By Duane Howell
For the Avalanche-Journal
Modest reductions in U.S. and world ending stocks and a slight increase in global consumption lifted cotton futures to a seven-week high last week before profit-taking trimmed the advance.
Spot March gained 101 points for the week ended Thursday to close at 74.56 cents after posting a high at midweek of 75.53 cents, up 574 points or 8.2 percent from the Nov. 9 low and its highest price since Oct. 22. It closed in the upper half of the weekΆs 243-point trading range.
Cash grower-to-business sales surged to a new crop year high on The Seam of 139,482 bales, up from 89,612 bales the previous week. Prices rose 66 points to an average of 68.82 cents, reflecting a 104-point gain to 15.89 cents in premiums over loan repayment rates. Daily price averages ranged from 68.11 to 69.35 cents.
U.S. current-crop export sales maintained a healthy pace at 299,500 running bales during the week ended Dec. 6, though down from the crop year high of 443,000 bales the prior week, while new-crop sales rose to 26,000 bales from 14,300 bales. Shipments slowed to 189,200 bales from 216,800.
In its December supply-demand estimates, USDA shaved U.S. production by 190,000 bales from a month ago to 17.26 million bales, boosted exports by 200,000 bales to 11.8 million, left domestic mill use unchanged at 3.4 million bales and cut ending stocks by 400,000 bales to 5.4 million.
A 400,000-bale reduction to 5.5 million bales in the crop estimate in Texas was partially offset by increases in the Delta and the Southeast. The higher export estimate reflected relatively strong sales in November.
The ending stocks estimate, down about 7 percent from a month ago but up sharply from 3.35 million last season, is equal to 35.5 percent of total use, down from 38.7 percent foreseen in November.
The USDA narrowed its forecast of the marketing year average price received by producers by a cent on each end of the range. The midpoint of 68 cents is down from an average of 88.30 cents last season.
Globally, lower beginning and ending stocks reflected mainly a technical adjustment for Turkey beginning in 2005-06, USDA said. Beginning stocks fell 450,000 bales to 69.18 million and ending stocks dropped 630,000 bales to 79.64 million, still a record high. World production rose by 70,000 bales to 116.90 million, with increases for several African Franc Zone countries mostly offset by cuts for Australia and the United States. Consumption edged up 150,000 bales to 106.48 million, 3 percent above last seasonΆs eight-year low.
Forecast world trade expanded 1.1 million bales to 37.7 million on higher expected demand by China, India and Vietnam. It now appears that two-thirds of ChinaΆs 2012 crop may be purchased for the national reserve, constraining supplies available to mills, USDA said.
ChinaΆs imports in the first quarter of the 2012-13 marketing year are similar to last year, USDA analysts said, and have helped to stabilize world prices.
ChinaΆs estimated mill use is unchanged on the month at 35.5 million bales, down nearly 7 percent from 2011-12. Yet import demand thus far has remained strong, driven by limited free stocks owing to the sale of 17 million bales — nearly three times the year-ago total — of the new crop to the state reserve.
The USDA raised its estimate of ChinaΆs imports by 500,000 bales from a month ago to 11.5 million. However, ChinaΆs 2012-13 import forecast remains less than half the 2011-12 imports.
This implies imports for the balance of this crop year will taper off, especially after the first of the calendar year when some cotton is expected to be released from the state reserve. Declining import demand would be expected to pressure world prices.
March jumped to its largest daily gain, 150 points, since Oct. 16 on the heels of the report on Tuesday. The reaction may have been linked partly to a reduction of 1.13 million bales from a month ago to 42.03 million in the ending stocks forecasts outside China.
Though China is expected to release some cotton from its reserves in the weeks ahead, some analysts expect the amounts to be small and the vast bulk of the stocks to remain in place through the rest of the crop year.
A trade analyst commented awhile back that not all stocks are equal, meaning that — though global stocks are abundant — the amount of lower-priced inventories isnΆt so plentiful, with buyers waiting on dips and helping to keep prices in a box.
Compared with stockpiles elsewhere, ChinaΆs reserve stocks are really expensive, with a minimum procurement price at the equivalent of $1.47 per pound on government purchases of domestic cotton through late last month, according to a U.S. agricultural attaché report.
Meanwhile, district estimates by the National Agricultural Statistics Service pegged production on the Texas High Plains at 3.405 million bales, up from last yearΆs drought-devastated crop of 1.835 million. This is near the top end of some industry estimates, which have ranged mostly from around 3.1 million to 3.5 million bales.
The updated district estimates are down from 3.96 million bales projected in October. No NASS district estimates were issued in November.
Yields are estimated at an average of 526 pounds per acre, down from 567 pounds harvested last season when much of the dryland crop was abandoned and record drought and heat restricted irrigated output.
Producers planted 4.23 million acres and abandoned 1.12 million or 27 percent, compared with last yearΆs plantings of 4.572 million acres and record high abandonment of 66 percent.
In the adjoining Rolling Plains, production is estimated at 445,000 bales, up from only 175,000 bales in the largely dryland region last year. Growers planted 1.17 million acres and harvested 835,000 acres yielding an average of 256 pounds. Last year, plantings were 1.337 million acres, harvested acres were only 168,500 and yields were 499 pounds.
