South Plains Cotton Update

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

The World Ag Supply/Demand Estimate, or WASDE report, came out this morning with the projected US crop size slightly bigger than anticipated at 17.5 million bales. The old crop estimates for the US crop remained unchanged, with a projected carryover of 9.8 million bales. Ending stocks for the new crop are forecasted to drop to 5.9 million bales by the end of next July. The estimate of world ending stocks continues to decline slightly, and let's face it, with only 4 to 5 million bales of domestic use, world stocks are all that really matters. The world stocks-to-use ratio is projected to decline from 46.9% this year to 39.9% next year.

New York futures continue their upward march. Another new life-of-contract high was set yesterday at 6750. The closing price for the week ended 344 points higher at 6692. Another 50-point gap was left between 6490 and 6540. That makes 3 significant chart gaps left on this steep upward trend. Have you ever played Jenga? Well, you know what happens when you have a tall precarious structure with a lot of gaps. It comes down much faster that it went up. With that in mind, if you remember last week I mentioned those 56-cent calls you could have bought for 160 points on May 15th. Yesterday they traded for 1110. That's a 9 and a half-cent profit. If you actually acted on the advice back in May, and have not already done so, get out! Don't be greedy, just take the profits and pat yourself on the back. By the way, that comes from Carl as well. On new crop sales, I don't think you could go wrong setting a floor under this price on at least half the crop right now, either with put options or a minimum price contract with a merchant.

Net Upland sales of 51,800 running bales were primarily for Turkey (21,100), China (15,000), Thailand (13,600), and Taiwan (6,100). Net sales of 72,700 for delivery in 2007/08, which begins August 1, were primarily to Thailand (26,000), Turkey (17,200), South Korea (10,900), and China (10,800). Exports of 389,100 went to China (148,700), Turkey (67,100), Pakistan (33,100), Mexico (28,300), Hong Kong (21,000), and Indonesia (20,100). Net American Pima sales of 5,900 were mainly for Japan (3,200) and China (1,600). Net sales of 4,600 for delivery in 2007/08 were for Portugal (1,300), Japan (1,300), Peru (1,200), and Pakistan (900). Exports of 7,900 were primarily to Pakistan (2,600), China (1,500), and India (1,200). Total exports of 397,000 were well above the 350,000 bales needed this week to reach the current USDA estimated 13.0 million 480-pound bales. The current pace of exports, if it holds, could push the year-end total back to 13.2 million bales. I heard this week that trucking rates to haul cotton have doubled in recent weeks; so maybe the push is on to have a strong finish and a good start to next year. We already have current year sales of about 2 million bales that will be carried into next marketing year. And this year there is no Step 2 about to run out, so there is no extra incentive to get it all offshore before August 1 like there was last year.

The FARM Assistance strategic analysis program can help you make long-term decisions like whether or not to buy or lease the adjoining farm. And if you buy it, what repayment terms can you afford? Decisions like these are what the FARM Assistance system was designed for. Call me at 806-746-6101 to make an appointment.

Growing conditions continue to remain nearly ideal for cotton this year. Rainfall since May 1st has ranged from 5 to 10 inches across most of the growing region according to the West Texas Mesonet. Annual totals range mostly from 15 to 20 inches, with the majority of locations already receiving their total average annual rainfall by the end of June. From the standpoint of total rainfall, this year is shaping up to match 2004, in which most locations ranged from 35 to 40 inches of rain for the year. The big difference is in timing, with most of 2004's rain coming after June 1st and a significant portion during October and November during harvest. Temperatures have been excellent as well with the highs ranging from 89 to 95 and the lows in the mid to uppers 60's. You can tell how good conditions have been by driving around the same area once a week and noticing the difference in crop stage. One person a the bi-weekly Plains Cotton Advisory meeting last Friday said they couldn't believe the change in appearance of the cotton in Yoakum County during a 4-day trip to Ruidoso.

Crop conditions, as rated by area county extension agents, improved again this week. Fields rated good and excellent rose another 5% to 44%. Fields rate poor and very poor declined 2% to 18%. We continue to have a small amount of extremely poor condition cotton being replanted to milo, but not enough to make a significant difference in final harvested acreage. There have not been a lot large hail events either. Last night a storm hung over the McAdoo area for quite some time with radar indications of nickel-sized hail. I haven't heard what the extent of any crop losses might have been as of this broadcast.

Dr. Boman was absent from last Friday's Plains Cotton Advisory group meeting, so there was no "around the room" guess of High Plains crop estimate. However, I spoke with him later and he was in agreement with my 3.5 million bale estimate. I came up with that number based on average abandonment, so if we continue to have weather like we have had so far, the crop will likely just get bigger.

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, to listen to archived recordings of the Ag Market Network conference calls, as well as weekly commentary from Mike Stevens, go to the AgMarketNetwork.net website. The next live broadcast will be from the New York Board of Trade on July 13th at 7:30 a.m. This month's conference will feature special guest speaker Joe Nicosia of Allenberg Cotton, with roundtable participants O.A. Cleveland, Carl Anderson, Jarral Neeper, Mike Stevens and Pat McClatchy. Come to the Posey Gin office at 7:30 to listen to the conference call, drink a cup of coffee and discuss what the experts had to say with the Lubbock County Marketing Club.

That's your South Plains cotton update for Thursday, July 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.