South Plains Cotton Update

South Plains Cotton Update on Ag Talk on Fox Talk 950 for Thursday, April 5th, 2007.
Jay Yates, Extension Risk Management Specialist at the
Texas A&M Agricultural Research and Extension Center.

Of course the big news this week is the record March rainfall. The final tally of precipitation at the Lubbock Airport for March is 5.94 inches. This amount completely shatters the old record of 3.56 inches set back in 1941 and is the most for any March since records began at Lubbock in 1911. The normal March rainfall at Lubbock is 0.76 inches. Other locations around the area received even more rain, with the National Weather Service Office at the Science Spectrum on the South Loop recording 9.15 inches. All actively reporting stations in the West Texas Mesonet, operated by Texas Tech, received more than 2.5 inches. The top spots were the Reese Center, Roaring Springs and Lubbock stations, all with just over 7 inches. Again, the normal March rainfall for the South Plains of Texas is less than 1 inch.

For roughly 3 million irrigated acres in the Texas High Plains that would normally apply 2 to 3 inches of pre-season water to have planting moisture, that translates into a nearly $75,000,000 cost savings. After last year's expensive irrigated crop, that is savings that are urgently needed by most producers.

If you need help analyzing all the opportunities available this year with high grain prices and the best soil moisture in April ever, contact me for a comprehensive, risk-based analysis of your current operation compared to any alternative scenarios you might be considering using the FARM Assistance program.

The prospective plantings report came out Friday, March 30th. The planted acreage of cotton in Texas is forecast to drop 11% to 5.73 million, according to the survey of growers taken by USDA in early March. Nationally, acreage is expected to drop 20% to 12.15 million, the lowest since 1990.

Net Upland sales of 358,900 running bales were 8 percent below the week earlier, but 35 percent above the prior 4-week average. The primary buyers were China (203,200 RB), Indonesia (34,800 RB), Taiwan (21,000 RB), Turkey (19,400 RB), Thailand (16,700 RB), and South Korea (14,600 RB). Exports of 284,700 RB--a marketing-year high--were 28 percent above the week earlier and 31 percent over the prior 4-week average. The major destinations were China (94,600 RB), Mexico (35,400 RB), Turkey (34,300 RB), Taiwan (19,300 RB), and Indonesia (16,400 RB). Net American Pima sales of 35,800 RB were mainly for Indonesia (8,900 RB), Japan (5,300 RB), unknown destinations (3,400 RB), Pakistan (3,300 RB), and China (3,000 RB). Exports of 33,000 RB--a marketing-year high--were primarily to China (18,200 RB), India (5,000 RB), and Pakistan (3,500 RB).

Although both Upland and Pima shipments were marketing year highs, the total of 317,700 is still only 71% of the 445,000 bales needed to reach the current 14 million bale estimate issued March 9th. Furthermore, accumulated exports are currently only 42% of the projected total. Last year at this same time, exports totaled 53% of the final tally. If we use the proportion of exports this time last year as an indicator of total export this year, we would only ship 11.4 million bales this year adding another 2.6 million to the current 8.8 million bale carryover. If that happens, don't expect any significant increase in cotton price this year, regardless of how high corn goes.

The ICAC World Production Forecast released Monday, indicates no change in world production, despite the expected drop in U.S. production. India is expected to step in and pick up the slack. World consumption is expected rise by 3 million bales, resulting in a 47 million bale carryover, for a world stock-to-use rate of 38%. Just remember that last year we started out with an estimated world stocks-to-use ratio of around 38% and wound up at 43% by the end of the year.

Let's put this all into perspective. If we only ship 12 million bales of cotton this year and wind up with a 11 million bale carryover, add to that a 750 pound average yield to the 12.15 million planted acres for a total production of 19 million bales, and we have a 30 million bale supply of cotton with domestic consumption of only 5 million and exports of 14 million. Well, you get the picture. That's why the futures market continues to tell us that planting intentions are still too high.

Speaking of which, the December contract closed down 22 points from 5939 last Wednesday to 5917 yesterday. We remain locked into a trading range that was established last October and so far there has been nothing to indicate any change. Given the previously mentioned supply/demand picture there also appears to be so little CCP at risk in this market to even consider needing to protect it.

We have some really good opportunities to improve your cotton marketing skills coming up. The first is the Ag Market Network, scheduled for April 12th. As always you can come to the Posey Gin office and cuss or discuss what is said or listen over the Internet. Secondly, the New York Board of Trade and Cotton Incorporated are again sponsoring the "Hedging With Options" workshop in Lubbock Tuesday, April 17th at the Holiday Inn on Avenue Q. There is no cost to attend, but to register, contact Raquel Allen at (212) 748-4094 - rallen@nybot.com or Kay Wriedt at (919) 678-2271 - kwriedt@cottoninc.com.

For more information on cotton marketing be sure to check out Dr. John Robinson's weekly cotton marketing newsletter by clicking on the Cotton Marketing link from the Extension Ag Eco website agecoext.tamu.edu.

That's your South Plains cotton update for Thursday, April 5th. This is Jay Yates, Risk Management Specialist with Texas Cooperative Extension. Join me each Thursday at this same time right here on Ag Talk on Fox Talk 950.

South Plains Cotton Update on Ag Talk on Fox Talk 950 for Thursday, April 12th, 2007.
Jay Yates, Extension Risk Management Specialist at the
Texas A&M Agricultural Research and Extension Center.

The weather tops the South Plains cotton news again this week. Only this time it is the wildly erratic conditions that caught our attention. We have gone from a high of 84 on April 2nd to a high of 31 on April 7th with 1 to 3 inches of snow. Then on Monday night we received around a quarter of an inch of rain, followed by a sandstorm on Tuesday. Last week I commented on the cost savings of good beginning soil moisture as we get ready to plant this year's cotton crop. According to comments in the weekly crop report by county agents, some of those cost savings are being used up by increased cost of land preparation. Not just because of high fuel prices, but also due to the crazy weather. Between re-listing fields and running sand fighters the cost of getting the land ready to plant has seen an increase this year over last. There are also some reports of re-applying yellow herbicides.

It's been a couple of weeks now since the USDA Prospective Plantings report came out. The corn market reacted with back-to-back limit down moves, but with December corn still well above $3 per bushel, feed grains are still a viable alternative for many High Plains farmers. There still seems to be some indication that producers have not fully made up their minds what to plant this year. The feeling that I get from producers is that with the good soil moisture, most will start with cotton and then be ready to replant to milo in the event of early season losses. We welcome the rain, but we have to always keep in mind that when you live on the plains, with moisture, comes hail. We had very small losses last year because it never rained. And unlike drought which takes out the lowest yielding dryland acres first, hail does not discriminate base on productivity.

If you need help analyzing all the opportunities available this year with high grain prices and the best soil moisture in April ever, contact me for a comprehensive, risk-based analysis of your current operation compared to any alternative scenarios you might be considering using the FARM Assistance program.

Net Upland sales of 314,200 running bales were 12 percent below the week earlier, but 1 percent above the prior 4-week average. The primary buyers were China (170,000), Turkey (41,000), Thailand (18,400), Indonesia (14,700), India (14,500), and Taiwan (12,400). Exports of 272,700 were 4 percent below the week earlier, but 18 percent above the prior 4-week average. The primary destinations were China (102,000), Turkey (54,200), Mexico (15,600), Indonesia (14,100), and Thailand (11,600). Net American Pima sales of 37,900 were mainly for Pakistan (16,200), India (6,600), South Korea (4,400), and Japan (3,200). Sales of 13,300 for delivery in 2007/08 were mainly for Germany (5,600) and India (5,500). Exports of 14,200 were primarily to Pakistan (4,200), India (2,400), Japan (1,500), and China (1,400).

USDA reduced projected exports to 13.5 million bales in the World Ag Supply/Demand Estimate released Tuesday, April 10th. Given the current levels of sales and shipments, that number may still be too high. To reach the 13.5 million bale estimate, we need to ship over 425,000 running bales per week for the rest of the marketing year. If we ship last week's marketing year high of 317,700 running bales every week for the rest of the marketing year we will only reach 11.65 million statistical bales. I should add here, that it is still logistically possible to ship 425,000 bales per week, since last year from this time until the end of the marketing year we averaged 459,000 bales per week.

The December cotton contract closed down 73 points this week at 5844 yesterday compared to 5917 last Wednesday. The May contract also lost ground as the funds began to roll positions to July closing down 144 points to 5182 from 5326. Certificated stocks remain high at 659,341 bales and CCC upland loan stocks remain at a staggering 10,737,486. The price range seems to be well established as huge stocks keep a lid on the market and healthy export demand keeps a floor under the market.

The Lubbock county marketing club met this morning at the Posey Gin office to listen to the monthly Ag Market Network teleconference. This week's program featured O.A. Cleveland (who has been absent the past few months), Mike Stevens and Carl Anderson. My favorite quote of the day was from O. A. Cleveland, when after listing a long litany of negative factors for the cotton market this year; he said "I am still optimistic about this cotton market." Dr. Anderson did say he felt there was a slim chance that exports could make the new USDA forecast of 13.5 million bales, but that he felt it would not drop below 13 million. Mike Stevens indicated that Monday's price break was the result of a "monstrously large open interest", but that he was encouraged that the market held to less than a 1 cent decline. To hear the entire recorded teleconference, go to www.agmarketnetwork.net.

We still have one last opportunity to work on those marketing skills before the planting season begins. The New York Board of Trade and Cotton Incorporated are again sponsoring the “Hedging with Options” workshop in Lubbock Tuesday, April 17th at the Holiday Inn on Avenue Q. There is no cost to attend, but to register, contact Raquel Allen at (212) 748-4094 - rallen@nybot.com or Kay Wriedt at (919) 678-2271 - kwriedt@cottoninc.com.

For more information on cotton marketing be sure to check out Dr. John Robinson's weekly cotton marketing newsletter by clicking on the Cotton Marketing link from the Extension Ag Eco website agecoext.tamu.edu.

That's your South Plains cotton update for Thursday, April 12th. This is Jay Yates, Risk Management Specialist with Texas Cooperative Extension. Join me each Thursday at this same time right here on Ag Talk on Fox Talk 950.

South Plains Cotton Update on Ag Talk on Fox Talk 950 for Thursday, April 19th, 2007.
Jay Yates, Extension Risk Management Specialist at the
Texas A&M Agricultural Research and Extension Center.

The South Plains cotton crop prospects this week continue to look very positive on the production side of the equation. In reports from county agents this week, most are reporting good soil moisture and have indicated that all pre-irrigation was eliminated this year for substantial cost savings per acre. Which is good news for producers who were counting on a disaster bill to help ease their cash flow burdens. It would appear we are right back where we started from on disaster assistance. Irrigation savings will also help cover the increased cost of fertilizer. I called a good friend who manages one of our area farm supply companies to ask about fertilizer prices for a budget I was working on and his response was to ask if I was sitting down and had a nurse present. The current price structure favors anhydrous, so if you are set up to use it you might want to consider all alternatives before just ordering what you have in the past.

Freezing weather has pushed back any idea of getting this crop in earlier than normal. Wheat is still being evaluated for frost damage. Orchards and vineyards incurred the greatest losses. The only cotton in the ground in our area was Dr. Ganaway's cold tolerance test planted around the 3rd of April. He tells me that it has finally sprouted, but was still in hiding from the Tuesday's hailstorm.

This week the USDA Farm Service Agency in Texas is sending out a letter to all cotton producers who have direct marketing loans with the CCC to inform them of the potential costs of forfeiting cotton. The letter, forwarded to me by Plains Cotton Growers, is the simplest explanation I have seen on the subject and gives a complete example, using likely charges for Texas producers. Fortunately, there is not really that much cotton in producer held loans. Only 640,916 of Texas' 5.7 million bale crop remains in producer held loans. The coops however, have nearly 2.5 million bales in the loan as of April 10th of this year.

If you need help analyzing all the opportunities available this year with high grain prices and the best soil moisture in April ever, contact me for a comprehensive, risk-based analysis of your current operation compared to any alternative scenarios you might be considering using the FARM Assistance program.

Sales of all cotton last week at 827,500 running bales, a marketing-year high, were more than double the previous week. That brings year-to-date sales to 82% of projected exports compared to 86% this same time last year. Of that total, 795,800 running bales were upland and 31,700 were Pima. The primary upland buyers were China (489,600), Turkey (108,400), Pakistan (47,400), Indonesia (39,100), and Taiwan (23,400). Pima sales were mainly for China (13,900), Pakistan (10,000), Japan (2,800), and Taiwan (2,600). Sales of 6,500 for delivery in 2007/08 were for India. Total exports were 273,000, over 150,000 bales short of the 425,600 bales needed to meet the current USDA forecast of 13.5 million bales. To put that into perspective, there are only 18 times in the past 3 years that we have ever shipped that much cotton in 1 week. The primary destinations for upland were China (63,000), Turkey (43,800), Indonesia (22,100), Mexico (21,900), Thailand (14,700), Taiwan (13,800), and Peru (11,100). Pima exports of 26,700 were primarily to China (6,100), India (4,000), Pakistan (3,900), and Turkey (3,700). With shipments only 64% of what was needed this week, next week, as well as the rest of the year, the number will have to be over 435,000.

The market gave us tremendous insight into Chinese buying patterns this season. For the first time since the crop was harvested, the nearby contract traded below 52 cents for an entire week and China stepped in and bought nearly 3 times as much cotton as they had the previous week. The market responded this morning by opening only 20 ticks higher in most contracts. As the old saying goes, "The cure for low prices is low prices." If we have any hope of making the USDA estimate of exports, the nearby contract will have to spend a significant amount of time below 52 cents. The other reason for the price needing to be this low to get the Chinese to buy is the price of synthetics. I read a report this week that the mill delivered price for synthetic fiber in China was 63 cents. To maintain rural income the price of cotton in China is kept artificially high, so the major competitor to US cotton is synthetic fibers.

New crop December continued to trade in the range between 56 and 61 that has been in place since September of 2006. This market has not traded outside a 4.5 cent range for exactly 8 months now. This range fits perfectly with the forecasted increase in price this year over last due to tightening world stocks. Last year December traded in the range of 47 to 51 cents for the entire time it was the front month, therefore this market already has built in tighter world supplies. Major production problems somewhere in the Northern Hemisphere are the only thing at this point that would drive December cotton above this range. On the downside, a recession caused by rising food prices due to the increased competition for gains to make ethanol could cut demand and force prices back into the 40's. I would lose my ag economics license if I didn't give a good argument for both higher and lower prices, but currently my bias is for more of the same. What does that means for this year's cotton marketing plan? Continue to look for opportunities to sell positive equity and premiums for quality fiber.

For more information on cotton marketing be sure to check out Dr. John Robinson's weekly cotton marketing newsletter by clicking on the Cotton Marketing link from the Extension Ag Eco website agecoext.tamu.edu.

That's your South Plains cotton update for Thursday, April 19th. This is Jay Yates, Risk Management Specialist with Texas Cooperative Extension. Join me each Thursday at this same time right here on Ag Talk on Fox Talk 950.

Jay Yates, Extension Risk Management Specialist at the
Texas A&M Agricultural Research and Extension Center.

Homemade jam and local wine may be in short supply this year, but the wheat crop does not appear to have received as much freeze damage as previously suspected. What does that have to do with the cotton crop you might ask? I was just a little afraid that some producers might harvest their wheat early for hay, because of the frost damage, and still have time to come back with a cotton crop. Most wheat I have seen in my travels this week had heads and pivots running, indicating that it will likely be taken to grain harvest. Only wheat that was intended to be hay will likely be baled over the next couple of weeks. The last thing this cotton market needs is any extra cotton to be planted on the Texas High Plains.

Reports from area county extension ag agents continue to tell the story of excellent soil moisture and cool weather. Most are ready for some warmer temperatures to help cotton ground reach critical planting levels. I also hear that summer grasses are behind on growth due to inadequate heat units.

I am still hearing a great deal of uncertainty over what cotton varieties to plant. If you are one of those folks still trying to decide, be sure to check out the Lubbock Center website at lubbock.tamu.edu. Right in the middle of the page you will find links to Dr. Ganaway's 2006 Cotton Performance Test and Dr. Boman's 2006 System Trials. Plains Cotton Growers has an excellent seed cost calculator to figure out exactly what that high priced bag of seed will cost you per acre at there plainscotton.org website.

Severe weather has been on everyone's mind this week. Our prayers go out to folks who lost their homes and businesses due to a line of tornados stretching from Olton to Tulia Saturday night. Monday night saw large hail between Snyder and Sweetwater. If the start to this year is any indication of what is yet to come, it could be a turbulent summer. This reminds me of the supposed Chinese curse, which says, "May you live in interesting times. May you come to the attention of those in authority. May you find what you are looking for". With the interesting weather we have had and the debate over a new farm bill bringing agriculture to the attention of the authorities, we should be careful what we are looking for. Just a thought.

Sales of all cotton last week, at 530,000 running bales, fell 36 percent from the previous week's marketing-year high. That brings year-to-date sales to 86% of projected exports compared to 88% this same time last year. Of that total, 499,800 running bales were Upland and 30,200 were Pima. The primary buyers of Upland were China (186,700), Turkey (65,100), Indonesia (56,200), Pakistan (48,400), and Taiwan (33,100). Net American Pima sales were mainly for China (9,300), South Korea (5,100), Turkey (4,400), and India (2,900). Sales of 26,900 for delivery in 2007/08 were primarily for Pakistan (15,500) and India (5,800). All cotton exports of 362,500, a marketing year high, were made up of 333,100 bales of Upland and 29,400 bales of Pima. The primary destinations of Upland cotton were Turkey (90,300), China (88,500), Indonesia (32,300), Mexico (29,100), Pakistan (17,300), Thailand (13,700), and Brazil (13,700). Pima exports were primarily to China (12,400), India (3,300), Japan (3,000), and Pakistan (2,900). With shipments at 83% of what was needed this week, the new weekly export target is 440,000 running bales for the remaining 14 weeks of the marketing year.

Certificated stocks rose to 710,703 with 19,195 awaiting review putting further pressure on New York futures. The amount of cotton in the USDA loan fell 210,524, but still a whopping 10,369,830 bales. Over 70% of that cotton is in the hands of cooperatives. Let's all hope they know what they are doing. If you are still holding any of the just over 3 million bales of producer owned cotton in the loan, stay on the watch for any equity offers of zero or above.

Even with cotton "on sale" all week, the Chinese cut purchases by over 60%. Maybe that's why the market responded to last week's big sales number with a nearly 100 point move down in the December contract from 5699 last Wednesday to 5600 yesterday. New crop December broke through the bottom of the 56 to 61 cent range that has been in place since September of 2006 with a new life of contract low 5515 on Tuesday. All of the technical indicators I follow currently have the December contract in a solid downtrend. One of the market commentators I regularly read said it best when he stated that this market is "screaming for farmers to plant something else." Too bad many parts of the Texas Southern High Plains don't really have that option for one reason or another. I have even heard of one landlord taking land away from a tenant because he refused to plant cotton for a loss this year.

For more information on cotton marketing be sure to check out Dr. John Robinson's weekly cotton marketing newsletter by clicking on the Cotton Marketing link from the Extension Ag Eco website agecoext.tamu.edu. Also, make plans to listen to the Ag Market Network on your radio May 15th at 7:30 a.m., featuring Carl Anderson, Mike Stevens and O.A. Cleveland. I would invite you to the Lubbock County marketing club meeting, but I'm sure everyone will be busy planting cotton on the 15th.

I've been working on a new blog site and now have it up and running. A transcript of this broadcast, as well as any resources mentioned, are now being posted to tceblogs.tamu.edu/mt/spcu and on DTN Local News Page 7. Of course, you can always reach me at the Lubbock Center at 806-746-6101.

That's your South Plains cotton update for Thursday, April 26th. This is Jay Yates, Risk Management Specialist with Texas Cooperative Extension. Join me each Thursday at this same time right here on Ag Talk on Fox Talk 950.