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.

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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.