South Plains Cotton Update

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

The cotton market this week acted like it was trying to revive the bull that was gored nearly 3 weeks ago. Thursday's close was the 4th above the 9-day moving average. The December 07 contract was up only slightly for the week, but the most important thing that can be pulled from the technical analysis is that the retreat filled the last two gaps left in the phenomenal rise that started in May. We also saw good support at the 38% retracement level of 6226. On the fundamental side, the almost 7 cent drop uncovered enough buying to hold the market up as export sales reached the 300,000 running bales needed to meet the 17 million bale estimate for the 07/08 marketing year.

Net Upland sales of 46,500 running bales for the 06/07 marketing year combined with net sales of 255,300 for delivery in 07/08 and previous sales to bring the total outstanding sales to 3.4 million bales compared to 2.2 million last year. The primary buyers were China (134,100), Mexico (63,300), South Korea (27,000), Turkey (26,300), Bangladesh (8,400), and Thailand (4,000). Exports of 438,300 running bales of upland were primarily to China (189,100), Turkey (41,700), Pakistan (40,700), Mexico (36,800), and Indonesia (34,600). American Pima exports of 15,700 were primarily to Pakistan (5,200), Indonesia (3,600), China (3,200), and Japan (2,500). Total exports of 454,000 running bales should bring the annual tally up to the 13.0 million bales forecast by USDA with 5 more shipping days left in the marketing year. If shipments the last 5 days remain steady the final number will likely come in at 13.4 million on the next estimate due out August 10th.

Old crop should have all been moved during the rally, but for the 160,000 bales of Texas cotton still in the loan held by producers there may still be hope for avoiding costly forfeiture charges. Continue to stay in contact with a merchant to take advantage of any opportunity for not more than $5 per bale equity. The Coastal Bend crops are delayed due to flooding and that could make for a short-term shortage of cotton available for shipment. On new crop, any rally above 66 cents should give the opportunity to buy puts yielding $25 per bale equity over loan while still leaving the upside open for the possibility of future gains.

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 crop condition improved slightly this week with county extension agents reporting less cotton in the poor to very poor range and more in the good to excellent range. General comments still indicate that the crop is 2-3 weeks behind, but looking good. From some of the cotton I looked at this week I believe those couple of weeks may just be gone as far as production goes. When it comes to heat units, we are going to find out this year if they are as important as we have always thought. If we make it through the summer without breaking 100 it will be only the 5th time in the recorded history of Lubbock for that to occur. Low abandonment, in the 5-7% range, could translate into another 4 million bale plus crop for the Texas High Plains, even with a 22% reduction in planted acreage. Weed pressure seems to be less of an issue this year compared to the wet year of 2004, possibly due to the wide adoption of Flex Technology.

Still no official word on when disaster signup will begin, but we are getting more and more request for the Disaster Calculator developed in cooperation with Plains Cotton Growers. There are 3 sites you can download the calculator from; Plains Cotton Growers at plainscotton.org, the Lubbock Research & Extension Center at lubbock.tamu.edu, and the home of the South Plains Cotton Update at tceblogs.tamu.edu. Since our last broadcast, the House passed the Farm Bill. The Senate won't take up the measure until after the Labor Day recess sometime in September. Our three representatives from the High Plains districts all voted against the bill as presented on the House floor after some last minute changes by the Democrat leadership. You might want to ask them about that when they're in the district for the break.

Probably the biggest thing the Ag Eco group will be dealing with on this Farm Bill will be the addition of an option to take a revenue-based CCP option rather than the current price-only CCP. Farm program participants would have a one-time option to receive a Revenue Counter-cyclical Program (RCCP) payment. A time would be established in the first year of the program to make the choice for the entire duration of the bill. The RCCP would be based on a national target revenue per acre. Dr. Richardson is already thinking about the simulation model he will develop to help producers make the decision which program to sign up for. It will likely be something similar to the Base & Yield Analyzer if this provision becomes law.

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 AgMarketNetwork.net. The next conference call will be August 14th at 7:30 a.m. and will feature regular speakers Carl Anderson, Mike Stevens, O.A. Cleveland and Pat McClatchy. As always, everyone is welcome to join the Lubbock County Marketing Club at the Posey Gin for the teleconference.

That's your South Plains cotton update for Thursday, August 2nd. 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 Lubbock Agricultural Research and Extension Center.

Treading water would best describe this week in the cotton market. The chart for December 07 has a classic wedge formation, indicating a market looking for a new direction. Add to that the convergence of the 9, 18 and 40-day moving averages and we have what looks like a magnifying glass focusing a ray of sunshine on an ant. Of course the ant is the August Supply/Demand Report and Crop Production Report due out first thing Friday morning, which just happens to be the first field survey based yield estimate of the season. If I were a speculator, today is a great setup for a straddle. If you don't know what that is, I wouldn't recommend even thinking about trying it. This market is likely to find a new direction tomorrow and it's anybody's guess whether it is up or down. The cash market also remains very flat as the pace of sales and exports for the new marketing year offer nothing to get excited about.

The current average industry estimate of the total U.S. cotton crop, according to AgWeb.com, is 17.7 million bales up from the July estimate of 17.5 million. My personal belief is that exports will be raised to 13.2 million, lowering beginning stocks, thereby leaving U.S. ending stocks unchanged in tomorrow's estimate. Domestic mill use likely will be unchanged as well. Worldwide, the Chinese keep cotton stocks and use information as closely guarded as nuclear secrets. The flooding in India is primarily in the northern state of Bihar which is more heavily planted to corn and rice than cotton. There appear to be no other large scale crop problems anywhere in the world to dramatically change the approximately 40% stocks-to-use ratio forecasted in the last Supply/Demand Report.

Net Upland sales for the 2007/08 marketing year, which began August 1, were 77,600 running bales. The major buyers were China (24,400), Thailand (10,600), Mexico (10,500), and Turkey (10,300). Outstanding sales of 1,597,600 on July 31, (the end of the 2006/07 marketing year) were carried over to 2007/08. Net sales of 11,250 for delivery in 2008/09 were for Mexico. Exports of 274,500 for July 27-31 were primarily for China (119,700), Turkey (47,900), Indonesia (23,000), Mexico (21,800), and Pakistan (13,300). Accumulated exports of 11,978,700 running bales of upland should be more than sufficient, when combined with the 652,400 running bales of American Pima, to meet or exceed the current USDA estimate of 13.0 million 480-pound bales. Upland exports of 103,500 for August 1-2 were mainly to China (45,200), Turkey (18,500), Mexico (13,600), and Indonesia (6,300). Exports for own account increased by 67,200, of which 65,900 were for China.

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.

Scattered showers across the area brought timely relief to cotton crops ready for a drink. Most areas covered by the West Texas Mesonet received at least some precipitation. Floydada, Paducah, Roaring Springs and Gail all receive over 2 inches. Temperatures are finally getting up to what we normally think of for West Texas in the summer. Tulia recorded a high of 100 degrees yesterday with several locations in the Rolling Plains over 100. The rest of the High Plains was only a few degrees behind. The forecast for today and tomorrow looks like more of the same.

Area extension ag agents continue to comment on the outstanding, but late, crops in their counties. This week's temperature should help with that. They also bring up the issue of pockets of aphids approaching levels requiring treatment. If you haven't checked fields yet, it would be a good time to start. The last thing we want is an area-wide aphid problem. Crop condition ratings remain virtually unchanged from last week, with 19% poor to very poor, 48% good to excellent and the remaining 33% rating fair.

Farm bill rhetoric is getting thick as the Senate prepares to take up the matter after the Labor Day recess. The word recess makes me think of an elementary school playground, how appropriate. Whatever Congress and the Administration finally come up with, the Texas Extension Risk Management group and the Ag & Food Policy Center at A&M will be ready to help farmers analyze their options under a new farm bill. I have every confidence that the level of cooperation between the local and state FSA offices and Texas Cooperative Extension will be just as good as it was last go around. I guarantee that the North Texas Regional Risk Management group is already preparing to help all our producers make the choices necessary for and efficient farm program signup.

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 AgMarketNetwork.net. The next conference call will be August 14th at 7:30 a.m. and will feature regular speakers Carl Anderson, Mike Stevens, O.A. Cleveland and Pat McClatchy. As always, everyone is welcome to join the Lubbock County Marketing Club at the Posey Gin for the teleconference.

That's your South Plains cotton update for Thursday, August 9th. 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 August 16th, 2007.
Jay Yates, Extension Risk Management Specialist at the Lubbock Agricultural Research and Extension Center.

The day before the August Supply/Demand Report came out the technical indicators all turned bearish and the market began to trade down. Since that time December 07 has lost 333 points for the week ending Wednesday, August 15th. The close yesterday of 6018 was precisely the 50% retracement level from the May to July run-up. December opened this morning 108 points lower at 5910, the first time this market has traded below 60 cents since June 21st. As of this writing, there is a 51-point gap left to fill, otherwise there is nothing left to support this market above 52 cents. Because of longer-term bullish market fundamentals, I would count a return to the low fifties as a second chance to buy CCP protection if that is something you need to do. We have been talking about December 08 offering support to December 07, but it may be the other way around. The 07 contract may just pull the 08 contract down in the mud with it. It's kind of like your kids. You hope they will be a good influence when they are hanging out with bad kids, but it usually works the other way around.

The World Ag Supply/Demand Estimate was released last Friday. Last week I mentioned that the average trade estimate of U.S. crop size was 17.7 million bales. The actual forecast was 17.35 million down from 17.5 million last month, resulting in a projected 100,000 bale decrease in domestic ending stocks. On the world balance sheet however, ending stocks were raised 740,000 bales from last month, pushing the projected stocks to use ratio back above 40%. That appears to be the only bearish fundamental affecting this market. The major cause of the current downtrend is most likely speculative long liquidations and formula trading.
The latest Supply/Demand Estimate offered the first glimpse of expected local production as well. According to the Texas Ag Stat Service, the High Plains, as represented by District 1-N and 1-S, are expected to produce 3.95 million bales this season, even with lower planted acreage from last year. We are only 1 or 2 timely rains away from making the fourth straight 4 million bale crop.

Net Upland sales of 355,300 running bales were up significantly from the previous week. The major buyers were China (140,700), Mexico (110,300), Turkey (28,200), Indonesia (19,000), Pakistan (11,300), and Colombia (10,200). Net sales of 34,400 for delivery in 2008/09 resulted as increases for Mexico (36,200) were partially offset by decreases for South Korea (1,800). Exports of 339,700 were primarily to China (158,300), Turkey (41,500), Mexico (33,700), and Indonesia (31,500). Net American Pima sales of 5,500 were mainly for Brazil (1,500), Thailand (1,400), and China (1,000). Exports of 12,800 were primarily to Pakistan (2,900), China (2,400), Indonesia (1,900), and Japan (1,900). Total sales of 360,800 and exports of 352,500 were both above industry expectations and well above the number needed to meet the new USDA estimate of 16.7 million bales. The total bales sold for delivery during this marketing year stands at double what it was this same time 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 program was designed for. Call me at 806-746-6101 to make an appointment.

Crop condition, as reported by area Extension Ag agents, continues to improve as the percentage of acres reported poor and very poor declined and those reported good and excellent increased. Most of that improvement came from much needed heat units. Accumulated growing degree days since May 1st topped 1500 this week in Lamesa with Lubbock not far behind at 1457 and Halfway registering 1262. Over the last 2 weeks, daily accumulations have hovered near or above 20 since the August heat wave began. Area farmers are hoping for a nice soaking rain out of tropical depression Erin, which made landfall near Lamar, Texas early this morning. The current track has the storm heading straight for Monahans, with the possible effect being felt as far north as Lubbock. Not good for the folks directly in its path that have experienced flooding in recent weeks, but good for Far West and Southern High Plains cotton producers. Also not good for our friends who are planning an outdoor wedding this Saturday in Lubbock. Sorry Laura, but the cotton farmers are praying against you.

Nothing new on the financial front this week, but if your farm bank account is like mine, it is almost out of money. So when you get that cotton laid by for the season you might want to join DeDe Jones and I for a class on managing your farm finances using QuickBooks. We still have a few spots left for the 2-day workshops to be held August 22nd and 23rd in Amarillo and August 28th and 29th in Lubbock. Call me at 806-746-6101 to register for either location. Just be sure to tell me which one you plan on attending, because I might forget to ask.

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 AgMarketNetwork.net. The featured speakers this week were Carl Anderson and Mike Stevens. For those of you who were listening to the call, note that the technical indicators that Mike said to watch out for have happened and we are now solidly in a down-trending market.

That's your South Plains cotton update for Thursday, August 16th. 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 Friday August 24th, 2007.
Jay Yates, Extension Risk Management Specialist at the Lubbock Agricultural Research and Extension Center.

We're delayed this week because of the Little League World Series. Congratulations to the Lubbock Western All Stars for making it to the U.S Championship game at 2:30 on Saturday against the Warner Robins All Stars from Georgia. A win tomorrow will put them in the World Series Championship Game against the International Champion on Sunday.

Unfortunately the news out of New York is not nearly as good as the news form Williamsport. Last Thursday while writing my weekly column, the cotton market was in the middle of a major meltdown. The market ended up closing down the 300-point limit. Every trading day since has seen the market trade completely within the range established last Thursday, with each successive day having an even smaller range. Thursday's close of 5861 was only 5 points higher than the open, suggesting the market may be ready to show us today which direction the market is headed in the future. A significantly lower close today could mean new lower prices in the weeks to come.

If you remember, the World Supply Demand figures were only mildly bearish earlier this month. However that combined with a technical setup which triggered numerous program trading models to start selling, a fear of a global economic slowdown and the disaster in the mortgage lending arena, which had fund managers scrambling for liquid capital and selling off positions in their long-only commodity funds. All these factors came together last Thursday for the perfect storm in the cotton market. This week we have been in the eye of the storm, just waiting to see which direction this market is heading when it comes out the other side.

Another good week of sales and shipments as net Upland sales of 397,600 running bales were 12 percent above the prior week. The major buyers were China (141,500), Turkey (111,300), Mexico (27,100), Thailand (23,800), and Taiwan (23,300). Exports of 310,900 were 9 percent below the week earlier and 23 percent under the prior 4-week average, but still at an excellent pace for this time of year. The primary destinations were China (117,100), Turkey (55,700), Mexico (32,400), Indonesia (30,000), and Thailand (13,700). Net American Pima sales of 3,900 resulted as increases for China (2,600) and Pakistan (1,800), were partially offset by decreases for Japan (1,300). Exports of 14,000 were primarily to China (3,600), Japan (2,800), Turkey (2,600), India (1,900), and Pakistan (1,300). Total exports of all cotton at 324,900 running bales brings total shipments to 134% of this time last year with an annualized rate of 18 million statistical bales, which is more than sufficient to meet the current USDA estimate of 16.7 million.

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.

Crop conditions, as reported by area county Extension Ag agents, deteriorated slightly this week for the first time in 4 weeks. Most of the decline came from the northern counties. We had some moisture this past week on the Western side of the High Plains, but the real rainfall was confined to a band from Gail east to Aspermont with anywhere from 3.5 to 6 inches in the storm last Friday and Saturday. The rest of the area has seen nothing but hot and dry with 20 to 30 mph winds for the last several days. Overall the dryland crop is shutting down and is predominately from 0 to 1 NAWF. Most irrigated is at or past cutout at 3 to 5 NAWF. My Grandpa always taught me to quit watering cotton on September 1st, so if he was right, and he usually was except that he always exaggerated the yields he used to make back in the forties, a good rain this week would be just what the cotton doctor ordered. Two inches of rain across the area would probably put the High Plains crop back over 4-million bales for the fourth straight season, thanks to ample early season rain and extremely low abandonment.

On the financial front, I received an article this week from Randy Neugebauer's office, which quoted Secretary Johanns saying that crop disaster relief signup would begin in October, with payments to made the following month. That goes right in line with what I shared earlier this year from my FSA insiders in College Station. If you need help setting up your farm accounting system, we still have a couple of spots open in Lubbock for the 2-day QuickBooks for Farmers and Ranchers Workshop August 28th and 29th here at the Agricultural Research and Extension Center. Call me at 806-746-6101 to register. We had an excellent group in Amarillo and are expecting the same in Lubbock based on current pre-registrations. DeDe Jones and Patrick Warminski will be coming down from Amarillo to help me teach.

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 AgMarketNetwork.net. The next conference call will be Friday, September 14th at 7:30 a.m. As always, everyone is welcome to come listen live at the Posey gin with the Lubbock county marketing club.

That's your South Plains cotton update for Friday, August 24th. 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 August 30th, 2007.

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

For the first time in a quite a while we have seen a positive price response to bullish news in the cotton market. Last week I noted that the technical signals continued to point down in the face of excellent export numbers reported by USDA mostly due to economic forces outside the cotton market. Two weeks of low prices are finally starting to have an effect on export sales figures. Total sales of 476,300 running bales bring the total sales figure for the current marketing year to 29% of the latest USDA estimate of 16.7 million 480-pound bales. This week's shipments of 322,900 bring total exports to 7% of the projected total, only 3 weeks into the marketing year. The current pace of shipments, if continued for the entire season, would translate into nearly 18 million bales.

Net Upland sales of 447,700 running bales were 13 percent above the prior week. The major buyers were China (216,000), Turkey (53,200), Mexico (45,500), Indonesia (36,600), Thailand (14,800), and Vietnam (13,500). Net sales of 12,000 for delivery in 2008/09 were for Mexico. Exports of 319,300 were 3 percent above the week earlier, but 13 percent under the prior 4-week average. The primary destinations were China (164,800), Mexico (40,300), Turkey (32,300), Indonesia (20,800), and Thailand (12,500). Net American Pima sales of 28,600 were primarily for China (26,700). Exports of 3,600 were mainly to China (1,100) and Pakistan (1,000).

Since this market has been dominated by technicals for the last 6 months or so, it is worth noting what is going on with the charts for this market. We have seen 18 consecutive closes below the 9-bar moving average since the current downtrend began on August 6th. There has not been a single positive technical indicator since that date. This week, when we penetrated the 61.8% retracement level, I truly believed there was nothing left to stop this thing from going right back down to the life-of-contract low 5160. However, the response this morning to the positive demand numbers, in the face of growing woes in the economy, has caught my attention. A close today above the 9-bar average of 5808 would be the first positive technical sign since the first week of August.

Loan stocks held by Texas farmers are becoming a concern as well. As of August 21st, Texas producers had 295,818 of the 403,513 bales of producer held cotton in the loan, or 73%. Much of that can be explained by timing, since Texas farmers are generally the last to put their cotton in the loan. However, most of the producers I have talked to have 6 weeks or less to redeem that cotton or face forfeiture at a cost of $20-25 per bale. The only chance for redemption at a rate that will not cost producers anything out of pocket will come from an up-trending market. Today's open gives the first glimmer of hope for that to happen.

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.

Crop conditions, as reported by area county Extension Ag agents, moved more to the center of the chart as both the amount rated poor to very poor and the amount rated good to excellent declined by 1/2% this week. The apparent trend is for the northern end of the South Plains to be deteriorating while the southern end is improving. There is a direct correlation between rainfall over the past two weeks and the crop condition ratings this week. All the good rains have fallen to the south and east of Lubbock, while everything north of Lubbock and the entire west side have had almost no rain. This year should test all theories about heat unit accumulation and the quality of heat units. It looks like Lubbock will not register a single daily high of 100 or above for only the fifth time in recorded history. I am only an economist, but I have always felt that the quality of heat units (no extremes on either low or high, accompanied by high solar radiation) is almost as important as the overall total. That would explain why the far northern cotton farmers have fared so well with fewer heat units than the South Plains. I still believe the High Plains will make or come very close to another 4 million bale crop this season.

It's finally official. Signup for the crop disaster program is set to begin October 15th for quantity losses of all crops during the 2005 or 2006 growing season. No date has been announced for producers experiencing a quality loss during that same time period. Livestock producers will be able to start signing up for the Livestock Compensation Program and Livestock Indemnity Program beginning September 10th.

If you missed the QuickBooks for Farmers and Ranchers course this week you missed a really good class. Our entire class was Ag people from dairy and feedlots to cotton and produce. If you're interested in future courses contact me and we will put you on the list to receive notice of our next class. If we have enough people who missed this course and want to get in a class before they start their 2008 books we may have another one in December.

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 AgMarketNetwork.net. The next conference call will be Friday, September 14th at 7:30 a.m. As always, everyone is welcome to come listen live at the Posey gin with the Lubbock county marketing club.

That's your South Plains cotton update for Thursday, August 30th. 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.