Interviews
Planted cotton acreage to be less than 12.51mn intended acres
15 May '07
4 min read
The national Drought Monitor as of May 8 still shows moderate-to-extreme drought zones in Mississippi, Alabama, Georgia, and Florida, surrounded by a ringer of abnormally dry area in Arkansas, Louisiana, and the Carolinas.
Planting. Nationally, as of May 4, U.S. cotton planting progress still lagged 2006 and the five year average. Jay Yates' South Plains Cotton Update reports that cotton planting was just getting in gear before being interrupted by the rainfall during the week ending May 11.
Supply Implications. Assuming that the May/June planting in West Texas goes well, the good sub-soil moisture means that large expanses of dryland acreage will likely make some sort of crop on the water that is already "in the bank". A few timely rains during the growing season could then give cotton yields at least as good as last year.
To get sustained cotton futures above 60 cents probably requires ending 2007/08 ending stocks-to-use below 20%, which in turn requires either U.S. plantings below 12 million acres or average U.S. yields below 800 lbs/acre. The latter seems unlikely to me given the good moisture situation that we have in the Southwest.
Demand Assumptions. Another big assumption underlying the 2007/08 outlook is the U.S. having 17.5 million bales of exports in 2007/08. The arguments in favor of USDA's view are that 17 to 18 million bales lies within the upward pointing five year trend projection of U.S. exports, and also that the projected foreign stocks-to-use ratio will likely continue below 40%, continuing a three year trend of declining foreign stocks.
World Forecast. In terms of the World new crop supply/demand picture, I think that a likely decrease in 2007/08 below 40% suggests that the A-Index could rise enough to significantly erode loan deficiency payments.
The underlying forecast for this is supported by a May 1 press release by International Cotton Advisory Commission which forecasted an expected decline of 2007/08 world ending stocks to 47 million bales, based on expected stable world production and greater imports by China. This view of China was echoed by a May 1 report by the USDA Foreign Agriculture Service attache in China.
Planting. Nationally, as of May 4, U.S. cotton planting progress still lagged 2006 and the five year average. Jay Yates' South Plains Cotton Update reports that cotton planting was just getting in gear before being interrupted by the rainfall during the week ending May 11.
Supply Implications. Assuming that the May/June planting in West Texas goes well, the good sub-soil moisture means that large expanses of dryland acreage will likely make some sort of crop on the water that is already "in the bank". A few timely rains during the growing season could then give cotton yields at least as good as last year.
To get sustained cotton futures above 60 cents probably requires ending 2007/08 ending stocks-to-use below 20%, which in turn requires either U.S. plantings below 12 million acres or average U.S. yields below 800 lbs/acre. The latter seems unlikely to me given the good moisture situation that we have in the Southwest.
Demand Assumptions. Another big assumption underlying the 2007/08 outlook is the U.S. having 17.5 million bales of exports in 2007/08. The arguments in favor of USDA's view are that 17 to 18 million bales lies within the upward pointing five year trend projection of U.S. exports, and also that the projected foreign stocks-to-use ratio will likely continue below 40%, continuing a three year trend of declining foreign stocks.
World Forecast. In terms of the World new crop supply/demand picture, I think that a likely decrease in 2007/08 below 40% suggests that the A-Index could rise enough to significantly erode loan deficiency payments.
The underlying forecast for this is supported by a May 1 press release by International Cotton Advisory Commission which forecasted an expected decline of 2007/08 world ending stocks to 47 million bales, based on expected stable world production and greater imports by China. This view of China was echoed by a May 1 report by the USDA Foreign Agriculture Service attache in China.
Texas A&M University
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