World stocks-to-use is estimated at 45.2 percent, the
lowest since 37.7 percent 15 years ago. In the 1994/95
season, the Memphis 41-34 quality cotton spot price
quoted by USDA averaged 87.3 cents per pound. Thus,
fewer world stocks indicate that in the first half of next
year, U.S. futures prices might be in the 85 cent per
pound range.

In the U.S., the latest cotton estimates show a slight
increase in production, higher exports, and lower ending
stocks. All cotton production was raised 96,000 bales
from last month to 12.59 million bales. That compares
with 12.82 million last season and 19.21 million two
years ago.
The Texas crop was increased 100,000 bales to 5.00
million, up from 4.45 million last season. The Delta
crop was decreased, while the Southeast crop increased.
Due to improving import-demand, U.S. exports were
raised 500,000 bales to 11.0 million. Carryover stocks
were lowered 400,000 bales to a reasonable 4.5 million,
the lowest since 2003. As a result, the projected average
producer price was increased by USDA 4 cents to 56 to
64 cents per pound for the 2009/10 season.
Prospects for decreased U.S. and foreign stocks and
increased demand have pushed March 2010 futures up from 60 cents to 74 cents since the first crop estimate
last August. The market rally is likely to continue.

Foreign cotton stocks are estimated at 47.3 million
bales, down sharply from 54.8 million a year ago. Also,
the foreign production versus consumption deficit gap
has increased to 21 million bales from 12.9 last year.
Consequently, world carryover stocks have dropped to
51.8 million, almost 10 million bales less than a year
earlier.
Because of high production costs and marginal cash
flow for cotton versus corn, soybeans and wheat, the
futures price of cotton will need to be high enough to
buy more acres in early 2010. With crop credit being
more closely reviewed by lenders this year, cotton prices
will have strong competition for acreage from lower per
acre costs of planting corn and soybeans.
Producers are getting much higher equities from
cotton placed into the Commodity Credit Corporation
(CCC) loan than expected a month ago. Also, producers
need to prepare for fixing prices for the new crop during
the first half of 2010. Expected price levels should be
the most attractive to growers since early 2008.
Best Wishes for a Happy Holiday Season
and a Prosperous New Year!