Interviews
Cotton exports prove to be healthier than expected
31 Mar '07
4 min read
Primary reductions in the U.S. are projected for the Midsouth, Southeast and Southwest in that order. The Mississippi River Delta states appear to be positioned to experience the largest decline with Mississippi reducing acreage to 740,000 acres, down 40% or 490,000 acres. Arkansas is expected to fall 29 percent with Louisiana reducing plantings to 380,000 acres--down 255,000 or 40%. Based on soil types and crop requirements, my analysis suggests that Mississippi would not reduce its acreage below 850,000 acres. Thus, I do expect actual planted acres in the Midsouth to be some 125,000-175,000 acres higher than the USDA report.
In the Southeast, Georgia planted 1.4 million acres in 2006 and current intentions project 1.15 million acres, or down only 18% or 250,000 acres. Cotton crowers in the Midsouth tend to have larger and more contiguous farm operations than growers in Georgia and other Southeastern states, the base land acreage "best and ideally" suited for cotton in the Southeast does not approach that of the Mississippi River Delta states. Given this backdrop, 2007 plantings intentions for the Southeast are not statistical outliers. However, the same can not be said for Mississippi. Thus, another reason to expect the Midsouth to plant more cotton acreage than the report indicates.
Texas, in the Southwest, is expected to see 2007 acreage drop 701,000 acres. However that is only an 11% drop as planted acreage is expected to be 5.73 million acres. This is actually only 245,000 acres, or just 4% below their 2005 plantings.
The weekly export sales report for the week ending March 22 had net upland cotton sales of 389,800 bales. The positive surprise was that China bought 201.900 bales. Thus and finally, sales to China accounted for fifty percent of U.S. export sales. If this continues, then old crop futures will likely build a base at 55 cents, some three cents higher than the current 52 cent base.
An economist can't help you here-not to dare suggest one ever has-but this market will follow Mother Nature. Nevertheless, the 54 cent equilibrium will continue to rule the day. Yet the bias is certainly some three to five cents higher with steady Chinese buying and limited weather scares.
In the Southeast, Georgia planted 1.4 million acres in 2006 and current intentions project 1.15 million acres, or down only 18% or 250,000 acres. Cotton crowers in the Midsouth tend to have larger and more contiguous farm operations than growers in Georgia and other Southeastern states, the base land acreage "best and ideally" suited for cotton in the Southeast does not approach that of the Mississippi River Delta states. Given this backdrop, 2007 plantings intentions for the Southeast are not statistical outliers. However, the same can not be said for Mississippi. Thus, another reason to expect the Midsouth to plant more cotton acreage than the report indicates.
Texas, in the Southwest, is expected to see 2007 acreage drop 701,000 acres. However that is only an 11% drop as planted acreage is expected to be 5.73 million acres. This is actually only 245,000 acres, or just 4% below their 2005 plantings.
The weekly export sales report for the week ending March 22 had net upland cotton sales of 389,800 bales. The positive surprise was that China bought 201.900 bales. Thus and finally, sales to China accounted for fifty percent of U.S. export sales. If this continues, then old crop futures will likely build a base at 55 cents, some three cents higher than the current 52 cent base.
An economist can't help you here-not to dare suggest one ever has-but this market will follow Mother Nature. Nevertheless, the 54 cent equilibrium will continue to rule the day. Yet the bias is certainly some three to five cents higher with steady Chinese buying and limited weather scares.
O.A. Cleveland
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