The October USDA Supply/Demand report
reduced the U.S. crop 440,000 bales to 13.0 million.
Texas accounted for most of the decline. Dry, hot
summer weather and early cool weather has cut the
Texas crop short. Wet weather causing boll rot and
seed sprouting in open bolls substantially reduced
projected production in the Delta states, especially
Arkansas and Mississippi. The U.S. crop will most
likely decrease several hundred thousand bales
more to perhaps 12.8 million next month.
Domestic use was lowered to only 3.4 million
bales because of sluggish U.S. textile exports.
Ending stocks of 5.4 million bales are plentiful.
The USDA projects prices received by producers
for the 2009/10 crop to average 49 to 52 cents.
Forecasts for the 2009/10 world crop were
virtually unchanged, leaving a carryover of 56.1
million bales. That is six months of use when 4.5 is
sufficient. Chinese production was lowered one
million bales to 32.5 million. But, beginning stocks
were increased, leaving plentiful stocks of 17.54
million. In India, the crop was increased slightly to
24.25 million bales. Their domestic use stands at
18.5 million, exports of 6.2 million, and a
substantial amount of 10.1 million ending stocks.
In all, production was decreased for China, the U.S.,
and Uzbekistan. Partially offsetting were increases
in India and Argentina.
The good news is that world carryover stocks
have decreased 7 million bales in the last two years
from 63.1 million to 56.1 million. Most of the
decrease has been in the U.S. where carryover
stocks have dropped from 10.0 million to 5.4
million bales.
On the other hand, more than offsetting the
decrease in world supply has been a sharp decrease
in demand by about 10 million bales. However, the
decline in use has slowed and is expected to
increase this season and hopefully the next season
as well.
On the positive price side is a decrease in
stocks-to-use from last year for export nations,
foreign countries, China, import nations, and the
world. It appears that the world surplus of cotton is
on the decline. With the smaller U.S. crop, the
2010 December futures is building support to trade
early next year in the mid-to-high 70 cent range.
Marketing alternatives are dominated by placing
cotton under Commodity Credit Corporation loan
and then negotiating for the best equity offer
available over the next nine months. Remember to
account for storage and handling costs. Placing
cotton with a marketing association or pool is
another popular method of selling producer cotton.
Cotton Market Comments by Dr. Carl Anderson
