South Plains Cotton Update on Ag Talk on Fox Talk 950 for Thursday March 6th, 2008.
Jay Yates, Extension Risk Management Specialist at the Lubbock AgriLife Research and Extension Center.
Area county agents report High fire hazards and extremely dry conditions in virtually every county. Soil moisture ratings are all in the short and very short categories. Wheat conditions continue to decline in the High Plains, but in the Rolling Plains the crop looks somewhat better even though there was little to no grazing over the winter.
Travels this week saw ground preparation in full swing with pre-plant yellow herbicides evident on spray booms and field cultivators across the area. High fuel prices, with farm diesel topping $3 per gallon, and dry weather conditions are causing most producers to limit the amount of tillage between crops this season.
The ginning season is nearly complete and the season average grades are excellent. The Lubbock classing office recorded 83% 11 & 21 with leaf 3 or less. Average staple length was 36.0 with 67% of all bales measuring 36 or longer. Average strength was 29.5 with 99% rating 26 or stronger. Average Micronaire was 4.1 with only 12.4% at 34 or less and only 2.8% at 5.0 and over. Only 3.5% bales were graded as bark. The total number of bales classed as of February 29th in Lubbock was 3,722,758 and in Lamesa 1,443,820 for an area total of 5,166,578 running bales or about 5.3 million statistical bales.
With both commodity and input prices at or near all-time highs, how do you decide which direction to take your farming operation? Should you buy a new combine or a cotton picker or just update the old strippers? All of these questions are what the FARM Assistance program were designed to help you answer. Call me at 806-746-6101 to schedule an appointment.
USDA Loan stocks of Upland continued to decline to 9.89 million bales as of February 26th. ELS stocks also declined to 285 thousand. Certified stocks increased to 607,793 bales in warehouses, 8,848 issued by USDA and 84,005 awaiting review.
As we expected, Net Upland sales of 97,300 running bales were down 50 percent from the previous week and 66 percent from the prior 4-week average. Increases were mainly for China (34,500), Turkey (17,200), Colombia (14,800), Thailand (9,900), and Indonesia (7,300). Net Upland sales of 20,700 for delivery in 2008/09 were mainly for Mexico (20,200). Exports of 270,700 were up 67 percent from the previous week and 45 percent from the prior 4-week average. The primary destinations were China (68,600), Mexico (37,100), Turkey (36,600), Indonesia (27,400), Vietnam (18,100), and Thailand (14,900). Net American Pima sales of 25,900 were primarily for Pakistan (7,300), China (6,600), India (3,900), and South Korea (2,300). Exports of 29,900 were mainly to China (10,500), Pakistan (4,100), the United Arab Emirates (2,600), and South Korea (2,400). Total shipments of all cotton were up significantly to 300,600 running bales, however that is still over 50,000 bales short of the amount required each week to meet the USDA estimate of 15.7 million 480-pound bales.
Last week I wrote that the cotton market was just crazy. I don't know what metaphor to use this week, as the New York futures market has lost all touch with the reality of the fundamentals. As we see in the export report, new sales of cotton dried up for the week ending February 28th when prices made the jump into 80-cent territory. With prices now in the upper nineties for most of this week, expect next week's new sales to be nearly zero. The cash market completely shut down the middle of this week. I had growers contract '08 cotton for prices in the mid 80's before all activity shut down due to merchants' inability to cover their cash positions on the board. The two days of locked limit-up moves (Monday and Tuesday), don't even begin to tell the story. December '08 was trading synthetically in the options pit for 10900, which means those who were short at 8700 on Friday had to make margin calls of 22 cents per pound or $11,000 per contract by Tuesday afternoon. We left two gaps in the extreme upward movement back on February 21st and 29th at roughly 80 and 85 cents. Look for those two points to be the level this market seeks to return to.
OK, here is my attempt to explain what I think is going on in the cotton futures market, besides the fact that the exchange went to all electronic trading this week. To a non-commercial commodity investor, cotton appears to be extremely cheap compared to the other major commodities. Using NASS published parity prices as the benchmark; I decided to see what each commodity has traded as a percentage of parity over the last two years. In February of this year wheat traded at 95% of parity, corn at 70% and soybeans at 80%. Cotton only traded at 38% of parity during the month of February, about where wheat, corn and beans were 2 years ago. Looks like a bargain if you ignore the fundamentals.
For more information on cotton marketing be sure to check out Dr. John Robinson's weekly cotton marketing newsletter by clicking on Market Outlook under the Resources drop down list 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 Ag Market Network conference call will be March 13th at 7:30 a.m., featuring Carl Anderson, Mike Stevens and O.A. Cleveland. As usual you are welcome to join the Lubbock County Marketing at the Posey Gin to listen to and discuss the comments made during the call. The Ag Market Roundtable discussion will be live at the Lubbock Civic Center, Friday April 4th at 7:30 a.m.
Also, in conjunction with the TCGA Annual Meeting and Cotton Trade Show, on April 2nd starting at 8:30 a.m., Cotton Incorporated and Plains Cotton Growers will be sponsoring the Cotton Price Risk Management and Pricing Strategies Seminar with speakers, Carl Anderson, Mike Stevens, John Robinson, O.A. Cleveland and Kelli Merritt.
We had the final installment of the South Plains Profitability Workshop on Tuesday. We had a very engaging group of producers along with our extension cotton marketing specialist, John Robinson and our extension grain marketing specialist, Mark Welch. The website associated with the workshop is southplainsprofit.tamu.edu. Check back from time to time for updated workshop information.
That's your South Plains cotton update for Thursday, March 6th. This is Jay Yates, Risk Management Specialist with the Texas AgriLife Extension Service. Join me each Thursday at this same time right here on Ag Talk on Fox Talk 950.
FARM Assistance - 1102 E. FM 1294, Lubbock, TX 79403
Tel. 806-746-4056 - Fax. 806-746-4057 - Cell 806-781-1002 - jayates@ag.tamu.edu - http://farmassistance.tamu.edu
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