South Plains Cotton Update

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

Last Friday the New York Board of Trade hosted the annual Cotton Market Roundtable with Carl Anderson, O.A. Cleveland, Mike Stevens, Jarral Neeper, Pat McClatchy and Joe Nicosia. If you missed it you can download it at agmarketnetwork.net. It says "NOT YET AVAILABLE" but it really is, if you just click on the link. Also, in his weekly column, O.A. Cleveland had a very good summary of the forum. It is available at cottonexperts.com. Carl sent me the complete version of his presentation, as well as the math that led him to make the statement that he predicted that Texas would make more total cotton this year than last off of fewer planted acres. If anyone is interested I can forward that information to you. To sum it all up, the expected price range, among the speakers present, was for December to trade from the high 50's to the low 70's.

New York futures may have hit the wall this week. After reaching a new life-of-contract high 6880 on Monday, December 07 fell due to an extremely overbought condition coupled with major weakness in corn. If you heard what Joe Nicosia said about farm commodities in general last Friday, that all the markets are really just trading corn right now, it makes since that a major drop in corn would signify the end of the cotton rally. Add to that the technical indicator of two daily closes below the 9-day moving average and you have the perfect opportunity to buy December 07 puts to protect the price of this crop in the field. A December 07 62 cent put, bought for 2 cents or less, would net the typical High Plains cotton farmer 2 to 3 cents over loan, with the upside still open if this market is only catching its breath before heading higher. 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 29,400 running bales were the result of increases for Turkey (11,900), China (10,900), and Thailand (7,100), partially offset by decreases for El Salvador (1,700), Taiwan (1,400), and Hong Kong (1,300). Net sales of 59,800 for delivery in 2007/08, which begins August 1st, were primarily to El Salvador (30,300), China (8,200), Mexico (5,400), and unknown destinations (5,100). Exports of 423,700 went mostly to China (136,000), Turkey (84,900), Pakistan (47,500), Mexico (34,100), and Indonesia (23,400). Net American Pima sales of 5,100 were mainly for Japan (1,200), Pakistan (1,100), India (1,100), and Hong Kong (1,000). Net sales of 49,000 for delivery in 2007/08 were primarily for China (32,300), Pakistan (6,900), and India (4,900). Exports of 14,000 were largely to China (3,600), Italy (2,600), Taiwan (2,100), South Korea (1,400), Indonesia (1,300), and India (1,100). Total exports of 437,700 were more than sufficient to meet the most recent 13.0 million bale estimate from USDA. In fact, if we continue at this pace, USDA will likely set the final export number at 13.25 million bales once the marketing year is over.

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Crop conditions, as reported by area county extension agents, remained about the same as last week with an increase in acres rated excellent and an increase in acres rated very poor. I guess the warmer drier weather has that effect on cotton. Those plants with little weed pressure and a good root system progressed nicely this week, while those under some stress responded poorly. Overall agents indicate that the crop is 1 to 2 weeks behind with most areas moving in to large scale bloom this week. Agents tell me personally, that real first bloom around Lubbock needs to be about the 10th, not the "mythical" 4th of July usually talked about at the coffee shop. Of course, where I grew up, growing Acala cotton, having blooms by the 4th of July really was a necessity. With the varieties we are growing today, however, I don't think it is quite as important.

Scattered rains brought some hail, but no extremely large events that would push up abandoned acreage significantly. Plainview and Denver City were the only Southern High Plains locations to receive more than an inch this past week. The Rolling Plains all the way from Silverton and Turkey down to Spur, Jayton and Aspermont received 1 to 2 inches. Heat unit accumulation continues to be our major concern with Lamesa topping 1,000 since the first of May, Lubbock at 960 and Halfway at 818. The last 7 days did pretty well with all 3 locations racking up more than 100 growing degree days for the week. That makes the fourth week in a row of over 100 units per week. Combine that with modest rains and you have the steady improvement in crop conditions we have seen the past few weeks.

On the financial side, the cost of energy and fertilizer remains high. The only good news is that with the reduced need to irrigate, area farmers should be able to afford much needed fertilizer. In my travels this past week, the lack of sufficient fertility was my major concern. The other problem we are facing when it comes to maximizing the potential of this crop is the lack of operating funds, due to the unprofitable crop many farmers had last year. When I get home next week, we will start looking into the relationship of yield and profit. Strangely enough those two don't always move in the same direction.

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 conference call will be August 14th at 7:30 a.m.

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