A slightly larger than generally expected expansion in U.S. planted area amid new worries about global economic growth and deterioration in technical signals weighed on cotton futures last week.
The benchmark December contract skidded 227 points to close the week ended Thursday at 76.45 cents, while maturing July lost 326 points to finish at 81.22 cents.
December completed a bearish reversal on monthly charts and posted back-to-back closes below its declining 50-day moving average. Trade buying and mill fixations along with short covering by other traders helped prices to rally after December had fallen to a low for the week at 75.17 cents.
July fell to a 10-session low close in the face of a continued decline in certificated stocks to 354,211 bales, lowest since October 2009, and no new delivery notices for three sessions in a row. It goes off the board Thursday.
Weak economic data in the United States and signs of a slowing of the rapid growth in China fanned worries that a sluggish global economy would hurt demand as a big new crop comes to market.
With low abandonment and early crop conditions suggesting high yields, some private U.S. production estimates soared to 17.5 million to 19 million bales and well beyond, up from USDA’s projection last month of 16.7 million bales and the 2009-10 output of 12.188 million.
U.S. growers planted an estimated 10.91 million acres of all cotton, USDA reported, up nearly 4 percent from the March intentions of 10.51 million acres and up 19 percent from last year’s 9.15 million acres.
The 2010 acreage is the largest since 2006 when growers planted 15.274 million acres. Plantings last year were the smallest since the payment-in-kind crop year of 1983.
Producers increased plantings in all states except Louisiana, where acreage was unchanged from last year’s record low. Texas growers planted 5.7 million acres of upland, up 14 percent from last year’s 5 million acres and 1.8 percent from the March intentions of 5.6 million acres.
Upland plantings jumped over 30 percent in Alabama, California, Mississippi, North Carolina and Tennessee, with California showing the largest percentage gain with a 76 percent increase.
By regions, upland plantings expanded 33.5 percent to 2.525 million acres in the Southeast, 15.6 percent to 1.880 million acres in the Mid-South, 13.5 percent to 5.95 million acres in the Southwest and 39.6 percent to 345,000 acres in the West.
Growers on the Texas High Plains planted 3.83 million acres, up about 17 percent from 3.267 million acres in 2009 and 3.265 million in 2008, while producers in the adjoining Rolling Plains seeded 875,000 acres, up from 849,500 and 822,300 acres, respectively.
The West Texas Plains acreage of 4.705 million, up 14 percent from last year’s 4.117 million acres, accounted for about 83 percent of the 2010 Texas upland plantings and about 44 percent of the U.S. upland area.
A few bolls had opened in a promising crop in the Lower Rio Grande Valley, traditional source of the nation’s first new-crop supplies. Growers there planted 110,000 acres, up 47 percent from only 74,700 acres last year. Abandonment has been described as almost nothing.
Valley growers braced for the possibility of flooding rains from Hurricane Alex, which hit the coastline Wednesday night about 110 miles south of Brownsville. However, preliminary reports indicated crops may have escaped serious damage.
More moderate rains elsewhere in South Texas could help to fill out unopened bolls and peripheral rains from in other cotton areas of the state would be considered as beneficial statewide.
U.S. crop ratings again showed little change, with good to excellent steady at 62 percent for the week ended last Sunday, fair down a percentage point at 32 percent and poor to very poor up a point to 6 percent. By comparison, ratings a year ago were 42 percent good-excellent, 32 percent fair and 26 percent poor-very poor.
Squaring cotton advanced 21 points to 48 percent, 19 points ahead of a year ago and up nine points from average. Cotton setting bolls expanded four points to 8 percent, behind the average of 10 percent.
The Dow Jones crop index based on the USDA report held steady at 101.1 percent of “normal,” up from 87.3 percent a year ago.
Widespread showers and thunderstorms boosted crop prospects on the Texas High Plains early in the week and more rainfall was expected heading into the holiday weekend. Temperatures were below normal.
But accumulated heat units totaled 501 from June 1-23 at Lubbock, 31 percent above the long-term average, according to extension figures, and reached 814 from May 1, up 21 percent from the normal of 674.
The rains will be particularly beneficial to dryland cotton and will reduce pumping costs on many farms with irrigation. Blooms were expected in some fields by July 4, considered relatively early.
Typically, the standing acreage on the High Plains near the end of June is fairly close to the harvested area. The great bulk of the annual abandonment usually occurs in the springtime.
The market shrugged off robust U.S. weekly export sales totaling 408,700 running bales. Sales for prompt shipment rose to 119,200 bales from the prior week’s 84,400 and new-crop bookings climbed to 289,500 bales from 172,400.
Commitments reached 13.206 million running bales for 2009-10, about 77 percent of which have been shipped, and 2.389 million running bales for 2010-11, about 2.4 times the forward bookings (1.009 million bales) of a year ago. Old-crop commitments trailed year-ago sales by 3.4 percent.
Shipments of 291,200 running bales, down from 317,000 the prior week, lagged the pace of roughly 343,000 bales now required to achieve the USDA forecast. Rollovers of unshipped sales appear likely to swell commitments at the start of the new crop year to even more impressive proportions.