Interviews
NY futures trade advances this week
21 Jul '06
3 min read
The market's strength was primarily due to US crop concerns, after brutally hot temperatures were felt all over the cotton belt since late last week, with little or no precipitation offering any relief.
This latest heat wave exacerbates an already dire situation for many dryland growers in West Texas, the Mid-South and parts of the Southeast and as a result many private estimates now see the US crop somewhere around 19.5 mio bales.
What strikes us is the rapid deterioration in the crops of Georgia and Mississippi over the last two weeks, with Georgia going from 14 percent to 35 percent and Mississippi going from 11 percent to 24 percent in the very poor to poor category.
The five states mentioned above - Alabama, Texas, Oklahoma, Georgia and Mississippi - made up roughly 58 percent of the US crop last season, which means that they carry quite a bit of weight in determining the size of the US crop.
Allowing for a combined reduction in Georgia, Mississippi, Alabama and Oklahoma of around 0.5 to 0.7 mio bales and leaving all other states at last year's level (which is probably a bit optimistic), we arrive at a US crop number of roughly 19.3-19.5 mio bales at this point.
The consumption side is still an enigma. The market does not seem to believe in the rather optimistic forecast of organizations like the USDA or Cotlook, who see mill use grow to 121.8 and 122.7 mio bales, respectively.
Even though the US economy has started to cool off, the latest retail sales statistics for the month of June still show a 6.1 year-on-year increase in sales of clothing and apparel, while overall consumer spending increased just below 6 percent. However, we need to realize that these numbers are lagging indicators and that the future may not look as rosy. Higher interest rates and higher energy prices are taking their toll.
This latest heat wave exacerbates an already dire situation for many dryland growers in West Texas, the Mid-South and parts of the Southeast and as a result many private estimates now see the US crop somewhere around 19.5 mio bales.
What strikes us is the rapid deterioration in the crops of Georgia and Mississippi over the last two weeks, with Georgia going from 14 percent to 35 percent and Mississippi going from 11 percent to 24 percent in the very poor to poor category.
The five states mentioned above - Alabama, Texas, Oklahoma, Georgia and Mississippi - made up roughly 58 percent of the US crop last season, which means that they carry quite a bit of weight in determining the size of the US crop.
Allowing for a combined reduction in Georgia, Mississippi, Alabama and Oklahoma of around 0.5 to 0.7 mio bales and leaving all other states at last year's level (which is probably a bit optimistic), we arrive at a US crop number of roughly 19.3-19.5 mio bales at this point.
The consumption side is still an enigma. The market does not seem to believe in the rather optimistic forecast of organizations like the USDA or Cotlook, who see mill use grow to 121.8 and 122.7 mio bales, respectively.
Even though the US economy has started to cool off, the latest retail sales statistics for the month of June still show a 6.1 year-on-year increase in sales of clothing and apparel, while overall consumer spending increased just below 6 percent. However, we need to realize that these numbers are lagging indicators and that the future may not look as rosy. Higher interest rates and higher energy prices are taking their toll.
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