What is in this article?:
- Whatever happened to dollar cotton?
- Bearish numbers prevail
• USDA bumped its estimate of world ending stocks for 2012-13 to a record 76.5 million bales in September.
• That's enough cotton to supply 71 percent of the world's needs in 2013-14.
• Cotton analysts believe the cotton market will hold steady, and advise producers to price cotton on rallies that may occur next spring.
Thoughts of dollar cotton seem like a distant dream these days, and for good reason, too.
China is estimated to have enough cotton in its strategic reserve to serve most of its domestic consumption needs for 2013. Grain and soybean prices have gone through the roof. Not only is cotton acreage shrinking next year. It needs to.
It all begins with that big number in the world ending stocks column, notes John Robinson, Extension economist, Texas A&M University, speaking at the Ag Market Network’s September conference call.
Those numbers reflected in USDA’s decidedly bearish Sept. 12 estimates of world cotton supply and demand were telling. Beginning stocks were increased for Australia by 300,000 bales, for India, 400,000 bales and for China, 1.3 million bales. “It just adds more weight to the supply side which is going to ultimately burden the ending stocks number.”
Meanwhile Indian cotton production was raised by 1 million bales compared to August, but USDA offset much of that with reductions in Brazil and the United States.
“The bottom line from all of these adjustments factors out to increasing supply, decreasing consumption and another move to record world ending stocks, at 76.5 million bales,” Robinson said.
“The world stocks-to-use ratio is now 71 percent. What that means is that when we get to the end of this marketing year, 71 percent of the cotton that the world needs in the 2013-14 marketing year is already in hand, in a warehouse. It’s just a picture of excess supply.”
U.S. numbers tell a different story. USDA adjusted its estimates for U.S. planted and harvested acres – 275,000 fewer acres planted and 375,000 fewer acres harvested. It bumped abandonment by 1.5 percent and raised estimated U.S. cotton yield slightly. Robinson believes further adjustments to harvested acres will come in future USDA reports, particularly in the dryland areas of Texas.
The adjustments in U.S. acres resulted in a little over a 500,000 bale decrease in production, which was partially offset by raising ending stocks 50,000 bales and lowering U.S. exports by 300,000 bales. “So the bottom line was that we got a little bit tighter ending stocks, by about 200,000 bales.”