South Plains Cotton Update

South Plains Cotton Update on Ag Talk on Fox Talk 950 for Friday September 7th, 2007.

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

This report was delayed due to the Precision Ag Expo on Thursday September 7th, which Eddie and I attended. We did a live broadcast of the market information in this report from the Expo. The export report did not come out until Friday morning so the report and commentary are also included.

Last week I made note of the fact that we had the first positive response to bullish fundamentals in the cotton market in a long time. The past week has confirmed a new direction and the possibility of renewed marketing opportunities.
The last 5 trading sessions have closed above the 18-day moving average and on Thursday the 9-day average crossed upward through the 18-day average. The downtrend, which began after reaching the life-of-contract high 6880 on July 16th, was broken last Friday when the market gapped up closing the week at 6097. The Wednesday weekly close rose 316 points this week, indicating the possibility of better equity offers on cotton still in the loan. If this uptrend continues make every effort to get any remaining cotton out of the loan before forfeiture and a possible $20-$25 per bale charge.

Net Upland sales of 276,900 running bales were 38 percent below the prior week. The major buyers were China (116,700), Turkey (44,300), Indonesia (33,700), Thailand (16,200), South Korea (12,200), and Mexico (11,900). Exports of 325,400 were 2 percent above the week earlier, but 3 percent under the prior 4-week average. The primary destinations were China (139,100), Mexico (38,000), Turkey (36,400), Thailand (24,500), Indonesia (23,600 MT), and Pakistan (12,800). Net American Pima sales of 1,900 were primarily for China (700) and Pakistan (600). Exports of 9,200 were mainly to Pakistan (3,100), China (2,600), and Italy (2,000). This week's total shipments of 334,600 were 11,500 bales more than last week and more than sufficient to meet the current USDA estimate of 16.7 million. I know that exports will slow down significantly when the Chinese and Indian crops began to make their way into the pipeline, but the annualized rate of current shipments is over 18.5 million 480-pound bales.

Besides good export numbers, a major drop in exchange certified stocks from 669,414 last week to only 477,894 on Thursday is also good news. Hopefully all that cotton has gone to export which would continue to be a boost to this market.

Crop conditions, as reported by local county Extension ag agents, improved somewhat this week as fields ranked good and excellent increased by 2% while those rated poor and very poor decreased by 0.5%. Much of that improved rating came from a steady supply of heat units combined with generous rainfall in both the Northern and Southern Rolling Plains.
Most Rolling Plains locations in the West Texas Mesonet system recorded from 4 to 7 inches during the month of August. The High Plains ranged from less than an inch in the southwestern end to 3 and a half inches at Floydada in the northeast. Rainfall from more recent storms has helped fill in some of the gaps left in August, but still dropped the most moisture to the north and east, with Silverton receiving over 4 inches in Thursday night's storm. Hail losses remain minimal. Although there has been some concern over spider mite and aphid populations, insect damage has been light overall.

Probably the best single source of cotton market stats in one place is the Weekly Cotton Market Report from the National Cotton Council at www.cotton.org/econ/reports/weekly-report.cfm. It comes out each Friday and has all of the factors affecting the U.S. market consolidated in one report. Everything I usually share in this report that is not of a local nature can be found in the Cotton Council report.

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. The featured speakers will be John Robinson, Mike Stevens and O.A. Cleveland. 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, September 7th. 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.

Of course the news this week is the latest World Ag Supply/Demand Estimate, or WASDE Report, that came out yesterday. Along with that we received a new estimate of Texas production by reporting district. The High Plains of Texas, as represented by TASS District 1-N and 1-S, saw the estimate raised 560,000 bales to 4.51 million. That increase combined with the rest of the district estimates to put the Texas upland cotton crop at 7 million bales, the third largest in history. The 900,000-bale increase for Texas was offset by decreases in other states to raise the US total 460,000 bales to 17.81 million. World production was raised 1.26 million bales, which means 70% of the forecasted increase in production will come from Texas. Total world use remained unchanged from last month resulting in increased ending stocks and a world stocks-to-use ratio of 40.4% up slightly from 40.3% last month. Had it not been for a 1.07 million bale decrease in beginning stocks, the ending stocks-to-use ratio would have climbed back over 41%.

The WASDE report appeared to be right in line with what the trade was expecting as the December contract continues to follow the uptrend confirmed last week by the crossover of the 9 and 18-day moving averages. Today the 9-day is set to cross the 40-day average, further confirming the trend to higher prices. Since cotton fundamentals remain flat to slightly bearish, current trends are highly related to the current prices for wheat and soybeans. As Mid-south and Delta farmers harvest their cotton, they will be deciding very early whether to forego next years crop in favor of a wheat/bean rotation, which would need a commitment immediately after harvest. I have read economists comments from the region which would suggest that the current December 08 cotton price doesn't come anywhere near delivering the kind of profitability the wheat/bean rotation has to offer.

This week saw a nearly 2 cent rise in December 07 futures, possibly offering some incentive to get the few remaining 06 bales out of the loan. Loan stocks have begun increasing as the Coastal Bend crop starts to trickle in. The Corpus Christi classing office has only classed 243,348 bales of the approximately 900,000 bales expected. They would normally be close to wrapping things up right now.

Net Upland sales of 100,500 running bales were 64 percent below the prior week and 73 percent under the prior 4-week average. The major buyers were Indonesia (24,000), China (20,400), South Korea (15,100), Mexico (13,500), and Turkey (10,000). Sales of 9,400 for delivery in 2008/09 were for Mexico (5,900) and El Salvador (3,500). Exports of 212,300 were 35 percent below the week earlier and 34 percent under the prior 4-week average. The primary destinations were China (90,400), Mexico (32,300), Turkey (28,900), and Thailand (11,400). Net American Pima sales of 3,800 were primarily for Indonesia (2,100), China (1,500), and India (1,200). Exports of 7,100 were mainly to China (2,100), India (1,400), and Turkey (1,000). Both export sales and shipments slowed tremendously this week taking us below the necessary pace to reach the unchanged USDA estimate of 16.7 million bales.

The decline in certified warehouse stocks halted this week as the number of bales increased slightly to 479,908 as of the close of business yesterday. A few years ago we would have said this was an overly oppressive number of stocks, but in the context of where it has been in more recent times, it is a more reasonable number.

The FARM Assistance analysis program can help you make strategic business decisions like whether or not to upgrade your harvest equipment or have the crop custom harvested. And if you buy, 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 local county Extension Ag agents, improved somewhat again this week as fields ranked good and excellent increased by 1.8% while those rated poor and very poor decreased by 1.0%. The reporting period of September 1-7 saw good heat unit accumulation and humidity. More recently we have seen heat units drop into the single digits since Tuesday. September showers have caused the crop, which was mostly finished blooming, to put on ornamental flowers across the tops of most fields as no blooms put on this late will have time to make any difference. The rains are exactly what this crop needed to keep the plants from stressing while they finish filling bolls. All we need now is a return to warmer weather and sunshine to complete the formula for another 4 and a half million bale crop.

Rainfall during the month of September has been widespread with all locations in the West Texas Mesonet receiving 0.15 inches or more during the first twelve days of the month. Thirty-three of the 50 locations have received 1 or more inches, while Denver City and Silverton topped the charts at over 6 inches. The area has also done very well for the growing season as a whole, with all locations, except Dimmitt, Hart, Muleshoe and Olton, receiving more than 10 inches since May 1st.

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 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. The featured speakers will be John Robinson, Mike Stevens and O.A. Cleveland. 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, September 13th. 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.

In the words of Mike Stevens on this months Ag Market Network conference call, "The end will come quicker than we think it's gonna come." The Ag Market Network conference call was this past Friday and the featured speakers included Mike Stevens and John Robinson who, in the absence of O.A. Cleveland, were vying for the best quotable market comment of the day. Mike also quoted another analyst when he made the comment about bull markets that "when they're over, they're over and they're not gonna ring a bell."
Both of these quotes epitomize the December 07 contract as it moved from life-of-contract low 5160 on May 14th to life-of-contract high 6880 on July 16th with no real change in fundamentals during that 9-week period. The same can said of the current bull run that started with the bottom on August 27th of 5697. Again we have had no dramatic changes in fundamentals, if anything we could make the argument that the cotton numbers have turned bearish, with an ever so slightly increasing forecasted world ending stocks. To understand this bull market we have to look beyond the cotton fundamentals. One factor is the record low value of the dollar. Thursday the dollar traded even with the Canadian dollar for the first time since 1976. I guess it's time to dig out all those Canadian quarters and dimes and go spend them, since they are finally worth the change we were given way back when. I wonder if the vending machines will be recalibrated to take them. Another comment made during the conference call was the competition for acres with the wheat/bean rotation in the Mid-south and Delta and South American corn and beans. The third factor mentioned was the speculative funds that see cotton as undervalued compared to other commodities. In another Stevens' quote he said "the specs can take it much farther than they should and they will" and that producer's should be ready to act because "when cotton moves it takes no prisoners."

In the local cash market we have seen a substantial rise in old crop equity offers for cotton in the loan from "stop calling me or we'll call the police" to offers to take the cotton out of the loan with no charges assessed to the producer. That's a big move since many of our farmers with cotton still in the loan were looking at forfeiture charges in the $20-25 range. Equity offers for new crop have climbed to 5 cents over loan.

Export sales rebounded somewhat this week, but still at an insufficient pace to meet the current USDA forecast. Net Upland sales of 177,900 running bales were primarily to China (55,700), Indonesia (32,000), Turkey (31,500), and Mexico (18,300). Exports of 247,900 were shipped to China (84,500), Turkey (51,100), Mexico (30,400), Thailand (16,500), Indonesia (9,000), and Taiwan (8,100). Net American Pima sales of 21,000 were for Japan (7,700), China (3,800), and India (2,600). Exports of 9,200 went mainly to Japan (3,000), Pakistan (2,700), and India (1,100). Total exports of 257,100 running bales were approximately 50,000 short of the number needed to make the 16.7 million bale estimate.

Certified stocks continued to grow this week with Wednesday's stocks at 491,341 bales in warehouses from Galveston, Texas to Greenville, South Carolina. The number of bales in the USDA Loan stands at 635,150 for upland and ELS combined.

The FARM Assistance analysis program can help you make strategic business decisions like whether or not to upgrade your harvest equipment or have the crop custom harvested. And if you buy, 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 local county Extension Ag agents, improved slightly again this week as fields ranked good and excellent increased by 0.3% to 51.8%, while those rated poor and very poor decreased by 0.5% to 16.3%. Continued warm weather and moisture contributed to the increase during the reporting period of September 8-14. Heat unit accumulation continues to rise on a straight line making in close in on the long term average. The current 10-day forecast would add another 114 heat units by the end of September, putting Lubbock at 2086 from May 1st to October 1st. That would also mean that a bloom set on August 5th in Lubbock would have enough heat units to be fully matured on October 1st. The longer term forecast is only to add 2-5 units per day during the month of October, so don't count on making much cotton after the first in the Lubbock area. I can't let the crop conditions stand without a quoted from John during the Ag Market Network. In relation to the 2-3 week late crop maturing into another High Plains record, he said "When you throw the ball, 3 things can happen and 2 of them are bad." Funny thing is I heard that same comment this week on Tech Talk with Robert, Jim 'n Eddie and Chris Level. So far the one good thing has happened to make another top yield since John made those comments last Friday. I don't even want to mention the 2 bad things that could happen, but Mike did remind us that the earliest recorded frost in Lubbock is October 7th.

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 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 Tuesday, October 16th at 7:30 a.m.

That's your South Plains cotton update for Thursday, September 20th. 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 September 27th, 2007.

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

Outside forces continue to drive December '07 cotton higher as fundamentals continue to erode. Slow export sales, due to higher prices, combined with news out of China that there is most likely 6 million more bales of local cotton than previously stated for the last 2 years combined. Also, forecasts of the Indian crop continue to rise as the condition of the crop improves. The dollar continues to trade at the historically low rate of even with the Canadian Dollar and 11 to 1 with the Mexican Peso. That means you could get a large specialty pizza at a local Texas chain, which recently gained much notoriety, for only 95 pesos. The biggest "outside" force is the December '08 contract, which is in a fight for its life with the wheat/bean rotation. At current prices for wheat and soybeans, many ag economists, in regions where that combination will work, say that cotton will have to top 80 cents to be competitive. December '08 set a new life of contract high 7450 last Friday. The spread of 840 points between '08 and '07 has grown tremendously since the previous high of 7350 back on July 13th, when the spread was only 480 points. That is part of the reason why I feel the '08 contract is dragging the '07 contract up with it and as soon as the planting decisions are made, the '07 contract will break lower. This could be an unusual marketing opportunity, where the best price comes early in the harvest season.

Total sales of all cotton this week remain weak at 140,300 running bales in the face of higher prices. Upland sales of 133,500 were 25% less than last week with the major buyers being Turkey (32,300), Indonesia (26,800), Mexico (24,300), China (23,400), and South Korea (17,200). Upland exports of 261,600 were up from last week, but when combined with only 4,000 bales of Pima, were woefully short of the 300,500 bales that need to ship each week. The primary destinations were China (107,500), Turkey (40,800), Mexico (32,200), Thailand (18,100), and Indonesia (15,900). Net American Pima sales of 6,800 were primarily for Peru (3,500), Japan (1,400), and India (1,300). Exports were to Japan (1,600), India (800), Pakistan (600), Brazil (500), and China (400).

Certified stocks topped a half million bales this week with 510,153 in warehouses, 4,370 bales issued by USDA and 45,023 awaiting review. USDA Loan stocks dropped to 553,435 bales of Upland and 46,506 bales of ELS, a combined loss of just over 35,000 from the previous report.

The FARM Assistance analysis program can help you make strategic business decisions like whether or not to upgrade your harvest equipment or have the crop custom harvested. And if you buy, 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 local county Extension Ag agents, continue to improve as we approach the end of the growing season. Fields rate poor to very poor declined 0.5% to 15.8% and those rated good to excellent increased 1.5% to 58.3%. Warm sunny weather, broken up by intermittent, timely rains, over the past two weeks is the main reason for continued improvement in the crop condition.
The weekly growing degree units for the month of September have averaged just over 90 in Lubbock and 100 in Lamesa. The seven-day forecast for Lubbock projects 95 more units to be added this week. Looking to the 15-day forecast to approximate the season total, we estimate that a bloom set on August 11th in Lubbock, or the 13th in Lamesa, should have the necessary 850 units to make quality cotton. The end to our excellent cotton growing weather is forecasted to come October 9th, when the heat units drop to zero with a high of only 65 and a low of 47. At least they are not predicting a freeze.

Rainfall totals for 4 locations in the West Texas Mesonet have now topped 20 inches during the growing season. Three of the four, Lake Alan Henry, Aspermont and Gail, are all off the caprock, with only Floydada, to the northeast of Lubbock, topping 20 inches for locations up on top. Only 3 reporting stations collected less than 10 inches during this period, Hart, Dimmitt and Olton, all to the northwest of Lubbock in an area that is highly irrigated. Eighty percent of all locations have received more than an inch of rain during the month of September.

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 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 Tuesday, October 16th at 7:30 a.m.

That's your South Plains cotton update for Thursday, September 27th. 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.