South Plains Cotton Update

South Plains Cotton Update on Ag Talk on Fox Talk 950 for Thursday October 4th, 2007.

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

We are living in interesting times. Our actions in these markets make that statement either a blessing or a curse as the supposed Chinese saying goes. December '07 cotton fell 252 points this week, mostly on Friday after posting the uptrend high of 6740 on Thursday. I had a bad feeling about what was about to happen Friday morning after hearing the merchants who attend the Plains Cotton Advisory Group say that higher prices had dried up all sales activity for the week. Sure enough, the market opened about even, and then proceeded to drop as much as 200 points during the day. It could have been worse. The grains were limit down across the board on Friday.See price graph
Yesterday the slide appeared to stall at the 38.2% retracement level of 6223 as the RSI shifted to overbought, so there is hope that the recovery may begin today. That just goes to show how much cotton is being supported by high grain prices in the face of bearish fundamentals. The need to not lose too many more acres to grain could limit the downside in cotton, especially for December '08 and the spread with July '08. However, the December '07 contract will become more and more vulnerable as expiration approaches if export sales don't start to pick up and meet USDA estimates.

Total export sales were a meager 103,400 running bales. However, that level was no surprise to the trade, which was expecting 80-100,000. Net Upland sales of 100,800 bales were 25 percent below the previous week and 42 percent under the prior 4-week average. The major buyers were Turkey (47,700), China (18,000), Indonesia (10,000), and Mexico (7,100). Exports of 258,000 were 1 percent below the week earlier and 2 percent under the prior 4-week average. The primary destinations were China (106,400), Mexico (26,700), Turkey (25,600), Indonesia (19,400), Thailand (15,800), South Korea (12,600), and Taiwan (11,200). New sales of American Pima were only 2,600 with shipments of only 2,200. The biggest buyer was India (1,200) and China received the most shipments at 800 bales. Total exports of 260,200 were well short of the 300,000+ bales needed each week.

Certified stocks continued to build this week with 526,656 in warehouses, 6,468 bales issued by USDA and 47,568 awaiting review. USDA Loan stocks dropped to 382,050 bales of Upland and 42,209 bales of ELS, a combined loss of 175,682 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 slightly as we approach the end of the growing season. Fields rate poor to very poor declined 0.5% to 15.3% and those rated good to excellent remained unchanged at 53.3%. Agents also reported that 37% of fields had bolls opening. While no fields were reported as harvested for the week ending September 28th, the USDA-AMS Classing office in Lubbock began grading samples of cotton from the local area on Monday, October 1st. Word has it that the small quantity coming in is from only 2 gins, therefore the classing office does not report the number of bales to protect confidentiality. Abilene has been receiving cotton for the past couple of weeks. The average mike of 4.2 at first glance would seem to be pretty fair until you consider that early cotton at Abilene would normally be dryland that got too hot and dry at some point in its life and would be high mike. We'll just have to wait and see.

We have had another week of remarkable heat units again this week, with the graphs, which would normally be flattening out at this time of year, actually increasing their upward slope.See heat unit graph
The last 7 days have seen 110 DD60's added to the crop in Lamesa, 93 in Lubbock and 78 at Halfway. The 15-day forecast for Lubbock calls for an additional 145 units to be added to this crop before it is all said and done. The fat lady has not yet begun to sing. As a matter of fact I don't think you can even hear her warming up off stage. That brings me to my last point. Everyone was surprised by the big increase in the High Plains crop estimate last month. Early indications are that the projected crop will grow even more in the new estimate, which comes out October 12th. We are headed for an unbelievable finish on the South Plains if we can just avoid severe weather. A small number of acres were lost last week due to hail. While devastating for the individuals losing a crop this late, it was very minimal in the scope of the whole crop.

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. with featured speakers Carl Anderson, O.A. Cleveland and Mike Stevens.

That's your South Plains cotton update for Thursday, October 4th. 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 October 11th, 2007.
Jay Yates, Extension Risk Management Specialist at the Lubbock Agricultural Research and Extension Center.
A rally in the grain markets and concerns over too much rain during harvest in China have helped to boost the cotton market this week. December '07 twice bounced off the 38.2% retracement line at 6223 and was able to stay above the 40-day moving average while trading significantly below the shorter-term moving averages. For the week the contract was up 78 points to finish on Wednesday at 6421.View price chart After the big drop last week the support levels held and the market has turned around in the face of the latest USDA Supply/Demand report due out on Friday. Average trade estimates are for a U.S. crop of 17.94 million bales. The range is between 17.61 million and 18.1 million. Ending stocks are expected to increase from 6.2 million last month to an average estimate of 6.36 million this month. Locally, we are expecting the High Plains crop to increase another 200,000 bales to about 4.7 million. I guess that would mean that all the increase for the U.S. would come from the High Plains of Texas. Last night's hail storm may reduce that number somewhat. Luckily we don't think it covered a large percentage of the acreage. Pictures of the damage are available in the online version of this newsletter at myspace.com/jayates85.

No export sales were reported this morning due to the Columbus Day Holiday on Monday. Don't expect big sales numbers as the first part of the reporting period was during a period of higher prices. My calculations indicate that there needs to be just over 300,000 bales of shipments to stay on track with the current USDA estimate of exports.
Certified stocks continued to build this week with 563,549 in warehouses, 3,786 bales issued by USDA and 56,501 awaiting review. USDA Loan stocks of Upland cotton increased 141,460 bales to 523,510, while ELS stocks decreased to 23,564.
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 dramatically this week as fields rate Good and Excellent rose 5.1% to 58.3%. Fields rate Poor and Very Poor also declined 1.5% to 13.8%. Agents also reported that 60% of fields had bolls opening compared to 37% last week. Lubbock, Mitchell and Yoakum Counties all reported a small number of fields that had been harvested as of last Friday. A tour of the area earlier this week revealed many fields defoliated and ready for harvest. The Lubbock Classing office began reporting numbers of samples graded this week. The Lubbock office has graded 2230 bales so far this season with the predominant grade being color 21, leaf 2, staple 34 and a mike of 4.2. Lamesa has received some samples, but not enough to report numbers.
Heat unit accumulation for the season appears to have wound up being adequate after a shaky start to the season.View heat unit graph Another 83 heat units over the next 15 days should make the harvest aides, which are going out in full force this week, continue to work exceptionally well. The best chance for a light frost is for next Wednesday with a forecast low of 39 for Lubbock.
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. with featured speakers Carl Anderson, O.A. Cleveland and Mike Stevens.
That's your South Plains cotton update for Thursday, October 11th. 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 October 18th, 2007.

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

The World Ag Supply/Demand report which came out on Friday held no great surprises for the cotton market. I won't go over all the numbers again, since I'm sure all of you have had ample opportunities to hear them before. The key items in the report however were that the US export number remained unchanged, US production was raised (entirely out of West Texas production), and the world carryover was increased, resulting in a stocks-to-use ratio of 42.5% compared to 40.4% last month. If you listened to Mike Stevens on his report last Friday or on the Ag Market Network, then you already know that all the increases in world production, use and carryover can be traced directly back to China.

The market responded to the news pretty much as one would expect without any major reaction. December '07 has trade in a 3-cent range from 62 to 65 for the entire month of October. View Dec 07 price chart Yesterday's close was 65 points lower than the previous Wednesday, but both were right in the middle of the range. If we continue this trend much longer, we will see a convergence of the 9, 18 and 40-day moving averages. The last time that happened was August 10th right before the 6-cent decline over the next 7 days. I'm not saying that's what I think is about to happen, but be ready to act on any action that breaks out of the 62 to 65-cent range. A similar range between 71 and 74 has bound December '08 for the month of October as well. Go back and listen to the recording of the Ag Market Network to hear Mike's suggestion for how to buy December '08 options for a reasonable cost. If this market moves out of this range to the upside we might want to consider using that strategy to buy 75-cent puts.

Total cotton shipments of 251,900 is still about 50,000 bales short of the amount needed to meet the USDA estimate of 16.7 million bales, which is unchanged from last month's forecast. Net Upland sales of 158,500 running bales were primarily to Turkey (58,100), China (22,900), Indonesia (20,500), Thailand (10,400), and Hong Kong (10,300). Exports of 246,600 were mostly shipped to China (104,300) Turkey (38,700), Mexico (26,500), Indonesia (16,000), and Taiwan (10,200). Net American Pima sales of 10,300 were primarily for Switzerland (7,000), Pakistan (900), Egypt (900), and China (700). Exports of 5,300 were mainly to China (2,200) and Pakistan (1,400).

Certified stocks continued to build this week with 596,240 in warehouses, 7,278 bales issued by USDA and 37,327 awaiting review. USDA Loan stocks of Upland cotton increased 389,246 bales to 912,756, while ELS stocks decreased 1,383 bales to 22,181.

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.

County Ag agent reports from last week indicated that defoliation was in full swing, with harvest just getting underway. As quickly as the harvest aids are doing their job, under the ideal weather conditions we have had, we can now say that harvest is in full swing across the area. Most gins are staying caught up with the strippers right now, so we don't see lots of modules on the ends of the fields, but farmers I have talked to say yields have been better than they estimated before starting. High winds across the area yesterday slowed things down a bit, but the current 15-day forecast has nothing but sunshine and more wind. If you guessed yesterday for the first freeze, you lost. Looks like the next best chance will probably be right on the average of November 1st in two weeks.

Responding to a question about compliance with the WTO related to the cotton program, Senator Harkin had this response, "Hopefully in the next few years, areas of the country that are planting cotton will begin to shift their crops and begin to grow other things." Listen to Harkin comment about cotton Maybe my next big economic analysis should be on the "Economics of Converting a Cotton Gin into a Cellulosic Ethanol Plant."

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.

That's your South Plains cotton update for Thursday, October 18th. 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.