World consumption was left unchanged at 127.8 million bales. World beginning stocks were lowered essentially the same as the increase in world production, thus, world ending stocks were the same as in the August report and stand at 51.6 million bales. This represents a 5.2 million bale drawdown in world stocks from the prior year.
Many in the industry were expecting USDA to increase its estimate of the 2006 Chinese crop, however, the official Chinese bureau has not increased its estimate and it is felt that USDA will not change their estimate unless or until the Chinese bureau does. Nevertheless, USDA did lower it estimate of Chinese consumption by 500,000 bales as well as its estimate of Chinese imports by 500,000 bales.
With all said and done, the estimate of 2007-08 world ending stocks is still above 50 million bales and almost equal to one year's use by the gigantic Chinese textile engine. Thus, until the harvest season is past, New York futures will be on the defensive once rallies reach the 63 cent level.
Current weather problems are one of the highlights being discussed. However, for the U.S., this is the hurricane season. Southeast, Midsouth and Southwest cotton crops are hit each year with what seems to be untimely rains.
The real tale will be old once late September and early October arrive. If weather then is fair and open, then the U.S. crop will likely increase. Thus, the odds are that the U.S. crop will get a bit larger.
It is clear that the U.S. harvest has begun as certificated stocks are once again increasing and are nearing 500,000 bales. That coupled with the fact that export sales for the prior week were just above 100,000 bales, suggests that the market will be more comfortable back at the 60 cent level.
marketing@alchempro.com
