South Plains Cotton Update on Ag Talk on Fox Talk 950 for Thursday December 13th, 2007.
Jay Yates, Extension Risk Management Specialist at the Lubbock Agricultural Research and Extension Center.
This week I listened to a presentation by Dr. Brent Bean about how wheat yields could be reduced by as much as 40% on wheat planted the first week of December. That would include dry planted September wheat that got its first rain Tuesday morning, like mine. The rain will be a big boost to all the irrigated wheat that has been nursed along to this point. I bet your wondering why a cotton market update starts out talking about wheat conditions. The condition of wheat on the High Plains north of Lubbock has everything to do with how much cotton will be planted in that area next year. As I stated last week, nobody knows at this point just how much wheat was planted behind this year's fall harvested crops, but it was substantial. Timely rains this winter will mean more wheat taken to grain harvest, which does not leave enough time to grow cotton on that ground next year.
The other thing about Tuesday's widespread rain that came from a thunderstorm in 36 degree weather is that it should refill that top 6 to 8 inches that had dried out, leaving us with a full profile going forward. A couple more timely rains like that between now and cotton planting time could set us up for another top 5 yield.
The crop report also came out Tuesday and the Texas High Plains, as represented by TASS districts 1-N and 1-S, remained at 5.3 million bales from 3.02 million harvested acres. That translates into the second largest crop in history and a record 842 pound overall average yield, 1040 in 1-N and 799 in 1-S.
The Lubbock classing office has graded over 2 million bales and Lamesa is just over 600,000. The average grade remains excellent at color 21, leaf 2, staple 36.0, mike 4.1, strength 29.6, uniformity 80.7 and only 1.4% bark. The grades at Lamesa are virtually the same with only slightly higher bark percentage at 3.7. Significant progress was made on harvesting this crop last week as the percent harvested increased from 76% the prior week to 82% the week ending December 7th, just before the front moved in. We won't see much progress in the next report since the recent storm dropped more than half an inch of rain across 39 of the 51 West Texas Mesonet sites. If 82% of the 5.3 million bales have been harvested and only 2.6 million has been classed, that means there are 1.75 million bales in modules out in the fields.
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.
Net Upland sales of 355,000 running bales were up 62 percent from the previous week and 69 percent from the prior 4-week average. The major buyers were China (88,500), Indonesia (65,000), Turkey (39,700), Pakistan (37,700), Thailand (26,300), and Mexico (25,400). Net sales of 12,300 for delivery in 2008/09 were mainly for Mexico (10,100). Exports of 273,200 were 29 percent above the week earlier and 48 percent over the prior 4-week average. The primary destinations were China (93,400), Turkey (62,700), Mexico (29,400), Indonesia (16,900), Thailand (13,800), and Vietnam (11,800). Net American Pima sales of 12,300 were primarily for Pakistan (5,000), India (3,300), Peru (1,300), and South Korea (1,000). Exports of 15,400 were mainly to China (4,900), Peru (2,800), Pakistan (2,700), India (2,100), and Germany (1,600). Total shipments of 288,600, although much improved, are still well below the 314,000 needed each week to reach the current 16.2 million bale USDA estimate.
This is where I have to admit that I was wrong last week. The new USDA Supply/Demand Estimate came out Tuesday and exports remained unchanged and as previously mentioned the Texas High Plains estimate also remained the same as last month. I still believe that the export number will likely drop some more in the future.
Certified stocks declined for the week with 555,247 bales in warehouses, 101 decertified, 2,276 issued by USDA and 5,175 awaiting review. USDA Loan stocks of Upland cotton increased another 600 thousand bales this week to 7,676,475. ELS stocks also increased to 141,333.
The March '08 contract surprisingly closed up 215 this week at 6525 compared to 6310 last Wednesday. The Supply/Demand Estimate must not have been quite as bearish as was anticipated. It also didn't hurt that the fed cut interest rates another quarter percent and wheat, corn and beans were all up substantially. The improved export sales number also reveals at what price level foreign mills are willing to step up and buy more cotton. Price Chart
The Ag Market Network conference call was this morning and if you missed it you can go to the website and listen when you have some time. Peter Egli was the guest speaker this month and the full panel of Mike Stevens, Carl Anderson and O.A. Cleveland joined him. The general consensus was optimistic for price over the next year, but the elephant in the room nobody likes to admit is there is the fear of recession. Peter Egli made the comment that "we are already in a recession if we just pick the right numbers to look at." They also emphasized a point I have made here about the '07 crop if you haven't already sold it. Put it in the loan and watch for any technical run-ups to unload it for 3 cents or better equity. The '08 crop looks to have a lot of potential to rise and a floor pricing strategy should be considered. To recap the price range projected by the panelist for the December '08 contract; Egli 71-85, Stevens 71-80, Anderson 72-78 and surprisingly bearish O.A. Cleveland 71-75. If O.A. is right and the quoted Goldman Sachs forecast of $14 beans and $5.50 corn is right, we may have the only cotton in the U.S. all within 200 miles of 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.
That's your South Plains cotton update for Thursday, December 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.
