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.
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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.
