Special for Bayer CropScience
Old crop export sales have been negative for the past eight consecutive weeks, but actual shipments have remained on target to meet the USDA projection. International mills are substituting cotton from the bumper crop being harvested in the Southern Hemisphere for prior U.S. purchases. However, the cancellations remain relatively small, but the total over two months is mounting. Nevertheless, let us not forget that a good number of the cancellations have actually been “buy backs” instigated by U.S. merchants and not by the international textile mills. Thus, the USDA export forecast of 15.75 million bales remains firm. Prices did rebound smartly on the week, but in the absence of any new information. Prices are caught in a narrow band in the short term and will likely remain so with the lack of any unexpected news.
The 113.00-cent area mentioned last week as major support in the December contract proved to be solid. Once prices dripped near that level last week price movement turned 180 degrees and moved back above 120.00. The rather wide price range between 113.00 and 125.00 will likely dominate for the remainder of May in the absence of major moisture coming to Texas. Should we move beyond the first week in June without that moisture then there will be major yield reductions and additional abandonment in Texas and Oklahoma.
Weather continues to be the primary factor favoring the bullish side of the price equation and the planting window is slowing closing on U.S. growers. That said, there remains a good month for most growers and even six week or more for some dryland planting in West Texas. Surely it is a lead pipe cinch that West Texas will receive a good rain within six weeks, but it has not for the past six times six weeks.
Nevertheless, the first week in June is approaching, “when it always rains,” but will it rain this year? Both the Texas-Oklahoma and the Delta crop will be weather reduced, but is remains just too early to provide any accurate forecast. The drought continues to spread in the Southwest, http://drought.unl.edu/dm/monitor.htm Major weather forecasts do not see any moisture during the coming week. That said, the Lamesa, Texas area (Dawson County) could see light isolated thunder showers on Sunday.
Look at the 1973 and 1974 cotton production in Dawson County, a major cotton producer in the all important Texas District 1-S. Cotton yield in 1973 was 564 pounds per acre. That was a year of excellent moisture. However, the 1974 crop faced the same type drought that the county is facing this year – almost identical. The yield was only 255 pounds. Very bad, but not a killer back then. The other half of the story, and the real killer, was that more than two-thirds of the planted acreage was abandoned due to drought. Production in 1973 was a booming 315,300 bales, a record to near record at the time. The 1974 production was off almost 90%, that is, DOWN 90%. Only 38,800 bales were harvested, another record to near record, but this time a record low … all this in back to back years.
The Texas season is closing in on this type disaster and such a season will cause cotton prices skyrocket above the 150.00 mark.
