by Kimble Charting Solutions
Showing posts with label cotton. Show all posts
Showing posts with label cotton. Show all posts
Friday, August 19, 2011
Thursday, July 28, 2011
Cotton's rebound raises hope of end to correction
by Agrimoney.com
Cotton futures' "impressive turnaround" in the last session, when it rebounded from a four-month low to close up the exchange limit, has prompted talk that the fibre's correction may be over.
Luke Mathews at Commonwealth Bank of Australia, forecast that "cotton market may rise further from here", supported by the likelihood of further downgrades to the crop in the US, the top exporter of the fibre.
And Commerzbank said it sees "more and more signs" that the fibre has found a level where it will be supported by investors, after a fall of more than one-half since setting a record high in March.
The statements followed cotton's revival in the last session from a seven-month low of 93.2 cents a pound, for New York's best-traded December lot, to close at 100.76 cents a pound – the maximum gain allowed by exchange rules. Trading volumes were also unusually strong.
'Chance to buy in'
The rebound was an "overdue" response to the dismal production prospects in Texas, America's top cotton-producing state, where crops have been devastated by the worst drought since records began in 1885, Commerzbank said.
Furthermore speculators had already cleared out their long positions, with net long exposure near a two-year low, meaning limited selling pressure might be expected from short-term investors.
"We could well see brief losses again over the coming weeks, but they should be seen as a chance to buy in," the bank said.
"It seems unlikely, therefore, that the price will dip below the 100-cent mark again, or if it does, this will be just a passing phenomenon."
'Widespread devastation'
The thesis found some support too from Keith Brown, president of Georgia-based brokerage Keith Brown & Co, who highlighted the extent of crop losses in Texas, where he had heard of one 80,000-acre co-operative which was set to produce 20,000 bales of cotton.
The average yield in Texas last year was 722 pounds, or 1.5 bales, per acre.
"In Texas, there is going to be more widespread devastation than people understand," Mr Brown told Agrimoney.com.
Technically, if cotton could avoid putting in a new low before the end of the month, "it has got a good chance of trading sideways" until the US Department of Agriculture's next benchmark Wasde crop report on August 11.
Economy factor
However, Mr Brown also highlighted the influence of world economic prospects on cotton prices, attributing the decline in cotton, as in many other commodities such as crude, to reduced growth hopes.
Indeed, he attributed a weaker performance by cotton on Wednesday, when the December contract dipped 0.08 cents into negative territory in late deals to stand at 100.68 cents a pound, on broader financial market weakness.
"It does depend on what the global economy holds," he said.
"There is more to cotton prices than flat out US supply and demand fundamentals."
Wednesday, July 27, 2011
Tuesday, July 19, 2011
Correction in cotton prices 'not over yet'
by Agrimoney.com
The correction in cotton prices may have further to go even after fresh declines on Monday, when New York's best-traded contract fell to its lowest since September, and took to 24% its fall over the last month.
Cotton for December delivery, the first new crop contract, fell the maximum allowed in New York to hit 94.46 cents a pound before recovering some ground in late deals.
The old crop October contract also pared losses amid fears for the crop in Texas – the biggest cotton-producing state in the US, the top-ranked exporting country.
"The terrible Texas drought - which has already caused significant downward revisions to US cotton production prospects and may cause even further future revisions - may start supporting prices," Luke Mathews, at Commonwealth Bank of Australia, said.
"After all, US and global cotton supplies are already extremely tight."
The US Department of Agriculture last week pegged the overall abandonment of US cotton crops at "a record 30%", and is expected by many analysts to cut its yield forecast too, from levels close to last year's.
'Staggering demand losses'
But while some farmers are predicting yields of 50% below normal on non-abandoned land, Texas's "parched crop" can provide only limited support to prices, veteran soft commodities analyst Judith Ganes-Chase said.
"The loss in demand that has occurred as a result of sky high prices this year and uncertain economic conditions has far outweighed any bullishness over the Texas crop woes," Ms Ganes-Chase, at J Ganes Consulting, said.
"The losses in global demand are even more staggering."
New orders from Asian mills, major consumers, has "virtually stopped" after the rise in cotton prices to a record high of 227 cents a pound kept a lid on consumer demand, and encouraged a switch to other fibres.
And inventories in the US, while "still limited", are "just nowhere near as pinched as previously estimated".
'Room on the downside'
The dynamics of pressure on consumption, at a time when mills were being left with high-priced cotton inventories that were difficult to shift, meant that the global stocks-to-use ratio may "jumpy by a disproportionate amount", Ms Ganes Chase said.
The stocks-to-use ratio is a key measure of the availability of a crop, and therefore of its price potential.
For prices, "there still could be plenty of more room left to go on the downside as this historic bull market unravels", she said.
The longer the market remained near current levels, which are still high by a historical perspective, "the more demand is going to be lost and the harder the market will eventually fall".
'Demand is poor'
At PitGuru, Jurgens Bauer said that cotton prices "likely will seek to find a level of support between 90-100 cents a pound".
He added: "Whether or not that market can stage more than a temporary bounce is the question. Supply concerns aside, demand is poor."
US weekly cotton export sales for 2010-11 have been negative - meaning cancelled orders - in 15 out of the last 16 weeks.
New York's best-traded December cotton contract closed down 3.5% at 97.95 cents a pound, with the September lot finishing down 3.5% at 97.95 cents a pound.
Wednesday, July 13, 2011
Banks caution over upbeat cotton supply forecasts
by Agrimoney.com
Investors may have taken too downbeat view of cotton price prospects from a key report which, citing lower consumption prospects, raised the estimate for world stocks at the close of 2011-12 by nearly 3m bales.
Rabobank cautioned that, while cotton prices were likely to "continue to ease", inventories "remain thin", even after an upgrade to 51.0m bales in the US Department of Agriculture's latest influential Wasde crop report.
The report implied a stocks-to-use ratio - a key measure of a crop's tightness – of 44%, signalling easier supplies than in 2010-11, for which the ratio comes in at 39%, but still making it the third-tightest season since 1994-95.
And even this made some assumptions on world production, pegged at a record 123.2m bales, which some analysts warned may prove too generous.
Big two producers
"We are still cautious about the large Indian and Chinese production forecasts," Goldman Sachs said, besides questioning the USDA's downgraded consumption estimate.
USDA officials forecast Indian harvest – the world's second biggest - rising 10.2% to 27.0m bales, despite concerns within the country over poor rainfall in Gujarat and Maharashtra and Andhra Pradesh, which account for more than 75% of its production of the fibre.
And they stuck by an estimate for production in top-ranked China rising 8.2% to 33.0m bales, despite a downgrade last week to an industry forecast for sowings, seen rising only 5.2%.
Goldman restated estimates of New York's near-term cotton contract standing at 125 cents a pound in both three months' and six months' time, before easing to 100 cents a pound in a year.
Large downgrade ahead?
Australia & New Zealand Bank analysts held out the prospect of a further downgrade to the USDA estimate for America's crop, even after a cut of 1.0m bales, to 16.0m bales, on Tuesday.
The downgrade factored in a higher figure for sowings, offset by crop losses of a record 30% thanks to "historic drought conditions, mainly in Texas", the top cotton-producing state.
ANZ said: "This latest revision to production comes with the USDA still making no change to US cotton yields," which were kept at 800 bales per acre, in line with last year's.
"This now sets the scene for US cotton yields to be revised in August, with a high probability of another large US production downgrade."
New York's best-traded December cotton contract stood 0.9% higher at 105.36 cents a pound at 09:30 GMT.
Drought-hit cotton growers face record crop losses
by Agrimoney.com
The cotton crop in the US, the top exporter of the fibre, is to suffer its worst ever abandonment rate, sapped by drought in Texas, where more than two-thirds of acres may be lost.
US officials on Tuesday forecast that America's farmers would reap only 9.6m acres of cotton, 600,000 acres less than previously expected, despite plugging an extra 1.1m acres of plantings into their forecast.
Indeed, the data implied an abandonment rate lifted to an all-time high of 30%, "due to historic dry conditions in Texas", the top producing state, Karis Gutter, America's acting secretary of agriculture, said.
In Texas, where data overnight showed 59% of the crop in "poor" or "very poor" condition, the abandonment figure "might come out at 70%, we don't know yet", said Keith Brown, the president of Keith Brown & Co, a brokerage in Moultrie, Georgia.
'Globalisation effect'
Nonetheless, despite the hike in the abandonment rate, from 18.9% last month, cotton prices fell - amid better prospects for some southern hemisphere crops, such as Australia's, which was pegged at a record 4.5m bales, up 250,000 bales on last month's forecast.
"The seasonal outlook is based on expectations of normal winter and spring rainfall coupled with substantial carry-over irrigation water and record-high water allocations in Queensland and New South Wales," USDA analyst Dath Mita said.
Indeed, the price fall was a "clear indication of the globalisation in world cotton", Mr Brown said, besides reflecting reduced hopes for consumption, as prices, which remain elevated by historical standards, temper demand and encourage a switch to man-made fibres.
"Our sources in China say that some mills are selling surplus cotton to other Chinese mills because of a build up in yarn supplies," encouraging them to pull back output.
'Unprecedented cancellations'
Indeed, the USDA highlighted an "unprecedented" level of cancellations of orders of US cotton as spinners idle "portions of their capacity, as they try to work off accumulated yarn inventory in the face of declining cotton prices".
"The dramatic fall in the level of shipments indicates weakening global demand," the department said.
Cotton for December delivery, New York's best-traded lot, stood 3.5% lower at 105.12 cents a pound in late deals.
Monday, July 11, 2011
Morning markets: cotton leads decline on China, euro jitters
by Agrimoney.com
Agricultural commodities could not maintain their ability to swim against the tide.
External markets continued on Monday the slide with which they ended last week, given an extra shove by data over the weekend showing Chinese inflation reaching a three-year high of 6.4% in the year to June.
This increase, spurred by a 14.4% rise in food prices, spurred thoughts that further interest rate rises might be in the wings, with associated risks for economic growth in the Asian powerhouse.
"We reckon [on] at least one interest rate hike in the third quarter, and view inflation will become 'structurally' higher for the following years," Australia & New Zealand Bank said.
Spread to Italy?
While Shanghai stocks managed a, typical, counterintuitive move, adding 0.2%, with separate data showing a rise to $22.2bn in China's trade surplus last month, other Asian stock markets failed to see the upbeat side.
Tokyo's Nikkei index shed 0.7%. Fresh concerns for eurozone sovereign debt gave a further dent to sentiment, after the European Union called a meeting of senior officials amid concerns that jitters could spread to Italy, the region's third-ranked economy, after Germany and France.
Furthermore, the Financial Times reported that some European leaders are considering allowing some default by Greece, the region's worst affected economy.
The euro dipped, and the dollar added 0.5% against a basket of currencies as of 07:50 GMT (08:50 UK time), making dollar-denominated assets such as many commodities that much less competitive as exports.
'Rain interruptions'
Prices of many raw materials fell, with New York crude down 1.3% at $95.00 a barrel.
And, among farm commodities, wheat was among the weakest, down 1.7% at $6.40 a bushel for September and 1.7% to $6.79 ¾ a bushel for the December lot in Chicago.
Kansas wheat for September fell 1.7% to $7.15 a bushel for September.
Pressure from harvests picking up pace in Europe too added pressure, despite some rain interruptions in France, the EU's top producer, and "further thunderstorms forecast for this Wednesday," according to Agritel.
Still, in northern France, the consultancy added that "yields seem less impacted by drought occurred this spring", helped by their late development which allowed them to benefit more from early summer rains.
Any sellers left?
Corn fell 0.5% to $6.38 a bushel against for September and 0.9% to $6.31 ½ a bushel for the best-traded, new crop December contract, given some support by fresh signs of demand.
South Korean feedmaker Nonghyup Feed bought 110,000 tonnes of corn for delivery between October and November.
Furthermore, there are some doubts as to the weight of selling left likely in corn, given the liquidation which funds have already undertaken in corn.
Regulatory data out late on Friday showed that large funds "have blown out of another 36m+ bushels of ownership which would have them reducing their length by nearly two-thirds since the beginning of April", Jon Michalscheck at Benson Quinn Commodities said.
In the latest week (to last Tuesday), "speculators liquidated a quarter of their net long position in corn, and positioning is now much closer to 'neutral'", ANZ said.
China damage
Even soybeans lost their grip on their gentle strength of late, which has been spurred by official data last month showing US sowings of the oilseed were below forecasts, at a time when supplies already look tight.
The news on China, the top importer of the oilseed, sent Chicago's best-traded November lot down 0.3% to $13.43 a bushel, with the old crop August contract shedding 0.2% to $13.44 ¼ a bushel.
Still, that was better than cotton, of which China is also the biggest buyer, which tumbled 2.2% to 111.41 cents a pound for the best-traded December contract.
The lot earlier hit 110.82 cents a pound, its weakest for five months. The decline also took the fibre below its 200-day moving average, near about 111.73 cents a pound, below which is has not fallen since August, according to Mike Mawdsley at Iowa-based broker Market 1.
Luke Mathews at Commonwealth Bank of Australia also noted the depressant to prices offered on Friday by a "bearish US jobs report and another week of [cotton] net export sales reductions in the US".
'Powerful heat dome'
More will be known on US shipments later, with the weekly data on export inspections.
Also potentially to effect market moves will be the prospect on Tuesday of the latest US Wasde report on world crop supply and demand estimates, which are of particular interest this time given the changes two weeks ago to estimates for US crop sowings, and unexpected stocks data too.
And the weather could, as ever, move the markets, particularly with attention on a US "heat dome" set to hit the Midwest – after some cooler weather and thunderstorms over the next few days.
"A powerful heat dome continues to appear in all the models," weather service WxRisk.com said.
"The dome develops around July 15 and spreads into the western Corn Belt on the 16th and looks to last for several days.
"The greatest heat is going to be from the Mississippi River westward towards of the Rockies."
Monday, July 4, 2011
Sowings upgrade fails to quell cotton crop fears
by Agrimoney.com
See the original article >>
The threat of high rates of lost acres, to drought, remains a spectre over US cotton production prospects despite the hike by American officials to their forecast for sowings of the fibre.
American farmers planted 13.7m acres with cotton this spring, a five year high, the US Department of Agriculture said on Thursday, lifting its forecast by nearly 1.2m acres.
However, there was no certainty that this increase will end up translating into a rise to the forecast for production too, given the extent of the drought challenges facing the crop, analysts said.
The USDA earlier in June estimated the abandonment rate at nearly 19%, among the highest in recent history. Officials estimate the proportion of the US cotton crop in "good" or "excellent" condition at 27%, compared with 62% a year ago.
'Conditions remain severe'
"With 1.16m more acres, a revision [in production] higher is possible, but due to weather problems resulting in yield reductions and a high abandonment rate, such an upwards adjustment is not a given," Rabobank said.
"Conditions of drought remain severe" in Texas, the main producing state in the US, the top cotton exporter.
Goldman Sachs analysts said that such fears might support prices of the fibre despite the, ostensibly bearish, sowings upgrade.
"While this large cotton average increase could accelerate the decline in cotton prices that we forecast, we expect that concerns for large abandonment in the US South will limit price downside in the near-term," Goldman said.
Price forecasts
The bank left its forecasts for cotton prices unchanged, at 150 cents a pound in three months' time, declining to 125 cents a pound in a year, for New York's near-term contract.
However, Rabobank said that, despite its reservations over US cotton production, "our view continues to be that prices will correct lower".
New crop cotton for December stood 0.1% higher at 118.75 cents a pound in late deals in New York. The soon-to-expire July contract was 1.1% higher at 161.50 cents a pound.
Saturday, July 2, 2011
Sowings upgrade fails to quell cotton crop fears
by Agrimoney.com
The threat of high rates of lost acres, to drought, remains a spectre over US cotton production prospects despite the hike by American officials to their forecast for sowings of the fibre.
American farmers planted 13.7m acres with cotton this spring, a five year high, the US Department of Agriculture said on Thursday, lifting its forecast by nearly 1.2m acres.
However, there was no certainty that this increase will end up translating into a rise to the forecast for production too, given the extent of the drought challenges facing the crop, analysts said.
The USDA earlier in June estimated the abandonment rate at nearly 19%, among the highest in recent history. Officials estimate the proportion of the US cotton crop in "good" or "excellent" condition at 27%, compared with 62% a year ago.
'Conditions remain severe'
"With 1.16m more acres, a revision [in production] higher is possible, but due to weather problems resulting in yield reductions and a high abandonment rate, such an upwards adjustment is not a given," Rabobank said.
"Conditions of drought remain severe" in Texas, the main producing state in the US, the top cotton exporter.
Goldman Sachs analysts said that such fears might support prices of the fibre despite the, ostensibly bearish, sowings upgrade.
"While this large cotton average increase could accelerate the decline in cotton prices that we forecast, we expect that concerns for large abandonment in the US South will limit price downside in the near-term," Goldman said.
Price forecasts
The bank left its forecasts for cotton prices unchanged, at 150 cents a pound in three months' time, declining to 125 cents a pound in a year, for New York's near-term contract.
However, Rabobank said that, despite its reservations over US cotton production, "our view continues to be that prices will correct lower".
New crop cotton for December stood 0.1% higher at 118.75 cents a pound in late deals in New York. The soon-to-expire July contract was 1.1% higher at 161.50 cents a pound.
Monday, June 27, 2011
Retreats in cotton and sugar to set trend - BarCap
by Agrimoney.com
See the original article >>
Reversals in prices of cotton, which fell the exchange limit, and sugar on Monday are a taste of things to come, given the ability of India to fill needs of both crops, Barclays Capital warned.
Both crops have defied the reversal in grains, with July cotton closing higher every day last week to gain nearly 14% in New York, where sugar added more than 4%.
However, such strength looks unlikely to last given favourable monsoon outlooks for India, the biggest producer of both crops.
"The recent pick-up in India's monsoon rains, coupled with a surge in plantings, bodes well for production prospects," said BarCap analyst Sudakshina Unnikrishnan, who correctly called the run-up in cotton prices, which hit a record in February.
Furthermore, data from the Indian government, which earlier this month added 1m bales to its cotton export quota of 5.5m bales, had shown farmers having a "strong preference" for planting the fibre.
'Prices to ease'
For sugar too, whose price rise has been accompanied by a rebound in speculative interest, Indian acreage is expected to expand year on year, a revival which helped persuade the government last week to permit a further 500,000 tonnes of exports of the sweetener.
"With India moving further into the export side of the equation and the global market moving further into a surplus, we see significant gains in sugar prices through the second half of 2011 as being capped," Ms Unnikrishnan said.
Many observers have forecast a return by sugar in 2011-12 to a large production surplus, estimated on Friday at 7.8m tonnes by ABN Amro.
"Despite the recent move up, we continue to expect front-month prices for both cotton and sugar to ease through the second half of this year on higher supply prospects," Ms Unnikrishnan said.
Chart signal?
The comments came as prices of both commodities eased on Monday, on a decline blamed in part on broader farm commodity market weakness, with grains suffering another sell-off, which sent corn and wheat down a further 3% in Chicago.
However, cotton's slide was also attributed to a cut from 12% to 6% in Chinese import duties on some cotton products, a move which sent prices on the Zhengzhou exchange down 4.6% for the January lot, which hit a contract low of 22,200 remninbi a tonne at one stage.
Meanwhile, New York sugar fell 0.2% to 27.35 cents a pound for the July contract, which expires on Thursday, while the second-in October lot dropped 1.9% to 25.50 cents a pound, with a potential chart sell sign not helping.
"It may be the case that the inability of the October contract to breach a double top in the charts at 26.31 cents a pound causes a rethink by the speculative community eventually, especially if this level remains inviolate at the July expiry," Thomas Kujawa at Sucden Financial said.
Wednesday, June 15, 2011
Drought hits US cotton while wet ruins wheat plans
by Agrimoney.com
Weather extremes in North America have set the US cotton crop off to its worst start since at least the early 1990s, besides lookinng like forcing both American and Canadian wheat farmers to abandon "significant" stretches of land.
The US cotton crop was, in the first full national ratings for 2011, pegged 28% in "good" or "excellent" health, down from 62% a year before and the lowest rating since at least 1994, when readily-accessible records begin.
The previous early-June low was set in 2006, when 40% of the crop was rated in the top two bands, and production fell more than 2m bales year on year.
In Texas, the major US producing state, just 26% of cotton was in the top two bands, amid a drought which is estimated to have cost more than $3bn.
"Emerging corn and cotton were damaged in areas of the High Plains due to hot and windy conditions," US Department of Agriculture officials said.
'High levels of precipitation'
The data follow a 600,000-acre cut, to 10.2m acres, last week by the USDA to its estimate for the area of cotton that will be harvested, implying near-record rates of abandonment.
And they came as the USDA highlighted continued delays to domestic spring wheat sowings thanks to wet weather which has prevented fieldwork by heavy farm machinery, leaving 12% left to sow of a crop which is normally all in the ground by now.
"High levels of precipitation were reported again this week," USDA staff in Montana, America's second biggest spring wheat state, said.
Broker US Commodites said that it was "now believed that up to 10% of the spring wheat area in the US will not be planted", with 8% of Canadian planting plans lost too.
'Abandon significant acreage'
In Canada, sowings of spring crops - largely wheat an canola - have reached 86%, "well behind" the typical 96%, and forcing farmers for a second successive season to leave land idle, the Canadian Wheat Board said.
"Pockets of Saskatchewan and Manitoba made some good seeding progress, but many farmers are now being forced to abandon significant acreage due to excess moisture," the board said.
Viterra, the Canadian grain handler, warned last week that Western Canadian sowings might fall 10m acres below an initial forecast of 62m acres.
The board added that in northerly areas, "more rain is badly needed, with only light showers received last week".
The board will later on Tuesday give a more detailed updated on Canadian crop conditions.
Tuesday, June 14, 2011
How Texas drought helps US cotton Futures
By Chuck Kowalski
Cotton growing areas in Texas are facing very hot, dry conditions and signs point to a lower than expected cotton crop thus far in the U.S. Texas is the largest cotton growing state in the country, so losses could be significant if the weather doesn't turn soon.
Someone who hasn't been following the cotton market for the last year might get very excited about this news. However, there is another side of the equation - as there always is. When we look at the world supply and demand picture, it gets cloudier.
Exports are getting weaker with a great deal of cancellations in recent weeks. You can imagine how some buyers might be inclined to cancel their orders for cotton from March when the price was around $2.20 a pound and now it is less than $1.50.
There are also more worries about a slowing U.S. economy as well as China trying to slow their economy. China and India are also expected to expand their cotton production in the upcoming season - the first and third largest cotton producers in the world, respectively.
Cotton is under pressure this week, as it is an economically sensitive commodity. The recent weakness in the stock market creates a tough headwind for cotton. December cotton, which is the new crop contract, is trading at $1.3050 a pound.
The market fell just below 1.15 in May and I would expect that to be a good value area for cotton. I wouldn't expect prices to fall much below there as long as drought condition prevails for cotton crops in Texas. If sentiment for the global economy turns for the better and stocks rally, cotton could have a nice rally.
Corn futures managed to set another record high even though many other markets were feeling pressure on Friday. July corn futures missed touching the $8 mark by one tick and are currently trading at $7.96 a bushel in the early afternoon.
Corn received more confirmation from the USDA yesterday that supplies are getting tighter for corn in the U.S. and globally. The USDA is now estimating demands to be 55 million bushels greater than production this year.
They removed 1.5 million acres of planted acres from the equation due to weather problems, but many analysts believe that number will grow. There were more than 5 million acres yet to be planted just a few days ago. They could get planted in time, but the odds are against them.
Corn acreage is being revised lower and now we have to worry about yields. More than 20 percent of the corn crop wasn't planted by May 22nd. Yields for corn tend to drop if it isn't planted by late May and especially in June. If things remain constant, yields will probably come in lower than estimated. Weather this season will be as important as ever.
More wet weather in the Midwest over the next week will cause problems with getting the final acres planted. Extreme heat in July could whip the markets into a frenzy as corn goes through its critical pollination phase. Heat stress at this time can reduce yields significantly.
There is also the chance that weather could be spectacular for the season and yields could be revised higher. For now, corn traders know there is no room for error this season and prices tend to rise under these conditions.
Friday, June 10, 2011
Cotton goes limit up as US crop downgraded - again
by Agrimoney.com
New York cotton futures reversed a correction which has seen them, twice this week, drop the daily maximum - and turned limit up instead, helped by a downgrade by the US to its harvest hopes.
The US Department of Agriculture cut by a further 1.0m bales, to 17.0m bales, its forecast for domestic cotton production this year, as a drought continues to savage Texas, the country's top cotton-producing state.
The downgrade was "due mainly to expected higher abandonment resulting from the increased severity of the drought in the South West," Kathleen Merrigan, the USDA's acting secretary of agriculture, said.
The estimate for abandoned acres was raised by 600,000 acres to nearly 2.4m acres, equivalent to nearly 19% of plantings – and compared with less than 300,000 acres last season.
The highest abandonment, at least since the 1960s, was recorded in 1998, at 2.6m acres, equivalent to 20% of sowings.
Exports reduced
The USDA forecast that the weaker harvest would have limited impact on US stocks at the end of next season, with the production decrease offset by weaker expectations for exports, including those in the current, 2010-11 crop year.
| Selected USDA US cotton estimates, change on last and (year on year) Area sown 2011-11: 12.57m acres, unchanged, (+14.6%) Area harvested 2011-12: 10.20m acres, minus 600,000 acres, (-4.7%) Year-end 2011-12: 2.50m bales, unchanged, (+11.1%) Year-end 2010-11: 2.25m bales, +500,000 bales, (-24%) |
America is the world's top cotton exporter.
The report also edged higher, by 320,000 bales to 45.8m bales, the estimate for cotton stocks held by other countries, as high prices keep a lid on consumption.
'No safety net'
Nonetheless, the revisions were deemed bullish by analysts, given the risks posed by such tight supplies.
"I think we've seen the high production numbers for the year, and that as time goes by they will drift downward," Jurgens Bauer at PitGuru said.
Rabobank said the report suggests that "major users will have more domestic supply, but the world's number one exporter, the US, will have less to sell".
Given record low inventories expected at the end of 2010-11, "and expectations of diminished supply from the US in 2011-12, the globe has little recourse if supply disruptions occur".
Lower supply vs lower demand
Cotton for July stood the exchange maximum of 6.0 cents, or 4.1%, higher, at 151.05 cents a pound, in late deals in New York. The contract had lost 12% in the previous four trading sessions.
The new crop December lot was 2.1% higher at 132.90 cents a pound.
"The market's reaction to the report suggest concerns about the supply of the fibre in the new season is starting to attract attention," supplanting concerns about high prices curbing use in 2010-11.
Thursday, June 2, 2011
Cotton price to tumble, despite production threats
by Agrimoney.com
Cotton experts have reinforced their forecast for a return to more typical conditions in the cotton market, saying that prices will become less volatile, besides suffering a "significant" decline from historically high levels.
The International Cotton Advisory Committee acknowledged that prospects for world production of the fibre had dimmed, cutting its output forecast by 300,000 tonnes to 27.3m tonnes.
Nonetheless, supplies would prove larger than had been expected thanks to bigger carryover stocks from this season, when higher prices are causing a bigger dent to consumption than had been thought.
"This season started with a firm demand from spinning mills, which were looking to rebuild their stocks depleted in 2009-10, but is ending with weaker demand," the influential intergovernmental group said.
Price impact
Indeed, the ICAC ditched expectations of a small rise in consumption this season.
| ICAC cotton forecasts for 2011-12 and (year on year change) Area: 36.3m hectares, (+8%) Production: 27.3m tonnes, (+8.8%) Consumption: 25.8m tonnes, (+3.2%) Exports: 8.3m tonnes, (+3.8%) Year-end stocks: 10.2m tonnes, (+11.7%) Stocks to use ratio: 39.5%, (4.7 points) |
With world stocks set to end next season at 10.2m tonnes, equivalent to nearly 40% of consumption, the ICAC restated a forecast that prices, as measured by the Cotlook A index, "will decline significantly" over the season, if "probably" remaining above the 10-year average of 60 cents a pound.
The Cotlook A, which measures a basket of physical cotton prices, is expected to average 165 cents a pound in 2010-11.
"It is also possible that price volatility, which has been extremely high this season, will decline in 2011-12, as increased global cotton supplies may give more confidence to market players," the committee added.
Drought threat
The forecast tallies with an outlook from Barclays Capital, which expects cotton prices "to decline in the second half of 2011 on higher global production".
"Global balances are likely to ease over the coming months, with year-on-year higher production across key cotton producers," BarCap analyst Sudakshina Unnikrishnan said on Thursday.
However, Rabobank analysts remain bullish on prices, at least over the summer, flagging the "production risks associated with recent prolonged adverse weather conditions", such as drought in Texas, the top producing state in America, which is the biggest cotton exporter.
The proportion of the Texas cotton crop rated in "good" or "excellent" condition was 33% as of Sunday, compared with 61% a year before, US Department of Agriculture data show.
More than 30% of the crop was rated in "poor" or "very poor" health – up from 3% a year ago.
'Positive bias'
"Given current new crop uncertainty in the US due to continuing hot and dry conditions, we expect price direction to maintain a positive bias in coming weeks," Rabobank said.
Luke Mathews at Commonwealth Bank of Australia added: "Forecasts that Texas will remain hot and dry though to Sunday continue to hold up the cotton market."
Nonetheless, cotton for July delivery has recovered some 13% from a mid-May low, despite losing early gains on Thursday to stand 0.3% lower at 160.44 cents a pound in New York at 12:15 GMT.
Friday, May 27, 2011
International cotton prices fall
by Zarina Ergasheva
The international cotton prices have sharply fallen. According to some media outlets, the price of one ton of cotton fell from US$5,200 in March to US$3,900 in late April.
Specialists from the Ministry of Energy and Industries (MoEI) consider that the international cotton prices fell as considerable cotton stocks were made following flurry in the cotton market. “International exerts expect this price to keep till the new cotton harvest,” said the source, “Many countries have increased areas under cotton and experts forecast cotton harvest will increase this.”
International media outlets reported in early May that according to International Cotton Advisory Committee (ICAC), after seven consecutive months of increase, cotton prices fell in April 2011 due to significant slowing in demand. The Cotlook A Index reached a record of $2.44 on March 8, 2011, but was down to $1.73 per pound on April 28. These prices remain very high by historical standards.
ICAC pointed out that very high cotton prices, problems of credit access, and the fact that cotton yarn prices did not increase as fast as cotton prices and started yielding ground in mid-March 2011, are all affecting mill use. Global cotton use is expected to reach 25.1 million tons in 2010/11, almost unchanged from 2009/10. A slowing of spinning operations and an increased switch to chemical fibers are curtailing demand for cotton and are reducing its share of world fiber use.
Production is expected to increase by 11% to a record of 27.6 million tons in 2011/12. Increased cotton supplies will feed demand in 2011/12, but high prices and competition from chemical fibers are expected to limit growth in mill use to 3%. World cotton production is projected to exceed mill use in 2011/12, which would result in ending stocks recovering to 10.1 million tons. The world ending stocks-to-use ratio, forecast to reach an all-time low of 33% this season, could rebound to 39% in 2011/12. This would remain lower than the 10-year average of 49% prevailing before 2009/10.
Daily News & Analysis (DNA) reported on May 9 that cotton prices, which were on an upsurge, have fallen 20% in the last one month, easing margin pressures on Indian textile companies and raising prospects of price cuts for end-consumers. Textile firms now expect to sustained margins, if not improved profitability. The decline in prices in India, the world’s second-largest cotton producer after China, is primarily on account of improved production and a supply-glut in the overseas markets. Significantly, this price decline has reduced cotton yarn prices benefiting companies using yarn to make garments.
We will recall that Tajikistan has allocated 210,000 hectares to cotton cultivation this year, but farmers have managed to plant cotton only on 203,100 hectares. Specialists from the Ministry of Agriculture (MoA) say farmers plan to yield some 400,000 tons of raw cotton this year.
In 2010, farmers planted cotton on 160,400 hectares and yielded some 330,000 tons of raw cotton.
Wednesday, May 25, 2011
What went wrong with cotton?
By Chuck Kowalski
Cotton futures made one of the most remarkable runs in recent history for commodities, but cotton prices have nosedived in the last two months. The cotton market was making headlines almost every day as prices shot above $2 and made record highs.
Almost every news agency was carrying stories of the remarkable rally and the implications of high cotton prices. As we know, commodity markets cannot rally straight up forever and now we are seeing the fallout of an unsustainable rally.
Cotton prices have fallen about 25 percent in the last two months, but the market is still 16 percent higher for the year and 90 percent higher for the last 12 months. That gives you a picture of the magnitude of this rally.
There was a panic rally in cotton, which often happens in commodities when supplies become extremely tight and end users have to scramble to buy supplies. To exacerbate the rally, commodity traders will typically push the market even higher when they smell blood in the water.
Eventually, the price will get to an extreme level where demand gets crushed. It looks like that happened when cotton stretched about $2. The marketplace will have to decide if it can support cotton prices above $2.
That is why extreme prices will often be tested at least twice. If cotton rallies up to that level again and demand dives, then the market will probably roll over hard and it will take some time before it can get there again.
The supply side is still tight for cotton, but demand needs to return. We have already seen some weather problems for the cotton crop and this year's harvest could come in low once again. The season has just begun and we'll see if cotton can form a short-term bottom around $1.50 on the July contract.
Farmers Closing in on Corn Planting
By: Sara Schafer
Major planting progress was made in many key corn states during the past week. As of May 22, 79% of the U.S. corn crop is in the ground. This compares to a five-year average of 87% for this point in the season.
Ten of the 18 corn states that planted 92% of the 2010 U.S. corn acreage has passed the 80% planted mark.
(click to enlarge)
Several states are still way behind average. Ohio only has 11% of its corn crop planted, which compares to the normal 74% planted by this time. Indiana, Pennsylvania and North Dakota have just under are under 50% planted this year, normally these states would be around 75% planted by this time.
Overall corn emergence went from around 20% emerged as of May 15 to 45% emerged by May 22. The five-year average for corn emergence by this time is 59%.
See the “Corn Planting Progress” reports.
Soybean Planting Progress Passes 40%
As of May 22, 41% of the country’s soybeans are in the ground. The five-year average for this time is 51%.
(click to enlarge)
Illinois, Iowa, Kansas, Louisiana, Mississippi, Missouri and Nebraska are all at a normal pace or exceeding the average of beans planted by this time.
Ohio has 4% of the 2011 crop planted, a staggering drop from the five-year average of 54%. North Dakota, Minnesota, Michigan, Indiana and Wisconsin are also all well behind their normal planting progress.
See the “Soybean Planting Progress” reports.
Cotton, Sorghum and Rice Planting on Track
As of this week, 57% of the U.S. cotton crop is planted. Normally just over 60% of the crop is planted by this time. Farmers in Arizona, California, Louisiana and Virginia all have more than 90% of their crops in the ground.
See the “Cotton Planting Progress” report.The U.S. sorghum crop is on pace to be planted at a normal rate. The five-year average for this time is 40%, which is also the current planting progress.
States such as Arkansas, Texas and Louisiana are more than 70% planted, while South Dakota, Colorado and Illinois are around the 10% planted mark.
See the “Sorghum Planting Progress” report.
Of the six major rice-growing states, all but one has more than 70% of their crops in the ground. Missouri is the only state lagging behind with 53% planted, likely due to the major flooding earlier this spring in the rice-growing areas of the state.
Currently, 84% of the U.S. crop is planted, which is only slightly behind the five-year average of 90%.
Sunday, May 15, 2011
Cotton may be set for 'another bullish scenario'
by Agrimoney.com
Analysts have rated cotton as emerging among the best-supported crops, in pricing terms, from a slew of key US data, with Rabobank saying the fibre may witness "another bullish scenario".
The US Department of Agriculture, in its first estimates for 2011-12 crops released on Wednesday, pegged world output at 124.7m bales, a rise of 8.8%, enough to return the market to a production surplus and ease a squeeze on supplies which drove prices to record highs.
The data, reflecting a forecast of a record harvest in India, the second-ranked producer, fuelled a modest sell-off in New York futures which continued in the current session when New York's July contract fell 2.1% to 147.22 cents a pound, well below the record 227 cents a pound for a spot contract reached in February.
The new crop December lot shed 2.2% to 122.50 cents a pound.
Drought losses
However, a number of analysts questioned a downbeat interpretation of the data, given that the forecast included an estimate of hefty losses among US farmers to adverse weather, which has bought flooding to some areas of the South, besides drought to Texas, the top producing state.
The USDA forecast the domestic crop coming in marginally below last year's, despite a 16.4% rise in sowings, citing "above-average abandonment and slightly below-average yields due to severe drought conditions in the south west".
The drop means the US, the top cotton exporter by a margin, will "not be able to make up any potential production shortfalls elsewhere", as it has done this season, Rabobank said.
"In our view, the supply and demand outlook remains tight in the new season. Due to low inventories, if production estimates are not achieved, a return to another bullish scenario appears likely."
'Particularly bullish'
And the bank was supported by other analysts. Luke Mathews at Commonwealth Bank of Australia termed the estimates "somewhat bullish" for new crop cotton.
World cotton stocks still looked set end 2011-12 "relatively tight", at 40% of consumption, compared with a 55% figure in 2008-09.
Australia & New Zealand Bank said that "the report for cotton was particularly bullish".
"Given dry conditions in the US, the USDA is now projecting essentially no growth in US harvested cotton acreage on last year," the bank said.
"Global 2011-12 forecasts were also positive, with the USDA increasing mill use by 3m bales while only projecting production higher by 8.7% year on year."
The USDA estimates were also more downbeat, in production terms, than those last week from the International Cotton Advisory Committee, which estimated world output rising by more than 11%, to 127m bales.
Saturday, May 14, 2011
Cotton Prices Headed to New Annual Highs Despite Bumper Global Crop
By: Fran Howard
Cotton futures have dropped dramatically, about 25%, since their highs of near $2.10/bale hit earlier this year. But strong demand for cotton will push the new-crop annual average price to a new record high despite anticipated record-high global cotton production.
USDA’s World Agricultural Supply and Demand Estimates released May 11 show that both U.S. and word ending stocks are on the rise. U.S. 2011-12 ending stocks are projected at 2.5 million bales, 43% above the 2010-11 carryout. Despite that sharp increase, projected ending stocks are the second lowest since 1990-91. USDA pegs the average cotton price for the upcoming crop at a record 95 cents to $1.15/lb.
USDA left U.S. cotton production at 18.1 million bales, unchanged from earlier reports, but says abandonment will be high. Nearly the entire state of Texas, which accounts for more than 40% of the U.S. crop, is battling extremely dry conditions. “Cotton acres are still questionable. Even in the Coastal Bend region, the cotton is not growing well,” says Carl Anderson, extension economist at Texas A&M University.
The area of the state from just south of Lubbock through the rolling plains to Wichita Falls, where about 3 million acres of dry land cotton is grown, is too dry to germinate seed. “We still need a couple of inches of rain before they can plant,” Anderson says. USDA projects growers will harvest 10.8 million acres out of an anticipated 12.6 million planted acres, with most of the abandoned acres likely to come from Texas.
“There’s a huge amount of uncertainty with new-crop cotton,” says Brad Chapman, cottonseed merchandiser with APEX, Eldridge, Iowa. “There are floods in the Delta and dryness out West.” New-crop cottonseed prices moved higher following the May WASDE report. Of the two areas, Texas is of the greatest concern.
“We hear it’s tough to prep the ground and there are water restrictions,” Chapman says.
Global outlook
World cotton production is expected to rise to 124.7 million bales, the largest world crop ever, according to USDA. India, China, and Pakistan will account for 70% of the 10.1-million-bale increase in global cotton production. Despite a bumper crop, USDA expects easing supplies along with anticipated global economic growth to boost world demand by 3 million bales. Overall world demand, however, will remain below its peak levels of 2006-07 and 2007-08, USDA notes.
USDA also estimates world trade in cotton will hit 40 million bales, as Chinese demand rises. World ending stocks are projected to increase to nearly 48 million bales, a 13% increase from the previous year, but the stocks-to-consumption ratio of 40% will remain relatively tight, according to the report.
“Old-crop cotton is tight,” says Anderson, and that pushed prices to unsustainable levels earlier this year. “China started to panic and ran cotton up to more than $2 per pound, then other countries began to bid for what cotton the United States had. The market was probably 20% overvalued.” Current December futures near $1.20 look much more reasonable, Anderson says.
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