2009-01-14 / Farm & Ranch

Cotton Market Weekly

January 8, 2008
A Service Provided by Plains Cotton Cooperative Association

Cotton futures prices on the Intercontinental Exchange (ICE) pushed higher this week as the inflationary tone seemed to be picking up steam. Traders said expectations for an upturn in the economy were high with the release of new stimulus proposals, and USDA reported export demand was higher than expected. In addition, the trade sees a much smaller planted acreage base for the United States and China next year which could cause tight supplies if the economy recovers.

Inflation expectations remained high this week, and there also was hope that the new Administration's stimulus package soon would help boost the economy to the upside. As a result, even poor economic numbers did not seem to raise cotton demand concerns.

Even though the market expects no major changes in supply and demand and business in the cash market is somewhat anemic, there were a number of other factors that allowed the market to move higher, according to traders. The government intervention in China, India, and the CIS countries in an attempt to support local cotton prices by mandating either a minimum price and/or by absorbing excess inventory into government reserves was very supportive to U.S. cotton futures prices.

Since some competitors of U.S. cotton have been pushed into the role of "residual supplier" by their own governments, it allowed the U.S. to capture a greater share of the little business that currently is available. Therefore, figures released in USDA's weekly export sales report were better than the trade anticipated.

With China as a renewed buyer, net export sales of 225,900 bales in the week ended Jan. 1 were more than three times the previous week and more than double the four-week average. With purchases totaling 124,200 bales, China was the featured buyer. Turkey and Bangladesh rounded out the list of the week's top three buyers with acquisitions of 37,900 and 21,500 bales, respectively. As of Jan. 1, cumulative cotton sales stood at 69.3 percent of USDA's forecast for the 2008-09 marketing year versus a five-year average of 60.6 percent.

Export shipments of 194,500 bales were up 43 percent from the previous week and five percent from the four-week average. Primary destinations included China, Turkey, and Thailand. Spot cotton sales in the week ended January 8 also rocketed higher as producers in Texas, Oklahoma, and Kansas sold 45,381 bales online compared to 10,222 bales the previous week. Average prices received by producers ranged from 39.69 to 41.66 cents per pound versus 33.60 to 44.4lcents per pound one week earlier.

In other news, traders now are bracing for more negative demand news from USDA's supply/demand report set for release on Monday, Jan. 12. There also is growing concern for supply if cotton producers in the United States and China back away from planting this year.

A survey from the annual Beltwide Cotton Conference this week in San Antonio, Texas, showed an average trade estimate for 2009 U.S. cotton plantings at 7.9 million acres as compared with last year's 25-year low of 9.4 million acres. Analysts now are interested to see if USDA's numbers mirror private estimates.

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