, from 33 million bales to 34 million bales, compared to 30.5 million a year ago. So apparently that crop is doing fairly well.”
Despite this, there is still a very tight gap between foreign consumption and production of about 5 million bales, noted Anderson. “When you add it all up, you have global stocks up about 18 percent from a year ago, and a stocks-to-use percentage of 45 percent which would normally support the market.”
Anderson noted that U.S. carryover increased to 3.4 million bales, which is up 31 percent from last year, and is the largest carryover since 6.3 million bales two years ago.
“This indicates that the market should be trading fairly stable for the next several months, barring any sudden weather shocks in any of the major-producing countries, the United States, China, Pakistan and India,” Anderson said.
Softening cotton demand is also a concern, according to Anderson. “We’re not getting much activity on the exchange from the user side. We had a big drop in cotton consumption last year which is what you would expect with higher prices. History says anytime we have an exceptionally big increase in price, you have a big hit in demand and big increase in polyester use. Demand is going to play a big role in whether the market is going to move out of the trading channel it’s now in.”
Anderson said that Texas cotton fields are in desperate need of moisture this winter to replenish subsoil moisture levels. “If the reports hold true of another three months to four months of extremely dry weather, it will be very difficult for our crop in Texas. Everything will depend on the spring rains.”
“We’re waiting with baited breath to see if there is an official forecast of another La Niña, which brought the drought to Texas last year,” Robinson said. “If it happens, it’s a repeat of the 1950s, back-to-back droughts.”
Analysts collectively project a price range for December 2010 cotton of between 95 cents and $1.25.
“Right now, with conditions the way they are, if cotton gets under $1.05, you’re going to have to get in line and get a ticket.” Stevens said.
Cleveland doesn’t see December 2010 cotton prices moving below a dollar a pound. “I tend to think this crop size may come down a bit. I sense that we’re starting to see a minor pickup in demand.”