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Cotton-grain price ratio must change for 2008-09

16 Jun '07
3 min read

Likely it was the initial rush to higher prices last week in the interior Chinese markets that led to the increase in New York. Too, local Chinese markets continued to see prices ease higher into the weekend. The confirmation that Chinese stocks were lower than expected and that their stocks will be drawn down more during the 2007-08 season was the basis for the beginning of this current uptrend.

Net cotton sales for export during the week ending June 7 totaled 142,200 RB with Upland accounting for 139,700 bales and American Pima 2,500 RB. However, the positive news related to shipments.

Export shipments totaled a marketing year high of 451,600 RB bales with shipments of Upland totaling 438,600 RB and American Pima 13,000 RB. Thus, weekly shipments for the eight remaining weeks in the marketing year now need to average only 399,550 RB bales to reach to reach the USDA revised estimate of 13.0 million bales.

The Midsouth if facing a drought, the Southwest has been dipped into a bath tub; the Southeast drought has not been totally alleviated. Drought plagues a number of world crops. However, it is a bit early for weather concerns to dictate market action. I am reminded of what began as the worst ever start for cotton (the week of July 4) in the Midsouth during the very early 1990's. The end result was record breaking yields!

Cotton is very drought tolerant. Currently Mother Nature is reminding Midsouth growers why corn production is not a viable alternative. While the Midsouth cotton crop is in reasonable very good condition, the hundreds of thousands of acres, mostly dryland, that were shifted to corn are under severe stress. Some of that corn will never grow to waist high, much less be harvested.

Cotton prices have turned the corner, but the market will continue to creep in both directions. Nevertheless, the bulls will win the war.

O. A. Cleveland

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