Cotton's Week: August 15, 2008

Cotton's Week: August 15, 2008

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Key Industry Issues Addressed

Attendees at the joint meeting of the American Cotton Producers (ACP) and The Cotton Foundation in Savannah, GA, were briefed on the status of farm bill implementation and World Trade Organization Doha negotiations. They also heard updates on the economic situation, the cotton futures market, a sustainability initiative, and a China delegation tour among others.

ACP state chairmen provided crop situation updates and offered topics for consideration on the ’09 Beltwide Cotton Conferences’ program.

Dr. Gary Adams, NCC’s vice president, Economics & Policy Analysis, said abundant cotton stocks will weigh on the market in the near term but at current prices competing crops will continue to pull US cotton acres out of production. He said the global economy’s performance coupled with higher energy costs is slowing overall cotton demand but stocks should tighten, nevertheless.

Teresa Lasseter, USDA Farm Service Agency administrator, provided attendees with an overview of the key ’08 farm law commodity provisions and said USDA is committed to getting them implemented and in the field as quickly as possible. She said the ’08 law has more provisions and is more complex than any in history, and the ACRE and permanent disaster provisions pose unique challenges – for USDA’s implementation and producers’ decision-making.

During his report, NCC Chairman Larry McClendon thanked USDA for its work on farm bill implementation and noted that, “Thus far, our contacts with USDA have been informative and Mrs. Lasseter’s FSA team is to be congratulated for their efforts. It is no small task for an agency to implement so many new programs in such a short time.”

McClendon provided a summary of NCC’s activities in Washington with farm bill implementation and in Geneva with the Doha trade negotiations.

In his update on trade matters, NCC President/CEO Mark Lange said US officials are still working on an approach for a restart of the Doha negotiations and Brazil may file damages any day now in their WTO case against US cotton.

Woods Eastland, Staplcotn president/CEO, reviewed the aftermath of the February-March futures market run and said ICE Futures U.S. has changed its margining rules and new pending legislation redefines a hedger or a bona fide hedge transaction.

Dr. Bill Norman, NCC’s vice president, Technical Services, along with Cotton Incorporated (CI) CEO Berry Worsham and NCC/CI consultant Dr. Andy Jordan, reviewed efforts by both organizations to define measurement parameters for sustainable cotton production. Worsham reviewed the campaign CI has undertaken to build on the consumer’s perception of cotton fabrics as sustainable, including significant work on technical aspects of crop and fabric production. Jordan reviewed the two organizations’ involvement in the “Field to Fabric” initiative that is working to define indices representing modern agriculture’s sustainability profile. Norman briefed the audience on the status of the Draft Standard for Sustainable Agriculture being developed within the American National Standards Institute’s (ANSI) standards development process.    

During the Cotton Foundation’s annual meeting, Missouri producer Charles Parker was elected Foundation chairman and Mark Nichols, an Oklahoma producer, was elected president. Trent Haggard, Case IH, was elected treasurer. Mark Lange will serve as executive vice president; Bill Norman, executive director/secretary and R.E. Shellabarger, assistant treasurer.

Foundation trustees for ’08-09 include producers: Nichols; Chuck Coley, Georgia; Cannon Michael, California, and Sledge Taylor, Mississippi. Allied industry trustees are: Mark Lindsey, DuPont Crop Protection; Douglas Rushing, Monsanto; Ted McKinney, Dow AgroSciences; Allen Scarborough, Bayer CropScience; Neil Strong, Syngenta; Jim Arnold, Helena Chemical; and William Norton, John Deere Des Moines Works.

Arizona producer Clyde Sharp (outgoing chairman) and John’s Deere’s Dave Rodgers (outgoing treasurer) were recognized for their multiple years of service to the Foundation.



USDA Sees 13.77 Million Acres

In its August crop report, USDA estimated a ’08-09 US crop of 13.77 million bales.

Upland production was estimated at 13.25 million bales and ELS production at 521,800 bales. Harvested area was estimated at 7.85 million acres, implying a non-harvested area of 1.40 million acres based on USDA’s June acreage report. The resulting abandonment rate is roughly 15.11%. The national average yield per harvested acre was estimated to be roughly 842 pounds, 21 pounds above the 5-year average.

On a regional basis, the Southeast crop is estimated at 2.97 million bales, based on 1.84 million harvested acres and a regional average yield of 774 pounds, 19 pounds above the five-year average for the region.

In the Mid-South, expected production is 3.92 million bales. Harvested area is estimated to be 1.93 million acres and the expected yield 973 pounds per harvested acre. The Southwest upland crop is an estimated 5.53 million bales. Expected harvested area is 3.61 million acres and the regional average yield is 737 pounds, 51 pounds above their five-year average of 686 pounds per harvested acre.

Upland production in the West is an estimated 825,000 bales, with harvested area of 277,000 acres and a regional average yield of 1,430 pounds, 83 pounds higher than the region’s five-year average.

The ELS crop is an estimated 522,000 bales. Harvested area is pegged at 194,000 acres with an average yield of 1,292 pounds per harvested acre.
 

US Cotton Crop, ’08-09

 

PLANTED

ACRES

Thou.

HARV.

ACRES

Thou.

YIELD PER

HARV.

ACRE

Lb.

5-YEAR

AVG.

YIELD

Lb.

480-

POUND

BALES

Thou.

UPLAND

 

 

 

 

 

SOUTHEAST

2,255  

1,839 

774  

755 

2,966  

   Alabama

400  

300 

701  

675 

438  

   Florida

85  

70 

734  

692 

107  

   Georgia

1,030  

890 

809  

784 

1,500  

   North Carolina

500  

397 

786  

774 

650  

   South Carolina

180  

118 

651  

716 

160  

   Virginia

60  

64 

833  

822 

111  

MID-SOUTH

2,750  

1,934 

973  

939 

3,920  

   Arkansas

860  

690 

1,113  

1,031 

1,600  

   Louisiana

335  

285 

909  

928 

540  

   Mississippi

660  

365 

934  

915 

710  

   Missouri

380  

299 

963  

956 

600  

   Tennessee

515  

295 

765  

823 

470  

SOUTHWEST

5,122  

3,605 

737  

686 

5,534  

   Kansas

47  

35 

603  

535 

44  

   Oklahoma

175  

170 

819  

685 

290  

   Texas

4,900  

3,400 

734  

688 

5,200  

WEST

408  

277 

1,430  

1,347 

825  

   Arizona

170  

138 

1,461  

1,371 

420  

   California

195  

107 

1,503  

1,382 

335  

   New Mexico

43  

32 

1,050  

946 

70  

TOTAL UPLAND

10,535  

7,655 

831  

812 

13,245  

TOTAL ELS

292  

194 

1,292  

1,259 

522  

   Arizona

3  

1 

960  

889 

2  

   California

260  

171 

1,347  

1,321 

480  

   New Mexico

5  

6 

960  

877 

12  

   Texas

25  

16 

840  

877 

28  

ALL COTTON

10,827  

7,849 

842  

821 

13,767  

Source: USDA-NASS August Crop Production Report. 





Cotton Stocks Seen Tightening

In its August report, USDA’s 13.77-million bale US crop projection for ’08-09 is down 230,000 bales from their July report. Mill use was unchanged at 4.40 million bales while exports were increased 500,000 bales to 15.00 million bales. The estimated total offtake stands at 19.40 million bales resulting in ending stocks of 4.60 million bales. The projected ending stocks-to-use ratio is 23.7%.  

USDA left US ’07-08 cotton production unchanged at 19.21 million bales as it did with both exports and mill use at 13.90 million bales and 4.60 million bales, respectively. Estimated total offtake stands at 18.50 million bales, generating ending stocks of 10.20 million bales and an estimated ending stocks-to-use ratio of 55.1%.

USDA’s ’08-09 world production projections were lowered 2.78 million bales from the July report to 112.16 million. Beginning stocks were lowered 900,000 bales from the previous month to 60.36 million. Projected world mill use was lowered 1.37 million bales to 124.54 million. The projected world ending stocks on July 31, ’09 is now pegged at 50.98 million bales. This has a corresponding stocks-to-use ratio of 40.9%.

For the ’07-08 marketing year, USDA estimated world production at 119.31 million bales, down 600,000 bales from the July report. World mill use was decreased 620,000 bales from the July report to an estimated 123.63 million bales. Consequently, world ending stocks for ’07-08 are estimated to be 60.36 million bales for a stocks-to-use ratio of 48.8%.



Mid-Year Meeting Set For Memphis

The NCC will conduct its Mid-Year Board of Directors meeting on Aug. 20-22 at The Peabody Hotel in Memphis.

NCC Board committees will meet Wednesday afternoon, Aug. 20, and Thursday morning, Aug. 21.  Cotton Council International’s Board of Directors meets Thursday morning, followed by the NCC Board’s open session that afternoon.  The NCC Board’s executive session is scheduled for Friday morning, Aug.22.

During Thursday afternoon’s open session, Larry McClendon will begin with the NCC chairman’s report. Other reports will be provided by NCC Vice Chairman Jay Hardwick (China delegation tour); NCC vice presidents Gary Adams (economic outlook) and John Maguire (Washington update); and NCC General Counsel Bill Gillon (trade). Cotton Council International President Robert Weil, II, will brief attendees on that organization’s activities, and Bruce Heiden will provide a Committee for the Advancement of Cotton update.



Sales Surge, Shipments Steady

Net export sales for the week ending Aug. 7 were 411,600 bales (480-lb). This brings total ’08-09 sales to approximately 4.2 million bales. Total sales at the same point in the ’07-08 marketing year were slightly more than 3.7 million bales. Total new crop (’09-10) sales are 29,800 bales.

Shipments were 230,800 bales, bringing total exports to date to 230,800 bales, compared with the 482,700 bales at the comparable point in the ’07-08 marketing year.



’08 PIE Tours Conclude

Southeastern cotton producers will visit operations in Texas on Aug. 18-21 on the last Cotton Foundation Producer Information Exchange (PIE) Program tour in ‘08.

PIE is conducted by the NCC’s Member Services staff, in conjunction with local producer associations. Bayer CropScience sponsors the program via a grant to the Foundation.

The 11 Southeastern tour participants will visit the Bayer CropScience Warehouse in Lubbock, TX, to hear a presentation on cottonseed and an overview on the Plains Cotton Growers Assoc. They also will hear presentations on “Texas Cotton Production” and the “Texas Cotton Improvement Program” from Texas A&M U. researchers. They will then tour PYCO industries where the group will focus on cottonseed and its varied uses. That will be followed by a tour of the Farmer’s Cooperative Compress. The next day in Lubbock the group will receive a presentation on electronic marketing at Plains Cotton Cooperative Assoc. They also will tour the Texas Feed Lot and the Back to Earth Resources to see how gin waste is converted into value-added products.

On the 20th in the Coastal Bend area, the group will visit Stover Equipment Company, the Port of Corpus Christi and the Smith Gin Coop. The tour concludes on Aug. 21 with a tour of the King Ranch and Farms in Kingsville and individual farm tours in San Patricio, Nueces and Kleberg counties.

The group includes North Carolina producers Andrew Burleson, New London; Joe Martin, II, Conway; Milton Prince, Belhaven; and Tory Slager, Pantego. They will be joined by Georgia producers Wes Busby, III, Dawson; Judson Hornsby, Iron City; and Brian Massey and Lee Trice, both from Bronwood; along with Alabama producer Jamie Wood, Town Creek; Virginia producer Lofton Braswell, Windsor; and Tennessee producer Brett Graham, Taft.



Prices Effective Aug. 15-21, '08

Adjusted World Price, SLM 11/16

63.43 cents

*

Coarse Count Adjustment

0.00 cents

Marketing Loan Gain Value

0.00 cents

Import Quotas Open

NA

Limited Global Import Quota (480-lb bales)

NA

ELS Payment Rate

0.00 cents

*No Adjustment Made Under Step I
 
Five-Day Average
 
Current 5 Lowest 3135 CFR Far East

78.26 cents

Forward 5 Lowest 3135 CFR Far East

NA

Coarse Count CFR Far East

NA

Current US CFR Far East

77.70 cents

Forward US CFR Far East

NA

 
'07-08 Weighted Marketing-Year Average Farm Price  
 
Year-to-Date (August-June)

57.05 cents

**

**August-July average price used in determination of counter-cyclical payment

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