South Plains Cotton Update on Ag Talk on Fox Talk 950 for Thursday December 20th, 2007.
Jay Yates, Extension Risk Management Specialist at the Lubbock Agricultural Research and Extension Center.
Harvest is nearly complete in the Southern High Plains as even Eddie is almost done. The rain and snow the end of last week put everyone who wasn't finished out of the field until Tuesday or Wednesday. I had a good visit with Randy Underwood Wednesday on Ag Talk while Eddie was out trying to finish up harvest. There are a lot of modules out in the fields and probably will be for quite some time. The Lubbock and Lamesa classing offices have combine to grade just over 3 million of the over 5 million bales they will likely process this year. With harvest over 85% complete that leaves over 1 million bales in modules out in the fields. That's job security for module truck drivers.
The Lubbock classing office has graded 2.3 million bales and Lamesa is just over 700,000. The average grade remains excellent at color 21, leaf 2, staple 36.0, mike 4.1, strength 29.6, uniformity 80.7 and only 1.5% bark. The grades at Lamesa are virtually the same with only slightly higher bark percentage at 3.9%. Lamesa has started to edge up some on bark as the weekly percentage is up to 4.7%. Recent daily bark numbers at Lubbock have also increased to 3-4%. As more post storm bales come into the classing office, the numbers will likely continue to rise. However, a tremendous amount of this crop was harvested under ideal conditions.
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Easy come, easy go. As prices rise, export sales fall again. Net Upland sales of 133,700 running bales were down 62 percent from the previous week and 49 percent from the prior 4-week average. The major buyers were Pakistan (30,900), Indonesia (14,500), Turkey (13,800), China (12,600), Guatemala (10,700), and Thailand (8,900). Net sales of 6,100 for delivery in 2008/09 were mainly for Colombia (5,300). Exports of 150,200 were 45 percent below the week earlier and 28 percent under the prior 4-week average. The primary destinations were China (40,400), Turkey (29,600), Mexico (18,900), Indonesia (16,500), and Thailand (9,700). Net American Pima sales of 24,600 were primarily for Pakistan (10,600), India (8,700), Turkey (2,200), and Portugal (1,800). Exports of 20,300 were mainly to India (7,700), Pakistan (6,900), China (2,100), Germany (1,300), and South Korea (1,000). Total shipments of 170,500 were slightly more than half of the 318,000 running bales needed each week for the rest of the year to meet the current USDA estimate of 16.2 million 480-pound bales.
Certified stocks were back up slightly for the week with 557,257 bales in warehouses, 706 decertified, 545 issued by USDA and only 41 awaiting review. USDA Loan stocks of Upland cotton increased over 1 million bales this week to 8,678,773. ELS stocks also increased over 50,000 bales to 195,110.
The rise and fall of export sales in direct opposition to nearby futures reveals what an uneasy balance we have between supply and demand in the cotton market right now. Every time the price of cotton dips, foreign mills step up their buying. As cotton prices rise on strong exports and competition from wheat, corn and beans, the export sales dry up. There is a lot of talk of next year's plantings being only slightly higher than 9 million acres, with less than 15 million bales of total production. With usage the same as this year that would leave the U.S. with a record low carryover. But, if prices rise to compete for acres with grain, exports will drop off, increasing the carryover back to an average range. Maybe now you understand why we are range-bound in cotton. The other reason is that whatever happens in the U.S. with cotton is becoming less and less important as India will surpass this country as the number 2 producer when the final harvest tally is complete for this season.
As much as I hate to say it, the best strategy for marketing this year's crop appears to be to put it in the loan until the rest of the world runs out of cotton and has to turn to the U.S. as the supplier of last resort. I have been reading a lot about the WTO ruling this week and I just can't understand how the world's residual supplier is supposed to have so much negative impact on the price of cotton in Brazil and West Africa. I guess that's why those guys get the big bucks and I am just an Extension Program Specialist in West Texas. As far as the '08 crop is concerned, I think this will definitely be the year to have a brokerage account set up and ready to go to use a futures strategy to lock in an "in-your-pocket" price of 70 cents or better. As competition for acres heats up, there should be some unique opportunities to lock in the best price in years.
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 20th. Feliz Navidad y prospero Ano Nuevo. Have a merry Christmas and a prosperous new year.
