Cotton's Week: February 13, 2009

Cotton's Week: February 13, 2009

phytogen

NCC Sees 8.11 Million Acres in ’09

US cotton producers intend to plant 8.11 million acres of cotton this spring, down 14% from ’08, according to the NCC’s 26th Annual Early Season Planting Intentions Survey.

Upland cotton intentions are 7.97 million acres, a decrease of 14% from ’08. Extra long staple (ELS) intentions of 142,000 acres represent a 19% decline from ’08. The results were announced at the NCC’s ’09 Annual Meeting, which began today in the nation’s capital.

Assuming an average abandonment rate of 9.4%, total upland and ELS harvested area would be about 7.35 million acres. Applying state-level yield assumptions to projected harvested acres generates a cotton crop of 12.76 million bales, compared to ’08’s total production of 13.04 million bales. Assuming average seed-to-lint ratios, ’09 cottonseed production is projected at 4.35 million tons, down from 4.43 million last year.

The NCC survey was mailed in mid-December to producers in the 17-state Cotton Belt. Responses were collected through mid-January.

Based on survey results, all four regions show intended upland cotton planting area decreases from last season. The West and Mid-South show the largest percentage drops of 31% and 23%, respectively. Smaller reduction of 18% and 9% are expected in Southeast and Southwest, respectively. Only two states indicated upland expansion, Kansas at 7% and Florida at 3%.

NCC Senior Economist Dale Cougot emphasized that, “as growers look at expected returns when comparing prices for cotton against competing crops, they will be influenced by lower fuel and fertilizer costs along with agronomic considerations, such as crop rotation and weather conditions in Texas, California and parts of the Southeast. Growers will continue to monitor relative crop prices over the coming weeks. USDA’s latest grain estimates, showing an increase in stock levels, highlights another major influencing factor this year. Also, the ratio of crude oil at $45 per barrel to corn at $4 per bushel does not foretell profitable ethanol production.”

Southeast respondents indicated declining acreage, except for Florida at the expense of peanuts. Alabama reported the largest percentage reduction at 33%, followed by Virginia at 23% and Georgia at 17%. These three states’ survey responses showed shifts to both corn and soybeans. South Carolina and North Carolina plan cutbacks of 18% and 12%, respectively, as growers primarily shift to soybeans.

Results for all the Mid-South states, except for Tennessee’s expected 4% decrease, signified sharp declines in the 25% range. The majority of growers’ intentions are to transfer over to soybeans. The largest Mid-South state decreases were seen in Arkansas (-29%), Mississippi (-27%), Louisiana (-26%) and Missouri (-24%).

Texas growers expressed intentions of reducing area by 9% to 4.5 million acres. The other regions’ reductions of relatively more acreage implies Texas’ share of the total upland area is expanding, now more than 57%, up from 54%.

“This will entail a wider variance in abandonment acres as crop estimates are prepared for the season,” Cougot stated. He noted only modest adjustments were in Kansas (+7%) and Oklahoma (-2%).

The Western region showed a projected 31% reduction. California upland planted area intentions presented losses of 55% -- the largest percentage decline of all Cotton Belt states. This stems from ongoing concerns over water availability, and reflects some producers’ opting to change to specialty crops. Survey respondents also revealed that Arizona and New Mexico growers intend to decrease upland area by 7% and 40%, respectively.

Adjustments in the four states producing ELS cotton indicated mixed reviews with declines in California and New Mexico partially offset by gains in Arizona and Texas. 

Prospective 2009 U.S. Cotton Plantings

 

2008 Actual (Thou.)  1/

2009 Intended (Thou.)  2/

Percent Change

SOUTHEAST

1,923 

1,580 

-17.8% 

  Alabama

290 

193 

-33.3% 

  Florida

67 

69 

2.5% 

  Georgia

940 

782 

-16.8% 

  North Carolina

430 

379 

-11.9% 

  South Carolina

135 

110 

-18.4% 

  Virginia

61 

47 

-22.8% 

MID-SOUTH

1,876 

1,438 

-23.4% 

  Arkansas

620 

441 

-28.8% 

  Louisiana

300 

222 

-26.0% 

  Mississippi

365 

268 

-26.5% 

  Missouri

306 

234 

-23.6% 

  Tennessee

285 

272 

-4.4% 

SOUTHWEST

5,205 

4,746 

-8.8% 

  Kansas

35 

38 

7.2% 

  Oklahoma

170 

167 

-1.7% 

  Texas

5,000 

4,542 

-9.2% 

WEST

292 

202 

-31.0% 

  Arizona

135 

126 

-6.9% 

  California

120 

54 

-55.4% 

  New Mexico

37 

22 

-39.7% 

TOTAL UPLAND

9,296 

7,965 

-14.3% 

TOTAL ELS

174 

142 

-18.6% 

  Arizona

1 

1 

25.0% 

  California

155 

119 

-23.0% 

  New Mexico

3 

2 

-27.1% 

  Texas

16 

19 

24.3% 

ALL COTTON

9,470 

8,107 

-14.4% 

1/ USDA-NASS  2/NCC





House Panel Approves Futures Bill

The House Agriculture Committee approved legislation to increase the transparency and strengthen oversight of futures, options and over-the-counter (OTC) markets.

The Derivatives Markets Transparency and Accountability Act of 2009, sponsored by Committee Chairman Peterson (D-MN), toughens position limits on futures contracts for physically-deliverable commodities as a way to prevent potential price distortions caused by excessive speculative trading. The bill also imposes a clearing requirement on OTC derivatives contracts and empowers the Commodity Futures Trading Commission with the ability to suspend trading in naked credit default swaps under certain circumstances.

In a Feb. 4 hearing, Cargill CEO and NCC Director Gary Taylor presented testimony expressing the cotton industry’s support for the legislation (see 2/6 Cotton’s Week). Legislation details are at http://agriculture.house.gov.



Stimulus Package Includes Ag Funding

The $789 billion economic stimulus package agreed to by House and Senate leadership includes funding targeted for USDA agencies and agriculture industries.

There will be $50 million included for the Farm Service Agency to maintain/modernize their information technology system.

Funding for Natural Resources Conservation Service watershed and flood prevention went up to $290 million. Rural broadband grants and guarantees administered by USDA stands at $2.5 billion. There is $20.4 million for direct farm operating loans and $50 million is provided in aid to aquaculture producers.

The package includes additional funding for a number of energy-related projects, including renewable energy priorities.



APHIS Revises Cotton Procedures

At the NCC Cotton Flow Committee meeting, Mike Ward, USDA Animal & Plant Health Inspection Service's (APHIS) Accreditation Manager, reported that the latest edition of the agency's Export Program Manual (XPM) contains revisions to Section 4-2, Special Procedures - Commodity – Cotton, and the new cotton warehouse compliance agreements will be phased in over the next 12 months.

The Flow meeting was one of several sessions convening at the NCC’s 71st Annual Meeting in Washington, DC.

Ward reported on several  key updates such as the use of “uniform densely packed baled cotton” in the place of Gin Universal Density or Gin Standard Density cotton bales. A footnote to the special procedures indicates that acceptable bale density is defined “…as a minimum compression rate of 22 pounds of lint per cubic foot (352.4 kg of lint per cubic meter)."...

Many cotton warehouses currently hold National Cotton Compliance Agreements from APHIS’ Plant Protection and Quarantine (PPQ) and assist merchants and others with APHIS- sanctioned inspections when bales are shipped to a country requiring phytosanitary certification.

When requested, compliant warehouses may provide inspections necessary to expedite phytosanitary certification. Once bales are inspected, the warehouser can fill in the appropriate sections of an APHIS PPQ Form 572, a document that is to be returned by the warehouser to the merchant or freight forwarder requesting the inspection.

Merchants or freight forwarders are responsible for reviewing the forms they receive from warehouses and making sure their 572 forms are complete. The next step is to send completed forms to APHIS as part of their application for a phytosanitary certificate.

Links to the XPM and Section 4-2 Special Procedures – Commodity – Cotton of the XPM are on the NCC’s Flow-Shipment page at http://www.cotton.org/tech/flow/index.cfm.



Sales, Shipments Steady

Net export sales for the week ending Feb. 5 were 127,500 bales (480-lb). This brings total ’08-09 sales to about 9.2 million bales. Total sales at the same point in the ’07-08 marketing year were about 9.8 million bales. Total new crop (’09-10) sales are 130,100 bales.

Shipments for the week were 171,900 bales, bringing total exports to date to 6.0 million bales, compared with the 6.5 million bales at the comparable point in the ’07-08 marketing year.



USDA Lowers ’08-09 Offtake

In its February report, USDA projected the ’08-09 US crop to be 13.04 million bales, unchanged from the January report. US mill use dropped 300,000 bales to 3.90 million bales while US exports were lowered 500,000 bales to 11.50 million due to lower projected foreign imports, especially by China. This generates a total ’08-09 offtake of 15.40 million bales. Ending stocks for ’08-09 are projected to be 7.70 million bales for an ending stocks-to-use ratio of 50.0%.

For the ’07-08 crop year, USDA gauged US cotton production at 19.21 million bales. Estimated mill use and exports were unchanged from the January report at 4.61 and 13.65 million bales, respectively. Total offtake for the ’07-08 crop year is estimated at 18.26 million bales. Ending stocks were 10.04 million bales and the stocks-to-use ratio was 55.0%.

The USDA report lowered ’08-09 world production estimates 330,000 bales from the January report to 109.51 million bales. World mill use was lowered 2.61 million bales to an estimated 112.63 million bales. Consequently, world ending stocks for ’08-09 are projected to be 61.71 million bales for a stocks-to-use ratio of 54.8%.

For the ’07-08 marketing year, USDA estimated world production at 120.54, unchanged from the previous month. Estimated world mill use was lowered 40,000 bales to 122.65 million bales. World ending stocks on July 31, ’08 are now estimated at 62.35 million bales for a corresponding stocks-to-use ratio of 50.8%.



’09 Gin School Registration Open

Registration is open for the ’09 Ginner Schools: Southwest Ginners School, Lubbock, TX - March 30-April 1; Western Ginners School, Las Cruces, NM - May 12-14; and Stoneville Ginners School, Stoneville, MS - June 9-11.

Coursework description and registration procedure is at the National Cotton Ginners’ Assoc. (NCGA) website, http://ncga.cotton.org.

School cooperators include NCGA, USDA-ARS, NCGA member associations, NCC, Cotton Incorporated, gin machinery/equipment manufacturers/suppliers, Cooperative State Research, Education and Extension Service, and select land grant universities.



Prices Effective Feb. 13-19, '09

Adjusted World Price, SLM 11/16

38.15 cents

*

Fine Count Adjustment ('07 Crop)

  1.17 cents


Fine Count Adjustment ('08 Crop)

  0.77 cents


Coarse Count Adjustment

  0.00 cents


Marketing Loan Gain Value

 13.85 cents


Import Quotas Open

5


Limited Global Import Quota (480-lb bales)

381,732


ELS Payment Rate

  18.23 cents


*No Adjustment Made Under Step I

 

Five-Day Average

 

Current 5 Lowest 3135 CFR Far East

 56.74 cents


Forward 5 Lowest 3135 CFR Far East

NA


Coarse Count CFR Far East

55.88 cents


Current US CFR Far East

58.05 cents


Forward US CFR Far East

NA


 

'08-09 Weighted Marketing-Year Average Farm Price  
 

Year-to-date (Aug.-Dec.)

55.17 cents

**

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

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