US exports suggest prices between growths to remain viable

11 Nov '06

3 min read

The fifty cent lid on the cotton market seemed to tighten a bit this week as the November USDA supply demand report suggested larger carryover in the U.S. and increasing production in China in the face of stable demand.

The market continued to hold its cards out for every player to see. With increasing certified stocks, exceptionally strong export demand for U.S. cotton must surface before the market can move higher. New York futures will likely ease lower.

USDA increased its estimate of U.S. production to 21.3 million bales, up 640,000 bales from its October estimate. Primary increases were in Georgia, Alabama, Mississippi and Texas.

Domestic cotton consumption, reflecting recent business activity, was lowered to 5.2 million bales, down 100,000. The increased crop size led USDA to increase its estimate of 2006-07 exports to 16.2 million bales, a 200,000 bales increase over last month.

However, that is some 1.9 million bales below last year's export level of 18.1 million bales. U.S. carryover was increased to 6.0 million bales, 600,000 bales more than the October estimate.

Thus, the supply demand numbers, as currently forecast by USDA, suggest there will be little to no change in 2006-07 U.S. beginning stocks and ending stocks-somewhat of a bleak picture for prices.

The world supply demand report was considered to be slightly friendlier than the U.S. number, seeming to imply that higher prices were in the forecast.

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