South Plains Cotton Update

South Plains Cotton Update on Ag Talk on Fox Talk 950 for Thursday May 17th, 2007.

Jay Yates, Extension Risk Management Specialist at the Lubbock Agricultural Research and Extension Center.

The top story this week is the return to the fields by area cotton farmers. Tractors with planters, trailers of seed and rod weeders making final seedbed preparations, have all been common sights in my travels this week. The other common sight has been fields of emerging feed grains. One stretch of highway 54 in Hale County made me forget that I was in the World's Largest Cotton Patch. I felt more like I was in Nebraska, with all the pivots towering over the seedling corn.

After last week's downpour, the rain has subsided in most areas, giving way to dry, but still somewhat cool, conditions across the area. Rain forecasts this week only resulted in 1/4 to 1/2 inch in the Northern Rolling Plains on Tuesday and 1/4 to 1/2 inch in the lower counties of the Southern High Plains on Wednesday. As my frequent appearances as host of the Ag Talk program this week would attest, the area north and east of Lubbock has had excellent planting weather.

Cotton planting is considerably behind normal for this time of year. Dr. Boman showed me a summary of last week's county agent reports compared to the 5-year average. A simple average of that report indicates that we are about 12% planted right now. If I remember correctly, the average is somewhere in the 20's. Corn planting however, is over 80% complete in the Southern High Plains counties which normally plant some corn. There are also reports of increased acreage of milo being planted, primarily in the southern counties.

I would expect the USDA Planted Acreage report which comes out at the end of June to have substantially reduced acreage in the Northern High Plains and somewhat reduced acreage in the Southern High Plains. From what I can see and the people I have talked to, the Rolling Plains will most likely continue to plant as much cotton as ever. I have heard reports that cotton strippers are being traded in 2-to-1 for combines north of Amarillo. In other parts of the cotton belt, pickers are cheaper than ever.

The FARM Assistance strategic analysis program can help you make long-term decisions like whether or not to pick or strip your cotton. And if you decide to pick it, would it be better to have it custom picked or buy or lease a machine on your own. Decisions like these are what the FARM Assistance system was designed for. Call me at 806-746-6101 to make an appointment.

New York futures closed up slightly on the July contract for the week at 4919 up from 4903 last Wednesday. The December contract closed 42 points lower at 5350 down from 5392. Both contracts closed above the 9-day moving average after posting new life-of-contract lows Monday at 4690 on the March contract and 5160 on the December.

Net Upland sales of 292,100 running bales were 43 percent below the previous week and 47 percent under the prior 4-week average. Increases for China (157,300), Turkey (42,500), Pakistan (29,500), Indonesia (26,000), Vietnam (15,800), and Thailand (14,400), were partially offset by decreases for Mexico (42,700). Sales of 57,100 for delivery in 2007/08 were primarily to Mexico (45,600, including 45,000 switched from 2006/07), Thailand (4,000), and China (4,000). Exports of 268,800 were 9 percent below the previous week and 10 percent under the prior 4-week average. The primary destinations were China (91,000), Turkey (40,500), Mexico (23,300), Indonesia (18,100), Pakistan (14,600), South Korea (11,000), Thailand (10,800), and Taiwan (10,500).

Total exports of all cotton at 305,100 running bales were 14% lower than last week and are still far short of the 411,000 bales needed, even with the lower USDA estimate this month. The good news is that we have now sold 100% of the current USDA estimate of 13.25 million bales. The big question is whether or not it will all be shipped before the end of this marketing year.

If you have already listened to this month's Ag Market Network conference call, you would know that Peter Egli doesn't believe that is a problem. By his calculations (as best I could follow), the Chinese will run out of cotton 2 to 3 months before having any new crop available and that supplies will actually get very tight by the first of October. If he is right you might want to continue to hold on to that loan cotton until we see how this situation plays out. I am somewhat skeptical though, because I have heard that justification for higher prices before and it didn't work out very well. He did have some good bullish comments that I wholeheartedly agree with. One is that when the market is near the bottom, everyone is most bearish. Second, cotton is ridiculously cheap compared to grains. Mike Steven's also pointed out something that I had noticed as well. The USDA estimates for China are considerably more bearish than last week's Chinese Ag Attache report. Carl suggested buying December 56 cent calls to cover those cotton acres being planted to something else. With what happened in the market on Tuesday and Wednesday, he might just have been right.

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, the Ag Market Network, which aired on May 15th, featuring Carl Anderson and Mike Stevens with special guest speaker Peter Egli of Plexus Cotton Limited, is available for download at agmarketnetwork.net.

This newsletter, as well as any resources mentioned, is 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, May 17th. 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.