South Plains Cotton Update

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

It's been almost a month since the first bale of cotton was hand picked on the Swanberg family farm in the Rio Grande Valley on June 29th. Twelve days have past since December 07 posted the life of contract high 6880. In O.A. Cleveland's newsletter last Friday he said he felt that would be the highest December would ever reach this season. Quoting the headline on my myspace page "You might be right." This week has seen trouble penetrating the 38% retracement point of 6226. At the same time the last 2 days have attempted to close the gap left on Friday at 6430. Look for another attempt to close that gap today, opening the way to lower prices. We have already had 5 closes under the 18-day moving average and the 9-day average crossed the 18-day average yesterday. If the 6226 level does not hold, look for a rapid descent to the 50% retracement point of 6020. That would put us squarely back in the middle of the 9-month long range between 56 and 63 cents. Fundamentals for this crop really haven't changed much since then, so it is reasonable to believe that we will stay in that range. The only hope for higher prices on this year's crop is the pull of December 08 to compete for acres with grain. As mid-south farmers harvest their cotton, they will already be making the decision this fall to double crop $6 wheat with $8 beans or save the land to grow loan cotton next year. Since the maximum spread between two futures contracts should never be much more than the cost of carrying that cotton forward, December 08 could pull December 07 up with it.

Net Upland sales of 23,700 running bales were the result of increases for China (26,100), Thailand (5,200), Mexico (2,800), and Japan (2,200), and were partially offset by decreases for Taiwan (13,000) and Hong Kong (3,400). Net sales of 93,000 for delivery in 2007/08 were primarily for Mexico (35,500), China (29,400), and Guatemala (9,600). Exports of 450,300 were primarily to China (152,600), Turkey (79,500), Indonesia (54,400), Mexico (29,500), and Pakistan (28,100). With the addition of 5,600 bales of American Pima, total shipments of 455,900 running bales exceed the number needed to reach the USDA estimate of 13.0 million. By my calculation we need to ship less than 400,000 running bales over the next 2 weeks to make that mark.

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 program was designed for. Call me at 806-746-6101 to make an appointment.

The universal comment from local county extension agents is that the crop is 2 to 3 weeks behind, but looks excellent. Everywhere I go people are afraid to even use the "F" word. Freeze that is, as in early October. Most area cotton is blooming, however you don't have to travel far to see some really small crops. Southeastern Scurry county, which it seems I have been traveling through twice a week lately, looks as good as I've ever seen it. Other farmers tell me this is the best looking crop they have ever had, if you just don't look at the calendar. They also remind me that late cotton on the High Plains is nothing new and it seems like we are always praying for a warm September to finish the crop.

Rainfall totals this week tapered off with only Gail, Lamesa and Lake Alan Henry receiving more than an inch of rain. Most locations received less than half an inch with many measuring no precipitation at all. Daytime highs remain in the lower 90's. That's not very good for accumulating lost heat units, but it sure makes the cotton look pretty.

On the financial side, the most important thing happening right now is debate on the new farm bill today in the House. Yesterday saw a flurry of press releases from the Administration and House Republicans and Democrats. The House republicans are threatening to block the bill as long as it has legislation to start taxing U.S. subsidiaries of foreign corporations to pay for increases in the bill. The President is threatening to veto the bill because it doesn't go far enough in reforming the system. Which is the administration catch phase for lower payment limits and income testing. On the Senate side they haven't even started working on it. Can you say one-year extension? Also, don't forget about disaster assistance for last year's dryland crop. If you had 60% CRC insurance on your cotton, the disaster payment will be about one-third of the insurance indemnity. If you want to calculate a more precise estimate of what you should have coming, go to the lubbock.tamu.edu website and click on the 2007 Disaster Calculator link in the center of the page. The only feedback I have received is that the payment it calculates isn't enough. But hey, I only do the math; I didn't set the payment rate.

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 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.