In the short-term, cotton markets will be very sensitive to weather in west Texas and the size of the crops in the major consuming markets of India and China.
“For the long term though, all eyes are on demand, and 2010 is already almost history — everyone is already thinking about 2011 and watching the U.S. economy carefully. We still consume 20 percent to 25 percent of the world’s finished cotton goods,” says Dale Cougot, senior economist for the National Cotton Council.
The USDA’s June acreage report showed U.S. acreage at 10.9 million, Cougot notes, with upland accounting for 10.7 million. All regions across the Belt have increased acres over 2009.
“In the Mid-South, acreage has rebounded somewhat, with most of the increases due to the price of cotton in relation to other crops and some crop rotation. The large increase in the West was due primarily to the large winter snowfall in the Sierra, which has mitigated some of the severe water shortages they’ve experienced the last several years.”
So far this year, Cougot says, west Texas and south Texas are experiencing “some of the best moisture levels in years — or some farmers say, decades, and one farmer told me it’s the best he’s seen in his lifetime. Of course, the crop isn’t in the warehouse yet, and August-September heat in west Texas can be very hard on it.”
The USDA’s Crop Index for the last two years, he notes, has shown the U.S. crop averaging about 40 percent to 50 percent good to excellent on a weekly basis. “But, this year, to date, has averaged almost 20 percent above that range. Acreage rated only good to poor has been almost zero.
“To this point, the crop is tracking very close to the 2004-05 season, which had record yields. There is more optimism for this year’s crop than we’ve seen in some time, and it could be one of those years when the production numbers continue to increase,” he said at the annual joint meeting of the Southern Cotton Ginners Association and the Delta Council’s Ginning and Cotton Quality Improvement Committee.
“The USDA’s estimate of 18.3 million bales is based largely on increased planted acres with some adjustment in abandonment and yields based on favorable moisture conditions in the Southwest. However, USDA’s first survey-based estimate of the crop will be released on Aug. 12. Current private estimates range between 17.8 million and 19.3 million bales. Some people are saying it could hit 20 million bales — while I can’t believe that just yet, I’m not completely ruling it out either.
“It really all comes down to what happens in Texas and their abandonment levels. Most of the numbers we’re seeing are for around 4 percent abandonment, but it could be as low as 2 percent — and that would be a big difference in bales produced.”
For the 2010 marketing year, “a holding pattern” is expected for U.S. mill use, Cougot says. “Recent data show some stability in usage, and exports are expected to rebound to levels higher than the previous four years. The 2009 marketing year, at 12.25 million bales, is going to be hard to hit, but we’ll do it. And more importantly, we have almost 5.75 million bales of cotton commitments going into the new crop year — that’s the highest since 1991.”