Interviews
USDA WASDE cotton repoprt for 2007/08
19 Jun '07
4 min read
Rainfall. Rainfall is as critical a variable to watch as ever, due to the potential variability of extensive dryland production in Texas, and because of the dryness in the Deep South. The U.S. Drought Monitor as of June 12 still shows moderate to exceptional drought centered on the Tennessee River Valley, with an outter tier of states (Lousiana, Arkansas, Missouri, North Carolina, and coastal South Carolina) that are abnormally dry.
These conditions will obviously affect rainfed cotton fields. Irrigated cotton in these regions can still get by, though prolonged extreme heat could affect yield potential. Seven day cumulative rainfall totals through June 17 highlight significant accumulations in Southwest and Central Texas, Oklahoma, East Texas-Louisiana-Arkansas (but not in the Delta regions) and South Carolina.
Planting. Nationally, as of June 11, U.S. cotton planting progress exceeded 90%, and only slightly lagged the five year average.
Supply Implications. To get sustained new crop 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 11.5 million acres or average U.S. yields below 750 lbs/acre. The ongoing uncertainty about plantings, emergence, stand density/quality, and growing conditions will provide somesupport for Dec07 futures as the market tries to assess planted acres and crop condition over the next several months.
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, the USDA June WASDE repoprt forecasts a reduction in world ending stocks-to-use down to 40%. This suggests that the A-Index could rise more than during 06/07, but perhaps not enough to significantly erode loan deficiency payments.
These conditions will obviously affect rainfed cotton fields. Irrigated cotton in these regions can still get by, though prolonged extreme heat could affect yield potential. Seven day cumulative rainfall totals through June 17 highlight significant accumulations in Southwest and Central Texas, Oklahoma, East Texas-Louisiana-Arkansas (but not in the Delta regions) and South Carolina.
Planting. Nationally, as of June 11, U.S. cotton planting progress exceeded 90%, and only slightly lagged the five year average.
Supply Implications. To get sustained new crop 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 11.5 million acres or average U.S. yields below 750 lbs/acre. The ongoing uncertainty about plantings, emergence, stand density/quality, and growing conditions will provide somesupport for Dec07 futures as the market tries to assess planted acres and crop condition over the next several months.
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, the USDA June WASDE repoprt forecasts a reduction in world ending stocks-to-use down to 40%. This suggests that the A-Index could rise more than during 06/07, but perhaps not enough to significantly erode loan deficiency payments.
Texas A&M University
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