Interviews
Market remains demand friendly
14 Jun '08
3 min read
USDA's June supply demand report lowered U.S. exports for marketing year 2007-08 down to 13.9 million bales. While just two months remain in the marketing year, I continue to think exports will fall as low as 13.7 million bales. Domestic use was left unchanged at 4.6 million bales; however, ending stocks were increased to 10.2 million. If exports do fall below the USDA projection, then carryover could rise to 10.4 million.
The cotton market is also focusing on West Texas crop conditions. With some 55 percent of U.S. plantings in the Southwest this year, the rapidly increasing drought conditions in that region could drop the U.S. crop as low as 12.5 million bales. However, the region has as much as two more weeks to receive favorable moisture required to alleviate the major concerns.
World ending stocks were projected to be 62 million bales, a level that begs the market to fall back to the low 60's or even high 50's. However, that is a most unlikely scenario as world stocks are expected to fall as much as seven to ten million bales during the 2008-09 marketing year. The USDA forecast is that world ending stocks, as of August 1, 2009, will be down to 54 million bales, or seven million below its projection of beginning stocks.
The market is growing increasingly concerned with respect to 2009 plantings. New agricultural legislation from Washington, coupled with the assumption of a continuation of the world commodity crisis, suggests that U.S. cotton acreage will fall as much as one million acres in 2009. That is, U.S. Cotton plantings in 2009 could be as low as 7.8 million acres.
Old crop cotton is very pricey above 70 cents. Be leery of any rally above that level. December has growth to the upside, as much as five cents if the current rally can hold.
The cotton market is also focusing on West Texas crop conditions. With some 55 percent of U.S. plantings in the Southwest this year, the rapidly increasing drought conditions in that region could drop the U.S. crop as low as 12.5 million bales. However, the region has as much as two more weeks to receive favorable moisture required to alleviate the major concerns.
World ending stocks were projected to be 62 million bales, a level that begs the market to fall back to the low 60's or even high 50's. However, that is a most unlikely scenario as world stocks are expected to fall as much as seven to ten million bales during the 2008-09 marketing year. The USDA forecast is that world ending stocks, as of August 1, 2009, will be down to 54 million bales, or seven million below its projection of beginning stocks.
The market is growing increasingly concerned with respect to 2009 plantings. New agricultural legislation from Washington, coupled with the assumption of a continuation of the world commodity crisis, suggests that U.S. cotton acreage will fall as much as one million acres in 2009. That is, U.S. Cotton plantings in 2009 could be as low as 7.8 million acres.
Old crop cotton is very pricey above 70 cents. Be leery of any rally above that level. December has growth to the upside, as much as five cents if the current rally can hold.
O.A. Cleveland
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