South Plains Cotton Update

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.