By Dr. O.A. Cleveland
Professor Emeritus, Mississippi State University
Special for Bayer CropScience
Cotton trended higher last week, up 215 points in the spot month, but the consensus was that prices were doing little more than treading water as the market awaits a combination of concerns of the ongoing West Texas drought, IndiaΆs export ban, ChinaΆs increased appetite for cotton, and the potential that the U.S. economy is progressing more rapidly than forecast.
In the near term, the market is apt to grudgingly move higher in the face of continued drought in West Texas. However, the record level of carryover stocks around the world remains the cross hairs of the long-term price outlook and will restrict any price advance above 90 cents in the absence of a weather-reduced crop. A narrow six-cent price range between 87 and 93 cents should be expected as the market works its way through the late May/early June planting season.
U.S. export sales continue to surprise the industry, week after week. Both new sales and shipments are well ahead of projections and prior industry estimates. Net sales of Upland for the week ending March 15 were 197,000 RB. Sales for the 2012/13 marketing year were 87,100 RB. Pima sales for the current year were 3,400 RB. China was the primary buyer, but Mexico and Vietnam were very strong buyers as well.
Shipments were 297,100 RB, well ahead of the pace necessary to meet the USDA forecast. In fact, given the near two month tenure of shipments running well ahead of the target needed to make the USDA estimate, it is apparent that USDA will have to increase U.S. exports as much as 500,000 bales. Export sales now stand at 109% of the USDA estimate and the marketing year still has 4 and a half months yet to go.
With India now out of the export market, most international sales have been for U.S. cotton. The export pace will draw down carryover stocks of U.S. cotton yet even further. Shipments only need to average some 235,000 RB a week to reach the USDA estimate. The pace for the prior two months has been above 300,000 RB. Shipments are on a pace to actually run as high as one million more than USDAΆs current estimate of 11.0 million bales. However, do not look for an estimate of more than 11.5 million bales at this time.
Existing home sales have continued to improve, reaching the highest level in nearly five years and 13% above the year ago level. This will generate a new demand for cotton-rich household goods, such as towels, sheets, drapery and upholstered furniture. No doubt it will take much more than that to generate a demand that will push prices higher, but the beginning has to start some time.
The AgMarket Network broadcast will be next Friday, March 30 at 7:30 AM, central time. The conference will be aired live over radio station KFLP 90 FM, Floydada Texas and KZIP 1310 AM, Amarillo Texas. Alternatively you can listen live over the internet at www.AgMarketNetwork.com. Additionally, the program will be archived beginning about noon on March 30 at www.AgMarketNetwork.com. Listeners can e-mail questions to the panel at patmc@agmidsouth.com
A key topic will be the March 30 Planting Intentions Report.
