It’s been a few days since my last report, but honestly little has taken place in the cotton market over that period of time. Lending to this is the fact that news out of the financial markets have calmed, as well. After giving back all the gains received following the August USDA supply/demand report, cotton futures have been in a holding pattern with 63 cents still providing a very solid floor. In the absence of any unsettling economic news, the cotton market appears comfortable trading at this level until the actual size of this year’s crop is better known.
Therein is the conundrum. If you ask 10 people their estimate of its size you will get ten different answers. Always a factor, this year its looms larger with demand at an historical low. Throw in greater uncertainty due to late plantings and scattered rain patterns, one can understand the wait and see attitude market movers are taking.
With the majority of the U.S. crop planted in the Southwest, the Texas crop is getting the most scrutiny at this time. In its August report, USDA estimated abandonment in this region at 18 percent, which was largely responsible for their 1.5 million bale decrease in domestic production to a 13 million bale total.
Many statisticians are now saying ten percent is more accurate, with the USDA most likely to make this adjustment in its next report to be released September 11th. The August estimate was a result of producer surveys which calls in to question; Was this higher abandonment number based off intended acres or actual planted acres?
Keep in mind, a significant number of acres were not planted in South Texas as well as areas north of Lubbock due to the extreme wet conditions in the spring. So, where “preventive plantings” fall into this equation will play a major role in actual harvested acres and final crop size.
The September release will be based on reported acres, thus giving us a clearer picture. There are an ever growing number of people in the trade that believe with a ten percent abandonment in West Texas that a 14 to 14.5 million bale U.S. crop is very possible. If so, our current 63 cent floor will certainly be tested. We, on the other hand, are more optimistic foreseeing a much slighter increase.
I’m looking forward to visiting this area in a couple of weeks to see for myself. However, its wide expanse and variability still makes an estimate very difficult. While at the mercy of late summer weather, we won’t truly know until harvesters get in the field. In any case, September 11th should be a very interesting day as USDA will take another stab at this prediction.
You have heard us talk for some time now about the value of quality cotton. Harvest preparation and defoliation techniques play a pivotal role in producing premium fiber. Next week’s edition of the Turnrow will focus on this key element to assist you in preserving fiber quality thus maximizing the value of your crop.
