South Plains Cotton Update

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.