Cotton market to be dominated by soybean & wheat markets
16 Oct '07
4 min read
In a policy change, USDA accepted the Chinese cotton estimates provided by the NDRC (National Development and Reform Committee) rather that its historical use of other Chinese government estimates. The NDRC has proven to have its hands around the cotton situation more so than any other governmental agency. USDA made changes back as far as 2004-05.
The Chinese crop was estimated at 35.5 million bales, up 3.0 million from last month. Imports were unchanged at 15 million bales. Chinese consumption was increased 1.5 million, up to 55 million bales. However, in changes that trace back to 2004-05, beginning stocks were adjusted higher by 3.9 million, up to 18.7 million bales. Chinese ending stocks were adjusted higher by 3.1 million bales, up to 17.7 million.
World beginning stocks were adjusted upward by 3.3 million bales to 60.3 million. USDA's estimate of the world crop was also raised 3.3 million bales, up to 120.3 million. World consumption was increased 1.7 million bales, to 129.5 million. Thus, world ending stocks were elevated to 55 million, up 3.4 million bales.
These numbers amplify my comment of last week that December 2008 contract cannot increase high enough fast enough to generate an increase in cotton acreage in 2008. The world cotton market will be dominated by the soybean and wheat markets.
Net export sales for the week ending 10/4/2007 were, as expected, poor. Sales totaled 154,700 RB with Upland sales at 151,400 RB and Pima at 3,300 RB. Primary buyers were Turkey (83,700 RB); Indonesia and Thailand. Again for the third consecutive China was absent as a primary buyer. Primary buyers of Pima were India (2,000 RB); Pakistan and Thailand.
Export shipments were 273,600 RB with Upland being 266,500 RB and Pima at 7,100 RB. Upland shipments to China led the way (81,000 RB); followed by Turkey and Mexico. Shipments of Pima were primarily to India (2,000 RB); Pakistan and Thailand.
The October report should not be viewed as bearish as the market had fully anticipated them for nearly two weeks, in some cases longer. A four cent range, 62-66 cents will dominate price activity.
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