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U.S. Cotton Market Monthly Economic Letter - March 11, 2010

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U.S. Cotton Balance Sheet
China Cotton Balance Sheet
World Cotton Balance Sheet

World Cotton Production
World Cotton Exports

World Cotton Consumption
World Cotton Imports

U.S. Cotton Balance Sheet (metric tons)

World Cotton Balance Sheet (metric tons)
World Cotton Production (metric tons)
China Cotton Balance Sheet
World Cotton Exports (metric tons)

World Cotton Consumption (metric tons)
World Cotton Imports (metric tons)
New York Nearby Prices 
Average Monthly Prices

Cotton prices rallied sharply over the past month.  Starting February 8, the May contract climbed from 69.00 cents/lb to a high of 84.60 cents/lb on March 1.  In more recent trading, prices retreated about 4 cents/lb, testing support just below 80 cents/lb before slightly rebounding to close at 80.21 cents/lb on March 10.  The rise in NY futures was closely followed by the A Index, which rose from 74.90 cents/lb on February 8 to 87.05 cents/lb on March 2 before falling back to 84.80 cents/lb on March 10.  The onset of the rally nearly coincided with the release of last month’s bullish USDA report (February 9), which featured the first significant increase in consumption estimates since the beginning of the crop year.  This month’s report, which includes a 675,000 bale reduction in ending stocks, can also be considered supportive of prices.  Contributing to this month’s decline in ending stocks were both a 500,000 bale reduction to the world production figure and a 170,000 bale increase to the world consumption projection. 

At 102.2 million bales, the current world production estimate represents a 5.0% decline compared to 2008/09 and a 14.7% decline compared to 2007/08.  Much of this year’s decline in production is a result of lower Chinese acreage and production.  Falling another 500,000 bales in the March, the current Chinese production figure (31.5 million bales) is 5.2 million bales lower than in 2008/09 (36.7 million) and 5.5 million bales lower than the record high of 37.0 million bales in 2007/08.  Other countries with significant revisions to 2009/10 production estimates were Uzbekistan (-300,000 bales), Brazil (+200,000 bales), and Turkmenistan (+100,000).

With the 170,000 bale increase, 2009/10 world consumption is now estimated at 115.7 million bales, which is 5.6 million bales more than in 2008/09 and 7.3 million bales less than in 2007/08.  Countries with significant revisions to 2009/10 figures include Pakistan (-250,000 bales), Turkey (+200,000), the U.S. (+100,000), and Vietnam (+100,000).  China’s consumption estimate was unchanged, and the decrease in China’s production figure was offset by a 500,000 bale increase in projected Chinese imports.  Import estimates for Turkey (+200,000 bales) and Vietnam (+150,000) also increased, while the import figure for Pakistan decreased (-250,000).  Export estimates rose for India (+400,000 bales), Pakistan (+200,000), and Australia (+100,000), while the Uzbek export estimate fell 100,000 bales.

This month’s reduction in world ending stocks resulted in another decrease in the world stocks-to-use ratio.  Falling 0.6 percentage points to 44.4%, the March estimate is the lowest since the 1994/95 season and is a likely reason why cotton prices have reached their highest levels in two years.  These higher cotton prices are expected to result in increased cotton acreage and production in 2010/11.  Preliminary figures for 2010/11 released February 19 in the USDA’s Cotton Outlook report forecast a 10.5% increase in world cotton production in the upcoming crop year.  With world consumption expected to grow 2.6% in 2010/11, however, the increase in production is not expected to be sufficient to completely overcome the production/consumption gap.  As a result, the stocks-to-use ratio is predicted to fall 2.6 percentage points to 41.8%, which could support prices throughout 2010/11.  In spite of the forecast for further tightening in 2010/11, futures prices suggest a reduction in price pressure in 2010/11, as 2010/11 contracts have been consistently trading several cents/lb lower than 2009/10 contracts.  The contradiction between preliminary estimates for fundamentals and futures prices emphasizes the uncertainty facing cotton markets in 2010/11 from this early standpoint.  As additional information becomes available to address questions regarding acreage, production, and consumption for 2010/11, fundamental pressure on prices should continue to be a dominant factor throughout the remainder of the 2009/10 crop year.


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(Millions of 480-lb. bales) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  February March
             
Beginning Stocks 5.5 6.1 9.5 10.0 6.3 6.3
Production 23.9 21.6 19.2 12.8 12.4 12.4
Imports 0.0 0.0 0.0 0.0 0.0 0.0
Supply 29.4 27.7 28.7 22.9 18.7 18.7
 
U.S. Mill Use 5.9 4.9 4.6 3.6 3.4 3.5
Exports 17.5 13.0 13.7 13.3 12.0 12.0
Demand 23.4 17.9 18.2 16.9 15.4 15.5
 
Ending Stocks 6.1 9.5 10.0 6.3 3.3 3.2
Stocks/Use Ratio 25.9% 52.8% 55.1% 37.6% 21.4% 20.6%
Source: USDA Top
(Millions of 480-lb. bales) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  February March
             
Beginning Stocks 18.4 22.5 20.5 20.5 22.4 22.4
Production 28.4 35.5 37.0 36.7 32.0 31.5
Imports 19.3 10.6 11.5 7.0 9.0 9.5
Supply 66.1 68.6 69.1 64.2 63.4 63.4
 
China Mill Use 45.0 50.0 51.0 44.0 47.5 47.5
Exports 0.0 0.1 0.1 0.1 0.1 0.1
Demand 45.0 50.1 51.1 44.1 47.6 47.6
 
Ending Stocks 22.5 20.5 20.5 22.4 18.3 18.3
Stocks/Use Ratio 50.0% 41.0% 40.2% 50.7% 38.4% 38.4%
Source: USDA Top
(Millions of 480-lb. bales) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  February March
             
Beginning Stocks 60.6 62.4 63.1 62.7 62.4 62.4
Production 116.7 122.0 119.9 107.5 102.7 102.2
Supply 177.3 184.3 183.0 170.1 165.2 164.7
 
Consumption 116.7 123.7 123.0 110.1 115.5 115.7
 
Ending Stocks 62.4 63.1 62.7 62.4 52.1 51.4
 
Stocks/Use Ratio 53.5% 51.0% 51.0% 56.7% 45.1% 44.4%
Source: USDA Top Source: USDA Top
(Millions of 480 lb. bales) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  February March
             
China 28.4 35.5 37.0 36.7 32.0 31.5
India 19.1 21.8 24.0 22.6 23.5 23.5
United States 23.9 21.6 19.2 12.8 12.4 12.4
Pakistan 10.2 9.9 8.9 9.0 9.8 9.8
Brazil 4.7 7.0 7.4 5.5 5.6 5.8
Uzbekistan 5.6 5.4 5.4 4.6 4.4 4.1
Australia 2.8 1.4 0.6 1.5 1.8 1.8
Turkey 3.6 3.8 3.1 1.9 1.7 1.7
African Franc Zone 2.5 2.3 1.6 1.6 1.6 1.6
Turkmenistan 1.0 1.2 1.3 1.4 1.1 1.2
EU-27 2.5 1.6 1.7 1.2 1.0 1.0
Syria 1.6 1.0 1.1 1.1 1.0 1.0
Greece 2.0 1.4 1.6 1.2 0.9 0.9
Burkina 1.4 1.3 0.7 0.9 0.9 0.9
Argentina 0.6 0.8 0.7 0.6 0.9 0.9
Rest of World 10.4 8.7 7.9 6.9 6.1 6.1
World Total 116.7 122.0 119.9 107.5 102.7 102.2
Source: USDA Top
(Millions of 480 lb. bales) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  February March
             
United States 17.5 13.0 13.7 13.3 12.0 12.0
India 3.5 4.6 7.0 2.4 5.7 6.1
Uzbekistan 4.8 4.5 4.2 3.0 4.0 3.9
Brazil 2.0 1.3 2.2 2.7 2.0 2.0
Australia 2.9 2.1 1.2 1.2 1.7 1.8
African Franc Zone 2.6 2.4 1.7 1.5 1.5 1.5
EU-27 2.0 1.6 1.6 1.0 1.1 1.1
Turkmenistan 0.6 0.8 0.8 0.6 1.0 1.0
Greece 1.4 1.3 1.3 0.8 0.9 0.9
Burkina 1.4 1.4 0.8 0.8 0.9 0.9
Pakistan 0.3 0.2 0.3 0.4 0.5 0.7
Tajikistan 0.6 0.6 0.5 0.4 0.5 0.5
Mali 1.0 0.9 0.5 0.3 0.4 0.4
Kazakhstan 0.9 0.9 0.5 0.3 0.4 0.4
Zimbabwe 0.4 0.4 0.4 0.3 0.4 0.4
Rest of World 6.6 4.9 4.3 3.1 3.0 3.1
World Total 44.6 37.3 38.5 30.2 33.8 34.4
Source: USDA Top
Note: African Franc Zone includes Benin, Burkina Faso, Cameroon, Chad, Cote d'Ivoire, and Mali.
(Millions of 480 lb. bales) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  February March
             
China 45.0 50.0 51.0 44.0 47.5 47.5
India 16.7 18.1 18.6 17.9 19.2 19.2
Pakistan 11.5 12.0 12.0 11.5 12.0 11.8
Turkey 6.9 7.3 6.0 5.0 5.1 5.3
Brazil 4.5 4.6 4.6 4.2 4.2 4.2
Bangladesh 2.5 3.2 3.5 3.8 4.0 4.0
United States 5.9 4.9 4.6 3.6 3.4 3.5
Indonesia 2.2 2.2 2.2 2.0 2.1 2.1
Mexico 2.1 2.1 2.0 1.9 1.9 1.9
Thailand 2.1 2.0 2.0 1.6 1.8 1.8
Vietnam 0.8 1.0 1.2 1.3 1.4 1.5
South Korea 1.1 1.1 1.0 1.0 1.0 1.0
Uzbekistan 0.8 0.9 1.0 1.0 1.0 1.0
Egypt 1.0 1.0 1.0 0.9 0.9 0.9
Syria 0.7 0.8 0.8 0.8 0.9 0.9
Rest of World 13.1 12.6 11.5 9.8 9.3 9.3
World Total 116.7 123.7 123.0 110.1 115.5 115.7
Source: USDA Top
(Millions of 480 lb. bales) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  February March
             
China 19.3 10.6 11.5 7.0 9.0 9.5
Bangladesh 2.6 3.2 3.5 3.8 4.0 4.0
Turkey 3.5 4.0 3.3 2.9 3.3 3.5
Pakistan 1.6 2.3 3.9 2.0 2.8 2.5
Indonesia 2.2 2.2 2.3 2.0 2.1 2.1
Thailand 1.9 1.9 1.9 1.6 1.8 1.8
Mexico 1.7 1.4 1.5 1.3 1.5 1.5
Vietnam 0.7 1.0 1.2 1.2 1.4 1.5
South Korea 1.0 1.1 1.0 1.0 1.0 1.0
EU-27 2.5 2.1 1.7 1.0 1.0 1.0
Taiwan 1.1 1.2 1.0 0.8 0.8 0.8
Russia 1.4 1.3 1.1 0.7 0.7 0.7
India 0.4 0.5 0.6 0.8 0.6 0.6
Egypt 0.5 0.5 0.4 0.4 0.4 0.4
Iran 0.1 0.3 0.3 0.3 0.3 0.3
Rest of World 4.3 4.6 3.9 3.2 3.2 3.2
World Total 44.8 38.1 39.0 30.0 33.8 34.4
Source: USDA Top
(Millions of metric tons) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  February March
             
Beginning Stocks 1.2 1.3 2.1 2.2 1.4 1.4
Production 5.2 4.7 4.2 2.8 2.7 2.7
Imports 0.0 0.0 0.0 0.0 0.0 0.0
Suppply 6.4 6.0 6.2 5.0 4.1 4.1
 
U.S. Mill Use 1.3 1.1 1.0 0.8 0.7 0.8
Exports 3.8 2.8 3.0 2.9 2.6 2.6
Demand 5.1 3.9 4.0 3.7 3.4 3.4
 
Ending Stocks 1.3 2.1 2.2 1.4 0.7 0.7
Stocks/Use Ratio 25.9% 52.8% 55.1% 37.6% 21.4% 20.6%
Source: USDA
Top
(Millions of metric tons) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  February March
             
Beginning Stocks 4.0 4.9 4.5 4.5 4.9 4.9
Production 6.2 7.7 8.1 8.0 7.0 6.9
Imports 4.2 2.3 2.5 1.5 2.0 2.1
Suppply 14.4 14.9 15.0 14.0 13.8 13.8
 
China Mill Use 9.8 10.9 11.1 9.6 10.3 10.3
Exports 0.0 0.0 0.0 0.0 0.0 0.0
Demand 9.8 10.9 11.1 9.6 10.4 10.4
 
Ending Stocks 4.9 4.5 4.5 4.9 4.0 4.0
Stocks/Use Ratio 50.0% 41.0% 40.2% 50.7% 38.4% 38.4%
Source: USDA Top
(Millions of metric tons) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  February March
             
Beginning Stocks 13.2 13.6 13.7 13.6 13.6 13.6
Production 25.4 26.6 26.1 23.4 22.4 22.3
Supply 38.6 40.1 39.9 37.0 36.0 35.9
 
Consumption 25.4 26.9 26.8 24.0 25.2 25.2
 
Ending Stocks 13.6 13.7 13.6 13.6 11.3 11.2
 
Stocks/Use Ratio 53.5% 51.0% 51.0% 56.7% 45.1% 44.4%
Source: USDA Top
(Millions of metric tons) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  February March
             
China 6.2 7.7 8.1 8.0 7.0 6.9
India 4.1 4.7 5.2 4.9 5.1 5.1
United States 5.2 4.7 4.2 2.8 2.7 2.7
Pakistan 2.2 2.2 1.9 2.0 2.1 2.1
Brazil 1.0 1.5 1.6 1.2 1.2 1.3
Uzbekistan 1.2 1.2 1.2 1.0 1.0 0.9
Australia 0.6 0.3 0.1 0.3 0.4 0.4
Turkey 0.8 0.8 0.7 0.4 0.4 0.4
African Franc Zone 0.5 0.5 0.3 0.4 0.3 0.3
Turkmenistan 0.2 0.3 0.3 0.3 0.2 0.3
EU-27 0.5 0.4 0.4 0.3 0.2 0.2
Syria 0.3 0.2 0.2 0.2 0.2 0.2
Greece 0.4 0.3 0.3 0.3 0.2 0.2
Burkina 0.3 0.3 0.1 0.2 0.2 0.2
Argentina 0.1 0.2 0.2 0.1 0.2 0.2
Rest of World 2.3 1.9 1.7 1.5 1.3 1.3
World Total 25.4 26.6 26.1 23.4 22.4 22.3
Source: USDA Top
(Millions of metric tons) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  February March
             
United States 3.8 2.8 3.0 2.9 2.6 2.6
India 0.8 1.0 1.5 0.5 1.2 1.3
Uzbekistan 1.0 1.0 0.9 0.7 0.9 0.8
Brazil 0.4 0.3 0.5 0.6 0.4 0.4
Australia 0.6 0.5 0.3 0.3 0.4 0.4
African Franc Zone 0.6 0.5 0.4 0.3 0.3 0.3
EU-27 0.4 0.3 0.4 0.2 0.2 0.2
Turkmenistan 0.1 0.2 0.2 0.1 0.2 0.2
Greece 0.3 0.3 0.3 0.2 0.2 0.2
Burkina 0.3 0.3 0.2 0.2 0.2 0.2
Pakistan 0.1 0.0 0.1 0.1 0.1 0.2
Tajikistan 0.1 0.1 0.1 0.1 0.1 0.1
Mali 0.2 0.2 0.1 0.1 0.1 0.1
Kazakhstan 0.2 0.2 0.1 0.1 0.1 0.1
Zimbabwe 0.1 0.1 0.1 0.1 0.1 0.1
Rest of World 1.4 1.1 0.9 0.7 0.7 0.7
World Total 9.7 8.1 8.4 6.6 7.4 7.5
Source: USDA Top
Note: African Franc Zone includes Benin, Burkina Faso, Cameroon, Chad, Cote d'lvoire, and Mali.
(Millions of metric tons) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  February March
             
China 9.8 10.9 11.1 9.6 10.3 10.3
India 3.6 3.9 4.0 3.9 4.2 4.2
Pakistan 2.5 2.6 2.6 2.5 2.6 2.6
Turkey 1.5 1.6 1.3 1.1 1.1 1.2
Brazil 1.0 1.0 1.0 0.9 0.9 0.9
Bangladesh 0.5 0.7 0.8 0.8 0.9 0.9
United States 1.3 1.1 1.0 0.8 0.7 0.8
Indonesia 0.5 0.5 0.5 0.4 0.4 0.4
Mexico 0.5 0.5 0.4 0.4 0.4 0.4
Thailand 0.4 0.4 0.4 0.3 0.4 0.4
Vietnam 0.2 0.2 0.3 0.3 0.3 0.3
South Korea 0.2 0.2 0.2 0.2 0.2 0.2
Uzbekistan 0.2 0.2 0.2 0.2 0.2 0.2
Egypt 0.2 0.2 0.2 0.2 0.2 0.2
Syria 0.2 0.2 0.2 0.2 0.2 0.2
Rest of World 2.8 2.8 2.5 2.1 2.0 2.0
World Total 25.4 26.9 26.8 24.0 25.2 25.2
Source: USDA Top
(Millions of metric tons) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  February March
             
China 4.2 2.3 2.5 1.5 2.0 2.1
Bangladesh 0.6 0.7 0.8 0.8 0.9 0.9
Turkey 0.8 0.9 0.7 0.6 0.7 0.8
Pakistan 0.4 0.5 0.9 0.4 0.6 0.5
Indonesia 0.5 0.5 0.5 0.4 0.5 0.5
Thailand 0.4 0.4 0.4 0.3 0.4 0.4
Mexico 0.4 0.3 0.3 0.3 0.3 0.3
Vietnam 0.2 0.2 0.3 0.3 0.3 0.3
South Korea 0.2 0.2 0.2 0.2 0.2 0.2
EU-27 0.5 0.5 0.4 0.2 0.2 0.2
Taiwan 0.2 0.3 0.2 0.2 0.2 0.2
Russia 0.3 0.3 0.2 0.2 0.1 0.1
India 0.1 0.1 0.1 0.2 0.1 0.1
Egypt 0.1 0.1 0.1 0.1 0.1 0.1
Iran 0.0 0.1 0.1 0.1 0.1 0.1
Rest of World 0.9 1.0 0.8 0.7 0.7 0.7
World Total 9.7 8.3 8.5 6.5 7.4 7.5
Source: USDA Top
 
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