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U.S. Cotton Market Monthly Economic Letter - April 10, 2008

Cotton Incorporated ~ Supply Chain Planning  Article PDF
 


U.S. Cotton Balance Sheet

World Cotton Balance Sheet

U.S. Cotton Balance Sheet (metric tons)

World Cotton Balance Sheet (metric tons)

World Cotton Production

World Cotton Consumption

World Cotton Production (metric tons)

World Cotton Consumption (metric tons)

New York Nearby Prices 

Average Monthly Prices

Projections from the USDA’s April report show marginally higher worldwide supply and demand, rising by less than 1% each.  World production increased by 832,000 bales to reach 119.7 million bales which was due to projected increases in the United States and India. Global supply increased slightly from 179.9 to 180.9 million bales.  Global consumption rose by a net 457,000 bales to 124.9 million bales on the strength of a higher estimate for Pakistan (+500,000 bales). 

In the United States, there has been an increase in supply from 28.5 to 28.9 million bales and an increase in demand from 19.1 to 19.2 million bales.  USDA’s Planting Intentions Report, released in March, showed total acreage declining by 13.3%.  The largest declines estimated for the states of California (-48.7%), Tennessee (-39.8), and Mississippi (-36.4). The only states projected to increase planted acres were Georgia (+1.9) and Oklahoma (+8.6%). U.S. mill demand increased from 4.6 to 4.7 million bales.  Exports remained flat at 14.5 million bales, which is in line with the average year-to-date pace of shipments seen in previous years. U.S. exports of cotton are expected to be 1.5 million bales higher than last year’s figure. Ending stocks rose from 9.4 million bales to 9.7 million bales, which surpassed March’s record of the highest forecasted level of ending stocks this year. Consequently, the stocks-to-use ratio relaxed to 50.5%, which is consistent with last year’s level and significantly higher than the forecasted ratio just a few months ago.

Prices over the past month started strong but finished approximately six cents (‘A’ Index) and four cents (NY Nearby price) lower than they started the month. The high prices in the early days of March skewed the ‘A’ Index and NY Nearby monthly average prices to seem higher than the markets were really trading by the end of March. Since reaching their peak on March 5th at 87.3 cents (NY Nearby price), prices have slowly eroded in recent weeks to about 73.9 cents (NY Nearby price). 

This weakening in prices was consistent with a return to the fundamentals in the market following a period of heavy influence of the commodity speculators and other commodity prices. Fundamentals still remain soft for the U.S. cotton situation. In January of this year, the forecast for the stocks-to-use ratio was 38.3%. It is now projected to be 50.5%. This change in the ratio reveals a fundamental weakness in the U.S. price structure, while the world stocks-to-use ratio continues to tighten. With the Nearby futures price now trading at approximately four cents per pound below the quote for the ‘A’ Index, U.S. prices appear to be following the direction of the world market more closely.  Even with the announcement of a 13.3% decline in plantings anticipated for the U.S. crop in 2008/2009, U.S. prices have not shown any evidence of strength. This lack of strength gives additional support to the idea that market prices are moving in a direction that reflects the weaker fundamental outlook.


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(Millions of 480-lb. bales) 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2007/08
            March April
 

 

 

 

 

 

   
Beginning Stocks 7.4 5.4 3.5 5.5 6.1 9.7 9.4
Production 17.2 18.3 23.3 23.9 21.6 19.0 19.4
Imports 0.1 0.0 0.0 0.0 0.0 0.0 0.0
Supply 24.7 23.7 26.7 29.4 27.7 28.8 28.8
               
U.S. Mill Use 7.3 6.3 6.7 5.9 4.9 4.6 4.7
Exports 11.9 13.8 14.4 17.5 13.0 14.5 14.5
Demand 19.2 20.0 21.1 23.4 18.0 19.1 19.4
               
Ending Stocks 5.4 3.5 5.5 6.1 9.7 9.4 9.7
Stocks/Use Ratio 28.1% 17.2% 26.0% 25.8% 54.0% 49.2% 50.0%
Source: USDA

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(Millions of 480-lb. bales) 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2007/08
            March April
 

 

 

 

 

 

   
Beginning Stocks 54.8 45.4 44.2 57.3 60.1 61.0 61.2
Production 88.4 95.3 122.1 117.7 122.1 118.9 119.7
Supply 143.1 140.7 166.3 175.0 182.2 179.9 180.9
               
Consumption 98.4 98.0 108.6 116.2 123.2 124.5 124.9
China 29.9 32.0 38.5 45.0 50.0 53.0 53.0
Non-China 68.5 66.0 70.1 71.2 73.2 71.5 71.9
               
Ending Stocks 45.4 44.2 57.3 60.1 59.0 59.2 59.6
China 15.0 15.0 15.1 20.3 16.3 16.6 16.4
Non-China 30.4 29.3 42.2 39.8 42.7 42.6 43.2
               
Stocks/Use Ratio 46.2% 45.1% 52.8% 51.7% 47.9% 47.6% 47.7%
Source: USDA

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(Millions of metric tons) 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2007/08
            March April
 

 

 

 

 

 

   
Beginning Stocks 1.6 1.2 0.8 1.2 1.3 2.1 2.0
Production 3.7 4.0 5.1 5.2 4.7 4.1 4.2
Imports 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Suppply 5.4 5.2 5.8 6.4 6.0 6.3 6.3
               
U.S. Mill Use 1.6 1.4 1.5 1.3 1.1 1.0 1.0
Exports 2.6 3.0 3.1 3.8 2.8 3.2 3.2
Demand 4.2 4.4 4.6 5.1 3.9 4.2 4.2
               
Ending Stocks 1.2 0.8 1.2 1.3 2.1 2.0 2.1
Stocks/Use Ratio 28.1% 17.2% 26.0% 25.8% 54.0% 49.2% 50.0%
Source: USDA

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(Millions of metric tons) 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2007/08
            March April
 

 

 

 

 

 

   
Beginning Stocks 11.9 9.9 9.6 12.5 13.1 13.3 13.3
Production 19.2 20.7 26.6 25.6 26.6 25.9 26.1
Supply 31.2 30.6 36.2 38.1 39.7 39.2 39.4
               
Consumption 21.4 21.3 23.6 25.3 26.8 27.1 27.2
China 6.5 7.0 8.4 9.8 10.9 11.5 11.5
Non-China 14.9 14.4 15.3 15.5 15.9 15.6 15.7
               
Ending Stocks 9.9 9.6 12.5 13.1 12.9 12.9 13.0
China 3.3 3.3 3.3 4.4 3.6 3.6 3.6
Non-China 6.6 6.4 9.2 8.7 9.3 9.3 9.4
               
Stocks/Use Ratio 46.2% 45.1% 52.8% 51.7% 47.9% 47.6% 47.7%
Source: USDA

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(Millions of 480-lb. bales) 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2007/08
            March April
               
China 22.6 22.3 31.0 29.5 35.5 35.5 35.0
India 10.6 14.0 19.0 19.1 21.8 24.5 25.0
United States 17.2 18.3 23.3 23.9 21.6 19.0 19.4
Pakistan 8.0 7.8 11.1 10.2 9.9 9.0 9.0
Brazil 3.9 6.0 5.9 4.7 7.0 7.1 7.1
Uzbekistan 4.6 4.1 5.2 5.6 5.4 5.5 5.5
African Franc Zone 4.1 4.4 4.9 4.2 3.6 2.7 2.8
Turkey 4.2 4.1 4.2 3.6 3.9 3.2 3.2
EU—27 2.2 2.0 2.3 2.5 1.6 1.6 1.6
Syria 1.1 1.3 1.4 1.6 1.0 1.2 1.2
Egypt 1.3 0.9 1.4 0.9 1.0 1.1 1.1
Turkmenistan 0.7 0.9 0.9 1.0 1.2 1.3 1.3
Australia 1.7 1.7 3.0 2.8 1.4 0.6 0.6
Kazakhstan 0.5 0.6 0.7 0.7 0.6 0.6 0.6
Tajikistan 0.7 0.7 0.8 0.6 0.6 0.6 0.6
Others 5.0 6.2 7.1 6.9 6.0 5.4 5.8
               
World Total 88.4 95.3 122.1 117.7 122.1 118.9 119.7
Source: USDA

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(Millions of 480-lb. bales) 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2007/08
            March April
               
China 29.9 32.0 38.5 45.0 50.0 53.0 53.0
India 13.3 13.5 14.8 16.7 18.1 18.1 18.1
Pakistan 9.4 9.6 10.5 11.5 12.5 12.0 12.5
Turkey 6.3 6.0 7.1 6.9 7.3 6.8 6.8
United States 7.3 6.3 6.7 5.9 4.9 4.6 4.7
Brazil 3.7 4.0 4.3 4.4 4.5 4.5 4.5
Bangladesh 1.6 1.7 1.9 2.2 2.4 2.5 2.5
Indonesia 2.3 2.2 2.2 2.2 2.2 2.2 2.2
EU—27 5.0 4.0 3.6 2.8 2.0 2.2 2.2
Mexico 2.1 2.0 2.1 2.1 2.1 2.0 2.0
Thailand 2.0 1.9 2.1 2.1 2.0 1.8 1.8
Russia 1.7 1.5 1.4 1.4 1.4 1.4 1.4
Taiwan 1.2 1.2 1.2 1.2 1.2 1.0 1.0
South Korea 1.5 1.4 1.4 1.1 1.1 1.0 1.0
Uzbekistan 1.1 1.1 0.9 0.8 0.9 1.0 1.0
Other 10.2 9.8 10.0 10.0 10.6 10.4 10.2
               
World Total 98.4 98.0 108.6 116.2 123.2 124.5 124.9
Source: USDA

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(Millions of metric tons) 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2007/08
            March April
               
China 4.9 4.9 6.7 6.4 7.7 7.7 7.6
India 2.3 3.0 4.1 4.1 4.7 5.3 5.4
United States 3.7 4.0 5.1 5.2 4.7 4.1 4.2
Pakistan 1.7 1.7 2.4 2.2 2.2 2.0 2.0
Brazil 0.8 1.3 1.3 1.0 1.5 1.5 1.5
Uzbekistan 1.0 0.9 1.1 1.2 1.2 1.2 1.2
African Franc Zone 0.9 1.0 1.1 0.9 0.8 0.6 0.6
Turkey 0.9 0.9 0.9 0.8 0.8 0.7 0.7
EU—27 0.5 0.4 0.5 0.5 0.4 0.3 0.3
Syria 0.2 0.3 0.3 0.3 0.2 0.3 0.3
Egypt 0.3 0.2 0.3 0.2 0.2 0.2 0.2
Turkmenistan 0.2 0.2 0.2 0.2 0.3 0.3 0.3
Australia 0.4 0.4 0.7 0.6 0.3 0.1 0.1
Kazakhstan 0.1 0.1 0.1 0.1 0.1 0.1 0.1
Tajikistan 0.2 0.2 0.2 0.1 0.1 0.1 0.1
Others 1.1 1.3 1.5 1.5 1.3 1.2 1.3
               
World Total 19.2 20.7 26.6 25.6 26.6 25.9 26.1
Source: USDA

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(Millions of metric tons) 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2007/08
            March April
               
China 6.5 7.0 8.4 9.8 10.9 11.5 11.5
India 2.9 2.9 3.2 3.6 3.9 3.9 3.9
Pakistan 2.0 2.1 2.3 2.5 2.7 2.6 2.7
Turkey 1.4 1.3 1.5 1.5 1.6 1.5 1.5
United States 1.6 1.4 1.5 1.3 1.1 1.0 1.0
Brazil 0.8 0.9 0.9 1.0 1.0 1.0 1.0
Bangladesh 0.3 0.4 0.4 0.5 0.5 0.5 0.5
Indonesia 0.5 0.5 0.5 0.5 0.5 0.5 0.5
EU—27 1.1 0.9 0.8 0.6 0.4 0.5 0.5
Mexico 0.5 0.4 0.5 0.5 0.5 0.4 0.4
Thailand 0.4 0.4 0.5 0.4 0.4 0.4 0.4
Russia 0.4 0.3 0.3 0.3 0.3 0.3 0.3
Taiwan 0.3 0.3 0.3 0.3 0.3 0.2 0.2
South Korea 0.3 0.3 0.3 0.2 0.2 0.2 0.2
Uzbekistan 0.2 0.2 0.2 0.2 0.2 0.2 0.2
Other 2.2 2.1 2.2 2.2 2.3 2.3 2.2
               
World Total 21.4 21.3 23.6 25.3 26.8 27.1 27.2
Source: USDA

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