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U.S. Cotton Market Monthly Economic Letter - January 13, 2010

Cotton Incorporated ~ Supply Chain Planning  Article PDF
 


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

After a period of virtually uninterrupted strengthening since early September, cotton prices moved largely sideways throughout December and faced a correction in early January, dropping 2.74 cents/lb on January 5 before finding support just above 72.00 cents/lb.  In more recent trading, cotton prices have rallied and regained about half of the losses incurred in early January.  The sideways movement in NY prices in December coincided with significant strengthening in the dollar (futures contracts based on the dollar’s value were up more than 4% in December).  Cotton prices have had a strong inverse correlation with the dollar since the onset of the credit crisis in September 2008, meaning that cotton prices have tended to fall when the dollar rises and that cotton prices have tended to rise when dollar falls. The fact that cotton prices in December were relatively flat while the dollar climbed in value represents the first major deviation from the dollar/cotton correlation since the credit crisis.  Also defying the correlation between the dollar and cotton prices was the A Index, which climbed throughout much of December and rose from levels around 75.00 cents/lb to 79.85 cents/lb before retreating back to levels near 78.00 cents/lb in early January.

The latest USDA report describes few changes from last month’s figures.  Globally, production estimates decreased only 6,000 bales.  There were, however, some significant changes at the country level.  Production estimates for both China (+500,000 bales) and Brazil (+150,000) increased while production estimates for India (-300,000) and the U.S. (-191,000) decreased.  World consumption figures changed only 145,000 bales with the sole notable declines being for Japan (-90,000) and Russia (-50,000).  Revisions to trade estimates were also minor, despite the official announcement last month from China regarding the allocation of import quota.  The world export figure decreased only 215,000 bales with a 200,000 reduction in the Indian figure being the largest country-level revision.  The Chinese announcement had no apparent effect on USDA trade figures.  It included both the 4.1 million bales (894,000 metric tons) at the one percent tariff mandated by China’s accession to the WTO as well as another 4.6 million bales (1 million metric tons) that will be permitted entry at sliding-scale tariff rates.  According to reports, much of the sliding scale portion of the allocation is to be designated for the “processing trade”, meaning that cotton allowed entry under these rules will only be allowed for use in the production of textile products destined for export.  There is speculation that China may issue additional import quota later in the year.

Given the small revisions to supply and demand figures, estimated ending stocks changed only slightly, falling 88,000 bales worldwide and leaving January’s stocks-to-use ratio unchanged from December’s level at 45.2%.  With the stocks-to-use ratio at its lowest value in 15 years, fundamental pressures are likely to continue to support prices in coming months.  Nonetheless, there are some potential mitigating factors that could limit further price advance.  One such factor could be further strengthening of the dollar.  Other upcoming events that could affect prices are acreage reports due to be released in February by the National Cotton Council and the USDA.  Given higher cotton prices, expectations are that these reports will describe increases in both U.S. and world acreage for 2010/11.  Considering the 9.2 million bale reduction in ending stocks described in current USDA estimates, the magnitude of any acreage increase would have to be large to move projections for 2010/11 stock-to-use ratios significantly higher and provide any downward influence on prices.


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(Millions of 480-lb. bales) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  December January
             
Beginning Stocks 5.5 6.1 9.5 10.0 6.3 6.3
Production 23.9 21.6 19.2 12.8 12.6 12.4
Imports 0.0 0.0 0.0 0.0 0.0 0.0
Supply 29.4 27.7 28.7 22.9 18.9 18.7
 
U.S. Mill Use 5.9 4.9 4.6 3.6 3.4 3.4
Exports 17.5 13.0 13.7 13.3 11.0 11.0
Demand 23.4 17.9 18.2 16.9 14.4 14.4
 
Ending Stocks 6.1 9.5 10.0 6.3 4.5 4.3
Stocks/Use Ratio 25.9% 52.8% 55.1% 37.6% 31.3% 29.9%
Source: USDA Top
(Millions of 480-lb. bales) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  December January
             
Beginning Stocks 18.4 22.5 20.5 20.0 20.9 20.9
Production 28.4 35.5 37.0 36.7 31.5 32.0
Imports 19.3 10.6 11.5 7.0 9.0 9.0
Supply 66.1 68.6 69.1 63.7 61.4 61.9
 
China Mill Use 45.0 50.0 51.5 45.0 46.8 46.8
Exports 0.0 0.1 0.1 0.1 0.1 0.1
Demand 45.0 50.1 51.6 45.1 46.8 46.8
 
Ending Stocks 22.5 20.5 20.0 20.9 17.0 17.5
Stocks/Use Ratio 50.0% 41.0% 38.8% 46.3% 36.4% 37.5%
Source: USDA Top
(Millions of 480-lb. bales) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  December January
             
Beginning Stocks 60.6 62.4 63.1 62.2 61.1 60.9
Production 116.7 122.0 119.9 107.5 102.7 102.7
Supply 177.3 184.3 183.0 169.6 163.8 163.6
 
Consumption 116.7 123.7 123.5 111.1 114.5 114.4
 
Ending Stocks 62.4 63.1 62.2 60.9 51.8 51.7
 
Stocks/Use Ratio 53.5% 51.0% 50.3% 54.8% 45.2% 45.2%
Source: USDA Top Source: USDA Top
(Millions of 480 lb. bales) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  December January
             
China 28.4 35.5 37.0 36.7 31.5 32.0
India 19.1 21.8 24.0 22.6 23.8 23.5
United States 23.9 21.6 19.2 12.8 12.6 12.4
Pakistan 10.2 9.9 8.9 9.0 9.8 9.8
Brazil 4.7 7.0 7.4 5.5 5.4 5.6
Uzbekistan 5.6 5.4 5.4 4.6 4.4 4.4
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 1.1
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 0.8 0.8
Rest of World 10.4 8.7 7.9 6.9 6.2 6.2
World Total 116.7 122.0 119.9 107.5 102.7 102.7
Source: USDA Top
(Millions of 480 lb. bales) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  December January
             
United States 17.5 13.0 13.7 13.3 11.0 11.0
India 3.5 4.6 7.0 2.4 6.8 6.6
Uzbekistan 4.8 4.5 4.2 3.0 4.0 4.0
Brazil 2.0 1.3 2.2 2.7 2.0 2.0
Australia 2.9 2.1 1.2 1.2 1.7 1.7
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 0.5
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 33.9 33.7
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
  December January
             
China 45.0 50.0 51.5 45.0 46.8 46.8
India 16.7 18.1 18.6 17.9 18.8 18.8
Pakistan 11.5 12.0 12.0 11.5 12.0 12.0
Turkey 6.9 7.3 6.0 5.0 5.1 5.1
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 3.4
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 1.4
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 9.5 9.4
World Total 116.7 123.7 123.5 111.1 114.5 114.4
Source: USDA Top
(Millions of 480 lb. bales) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  December January
             
China 19.3 10.6 11.5 7.0 9.0 9.0
Bangladesh 2.6 3.2 3.5 3.8 4.0 4.0
Turkey 3.5 4.0 3.3 2.9 3.3 3.3
Pakistan 1.6 2.3 3.9 2.0 2.6 2.7
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 1.6 1.5
Vietnam 0.7 1.0 1.2 1.2 1.4 1.4
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 0.8 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 3.3 3.2
World Total 44.8 38.1 39.0 30.1 33.9 33.6
Source: USDA Top
(Millions of metric tons) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  December January
             
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 0.7
Exports 3.8 2.8 3.0 2.9 2.4 2.4
Demand 5.1 3.9 4.0 3.7 3.1 3.1
 
Ending Stocks 1.3 2.1 2.2 1.4 1.0 0.9
Stocks/Use Ratio 25.9% 52.8% 55.1% 37.6% 31.3% 29.9%
Source: USDA
Top
(Millions of metric tons) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  December January
             
Beginning Stocks 4.0 4.9 4.5 4.4 4.5 4.5
Production 6.2 7.7 8.1 8.0 6.9 7.0
Imports 4.2 2.3 2.5 1.5 2.0 2.0
Suppply 14.4 14.9 15.0 13.9 13.4 13.5
 
China Mill Use 9.8 10.9 11.2 9.8 10.2 10.2
Exports 0.0 0.0 0.0 0.0 0.0 0.0
Demand 9.8 10.9 11.2 9.8 10.2 10.2
 
Ending Stocks 4.9 4.5 4.4 4.5 3.7 3.8
Stocks/Use Ratio 50.0% 41.0% 38.8% 46.3% 36.4% 37.5%
Source: USDA Top
(Millions of metric tons) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  December January
             
Beginning Stocks 13.2 13.6 13.7 13.5 13.3 13.3
Production 25.4 26.6 26.1 23.4 22.4 22.4
Supply 38.6 40.1 39.9 36.9 35.7 35.6
 
Consumption 25.4 26.9 26.9 24.2 24.9 24.9
 
Ending Stocks 13.6 13.7 13.5 13.3 11.3 11.3
 
Stocks/Use Ratio 53.5% 51.0% 50.3% 54.8% 45.2% 45.2%
Source: USDA Top
(Millions of metric tons) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  December January
             
China 6.2 7.7 8.1 8.0 6.9 7.0
India 4.1 4.7 5.2 4.9 5.2 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 1.2
Uzbekistan 1.2 1.2 1.2 1.0 1.0 1.0
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 0.2
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 1.4 1.3
World Total 25.4 26.6 26.1 23.4 22.4 22.4
Source: USDA Top
(Millions of metric tons) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  December January
             
United States 3.8 2.8 3.0 2.9 2.4 2.4
India 0.8 1.0 1.5 0.5 1.5 1.4
Uzbekistan 1.0 1.0 0.9 0.7 0.9 0.9
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 0.1
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 7.3
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
  December January
             
China 9.8 10.9 11.2 9.8 10.2 10.2
India 3.6 3.9 4.0 3.9 4.1 4.1
Pakistan 2.5 2.6 2.6 2.5 2.6 2.6
Turkey 1.5 1.6 1.3 1.1 1.1 1.1
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 0.7
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 2.1 2.0
World Total 25.4 26.9 26.9 24.2 24.9 24.9
Source: USDA Top
(Millions of metric tons) 2005/06 2006/07 2007/08 2008/09 2009/10 2009/10
  December January
             
China 4.2 2.3 2.5 1.5 2.0 2.0
Bangladesh 0.6 0.7 0.8 0.8 0.9 0.9
Turkey 0.8 0.9 0.7 0.6 0.7 0.7
Pakistan 0.4 0.5 0.9 0.4 0.6 0.6
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 0.2 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 7.3
Source: USDA Top
 
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