2009-03-04 / Farm & Ranch

Cotton Market Weekly

February 26, 2009
A Service Provided by Plains Cotton Cooperative Association

A bullish export sales report provided a shot in the arm for cotton on Feb. 26, helping cotton futures prices on the Intercontinental Exchange to close with moderate gains. Ahead of the report, futures had closed lower for five consecutive trading sessions.

The U.S. Department of Agriculture reported net export sales of U.S. cotton totaled 586,900 bales in the week ended Feb. 19, a marketing year high and 35 percent more than the previous week. China was, by far, the featured buyer accounting for almost 300,000 bales of the total followed by Turkey with purchases of 48,800 bales. Vietnam, Pakistan, Indonesia, Thailand, Taiwan, and South Korea also purchased significant quantities of U.S. cotton during the week. Net sales of 3,100 bales for delivery in 2009- 10 were for Chile and Mexico.

Export shipments for the week to-taled 147,200 bales, down 18 percent from the previous week and 13 percent from the four-week average. The primary destinations were China and Turkey. The shipment volume was disappointing but somewhat under standable, according to one analyst. The sales volume now implies that weekly sales need to average less than 95,000 bales for the remainder of the marketing year to achieve USDA's current export projection, he said. Another analyst commented that the pace of export sales could prompt USDA to increase its estimate for the current season which could tighten the balance sheet for 2009-10.

One possible explanation for the recent surge in export sales is U.S. cotton represents the two cheapest growths quoted in Cotlook's "A" Index. Previously, textile mills had been content to cover their needs through March; however, they are starting to extend that coverage through April, said one trader. In a few cases, high grades of cotton are being sold for May delivery, he noted, adding that the weakness in consumer demand may have been "greatly exaggerated."

Spot cotton sales also have been surging in recent weeks. Producers in Texas, Oklahoma and Kansas sold 45,484 bales online in the week ended Feb. 26 compared to 36,977 bales the previous week. Average prices received by producers ranged from 33.67 to 38.71 cents per pound compared to 37.96 to 43.37 cents per pound the prior week.

Abnormally warm weather in West Texas this week may have turned thoughts to the upcoming planting season. Record setting or near record setting high temperatures in the 80s were seen in the Texas High and Rolling Plains, but much needed rain remained absent from near-term weather forecasts. Windy conditions in South Texas were expected to further deplete topsoil moisture levels there. The optimal planting window is approaching in the Texas Rio Grande Valley, and rain is urgently needed to provide good seed germination. Dry conditions were not the rule in northern parts of the Memphis Territory this week.

Scattered showers were reported in the area, making field work sporadic with growers applying fertilizer and preparing their fields wherever possible. In other parts of the Delta, field work proceeded at a steady pace. Elsewhere, dry conditions persisted in the Southeast where cotton producers would welcome any rain to help ease drought conditions.

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