Another change that dovetails in with the decline in Chinese import needs is that the estimate for the 2007 Indian crop was raised to 23 million bales, up 500,000 from the July estimate. The increased estimate of the Indian crop suggests that they will again be very competitive in pricing their cotton to China, and thus, continue to solidify their increasing share of the Chinese import market. These two factors could place considerable price pressure on New York through the expiration of the December contract.
While not suggestive of significant pressure to push prices higher, the 620,000 bale net increase in consumption was largely accounted for by a 200,000 bale increase in the U.S. and a 500,000 bale increase in Brazil.
USDA's first objective yield survey of the U.S. crop dropped the crop to 17.35 million bales as of August 1 field conditions, a marginal 150,000 bale decline from the July subjective estimate. U.S. domestic consumption was raised 200,000 bales, to 4.6 million. However, exports were lowered, in conjunction with the 500,000 bale reduction in import demand by China, to 16.7 million bales, down 300,000 from the July estimate. U.S. carryover was lowered 100,000 bales to 5.8 million.
Production estimates included 6.137 million bales for Texas; 1.85 million for Arkansas; 1.65 million in Georgia; and 1.35 million for Mississippi. Upland yields were as follows: California, 1,383 pounds per acre; Arizona at 1,375; Arkansas at 1,083; New Mexico at 1,042; Mississippi at 960 and Louisiana at 946.
Upland production was estimated at 16.537 million bales. American Pima production was estimated at 808,050 bales.
The key to me is that world carryover, now expected to fall some 6.34 million bales, will still cling near 52 million bales at the end of the 2007-08 marketing season. Additionally, U.S. carryover, while down 3.9 million bales from the prior year, will still be just 200,000 shy of six million bales. That is, there is still a lot of cotton in the world.
The market has a lot of work to do if it is to hold above 64 cents, basis December.
marketing@alchempro.com
