USDA: Weekly Cotton Market Review: May 11, 2012

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Spot cotton quotations averaged 311 points lower than the previous week, according  to the USDA, Agricultural Marketing Service’s Cotton Program. Quotations  for the base quality of cotton (color 41, leaf 4, staple 34, mike 35-36 and 43-49,  strength 27.0-28.9, uniformity 81.0-81.9) in the seven designated markets averaged  78.13 cents per pound for the week ended Thursday, May 10, 2012. The  weekly average was down from 81.24 cents last week and 146.71 cents reported  the corresponding period a year ago. Daily average quotations ranged from a high  of 80.17 cents on Friday, May 4 to a low of 74.41 cents on Thursday, May 10.

Spot transactions reported in the Daily Spot Cotton Quotations for the week ended  May 10 totaled 3,915 bales. This compares to 5,736 bales last week and 692 bales  reported a year ago. Total spot transactions for the season were 844,223 bales,  compared to 592,488 bales the corresponding week a year ago. The ICE July settlement  prices ended the week at 81.82 cents, compared to 89.21 cents last week.

Prices are in effect from May 11-17, 2012 
Adjustment World Price (AWP) 73.74 ELS Competitiveness Payment 0.00 
Loan Deficiency Payment (LDP) 0.00 Fine Count Adjustment 2011 Crop 0.09 
Coarse Count Adjustment (CCA) 0.00 Fine Count Adjustment 2012 Crop 0.29 
Source: Farm Service Agency, FSA, USDA

USDA ANNOUNCES SPECIAL IMPORT QUOTA #13  FOR UPLAND COTTON  May 10, 2012

 The Department of Agriculture’s Commodity Credit Corporation announced a special  import quota for upland cotton that permits importation of a quantity of upland  cotton equal to one week’s domestic mill use. The quota will be established on  May 17, 2012, allowing importation of 14,594,057 kilograms (67,030 bales) of upland  cotton.

 Quota number 13 will be established as of May 17, 2012, and will apply to  upland cotton purchased not later than August 14, 2012, and entered into the U.S.  not later than November 12, 2012. The quota is equivalent to one week’s consumption  of cotton by domestic mills at the seasonally-adjusted average rate for  the period May 2011 through July 2011, the most recent three months for which  data are available.  Future quotas, in addition to the quantity announced, will be established if  price conditions warrant.

 Regional Summaries

Southeastern Markets

Spot cotton trading was inactive. Supplies and demand  were moderate. Producer offerings were light.  Average local spot prices were lower. Trading of  CCC-loan equities was inactive. Producer interest in  forward contracting was very light as ICE futures  trended lower in the period.

A band of severe weather brought heavy localized  downpours to cotton growing areas throughout the  region during the period. Precipitation totals measured  around one-quarter of an inch to one inch in locales  from south Alabama to the coastal plains of the  Carolinas. The strong storms produced damaging  wind gusts and hail as the cold front swept eastward  late in the week. Planting activity expanded rapidly,  but fieldwork was delayed momentarily as the showers  passed. Producers welcomed the beneficial moisture,  particularly in areas where fields were dusted in  ahead of the system. The timely rainfall improved  soil moisture conditions and helped seedbeds to firm.  Warm temperatures forecast in the near term should  aid germination and stand establishment. Scouts reported  insect pressure from nematodes and thrips in  the earliest planted fields in Georgia and the Carolinas.  Producers treated fields as needed and applied  herbicides and fertilizers.

South Central Markets

North Delta  

Spot cotton trading was inactive. Producer offerings  and supplies were light. Demand was light. Average  local spot prices were lower. Trading of CCC-loan  equities was inactive. No forward contracting was  reported.

 A cold front brought much needed moisture and  cooler temperatures to the region early in the week.  Rainfall totals ranged from one-half of an inch up to  five inches. Hail was reported in a few localized areas  with some light crop damage. A few areas in northeastern  Arkansas and Missouri received only trace  amounts of precipitation. Emergence has been very  good in planted fields, with very little replanting required  due to storm damage. Insect pressure was  building quickly in some areas, due to favorable conditions.  Local experts reported heavy populations of  boll moths and thrips in areas that received rain and spider mites in drier fields. Planting was estimated at  77 percent completed in Arkansas, 49 in Missouri,  and 29 percent in Tennessee, according to the National  Agricultural Statistics Service. All of these figures  were well ahead of the five-year average.

South Delta  

Spot cotton trading was inactive. Supplies were moderate.  Producer offerings were light. Demand was  light. Average local spot prices were lower. Trading  of CCC-loan equities was inactive. No forward contracting  was reported.

 Growers in Mississippi made excellent progress  early in the period before some much needed moisture  arrived to delay planting for a day or two. In spite of  delays, sowing this season’s crop moved well ahead  of the five-year average according to the National Agricultural  Statistics Service, 68 percent currently compared  to 31 percent historically. Planting in Louisiana  advanced to 84 percent completed compared to a five- year average of 63 percent and was expected to wind  down rapidly. Some areas remained dry and were in  urgent need of moisture. Crop extension specialists  reported unusually high populations of thrips and  plant bugs in some areas throughout the region. Producers  are actively treating infested fields while others  are struggling to control weeds in a few areas.

Southwestern Markets

East Texas-Oklahoma  

Spot cotton trading was slow. Supplies were heavy.  Demand was light. Average local spot prices were  lower. Producer offerings were light. No forward  contracting was reported. Trading of CCC-loan equities  was slow. Foreign mill interest was light. Interest  was best from China, Korea, Taiwan, and Turkey.

Texas received intermittent beneficial rainfall,  which encouraged early season growth. Some replanted  fields were reported in southern Texas, and  later planted stands were at the five to six leaf stage.  Compared to the previous year, fewer acres had been  planted in central and eastern Texas, but yields are  expected to be significantly higher due to increased  rainfall. In Kansas, according to local reports, planting  advanced. Spotty rainfall was received which  helped replenish subsoil moisture. In parts of Oklahoma,  heavy rainfall brought up to 10 inches of precipitation  to cotton-growing areas. Although beneficial rainfall was received, droughty conditions remained problematic in the Panhandle and for some southwestern  counties. Planting expanded throughout the state.

West Texas  

Spot cotton trading was slow. Supplies were heavy. Demand was light. Average local spot prices were lower.  Producer offerings were light. No forward contracting was reported. Trading of CCC-loan equities was inactive.  Foreign mill inquiries were steady and mostly for off-grade qualities. Interest was best from China, Korea, Taiwan,  and Turkey.

 Planting was delayed because of rainfall (a trace to three inches) and cooler temperatures (mostly in the 60s  and 70s). Fieldwork continued on drier acreage with most producers building rows and pre-watering ahead of  planting. Some organic producers began to plant on irrigated acreage. Dryland producers continued to wait on a  planting rain before commencing sowing operations. Although sporadic rainfall was received, droughty conditions  proved problematic for dryland producers and continued to delay planting activity.

Western Markets

Desert Southwest (DSW)

Spot cotton trading was inactive. Supplies and demand were light. Average local spot prices were lower. Producers  were disappointed as ICE December futures drifted lower in the period. No forward contracting or domestic  mill activity was reported. Foreign mill inquiries were slow and mostly for any off-grade qualities.

Planting neared completion in Arizona, New Mexico, and El Paso, Texas. Local experts reported that the crop  progressed normally in Yuma, Arizona. The first pin-head squares were sighted in some early-planted fields.  The crop made good progress throughout the region.

San Joaquin Valley (SJV)  

Spot cotton trading was inactive. Supplies were moderate. Demand was light. Average local spot prices were  lower. No forward contracting or domestic mill activity was reported. Foreign mill inquiries were light for current  and new-crop cotton. Shippers were hoping China would have new or additional import quotas in place  soon, which would revive demand.

Clear, warm days allowed planting to continue without interruptions. Several Valley locations reported good  seedling emergence and vigor. This year’s final snow survey showed that the Sierra Nevada Mountain snowpack  stood at 40 percent of average for this time of year.

American Pima (AP)  

Spot cotton trading was slow. Supplies were moderate. Demand was light. Producer offerings were moderate.  Average local prices were lower. AP prices were under pressure as ICE future prices weakened. No forward  contracting or domestic mill activity was reported. Foreign mill inquiries were light for current and new-crop  cotton.

 Planting was virtually completed in the Far West. The crop made good progress under ideal conditions  throughout the region. No insect pressures were reported.

Textile mill  

Domestic mill buyers purchased a moderate volume of color 42 and 51, leaf 5 and better, and staple 34 and longer  for July through September fill-in needs. Mill buyers also inquired for a moderate volume of color 53 and better,  leaf 5 and better, and staple 32 and longer for October delivery. Most mills operated on a five-to-seven day  schedule. Demand for open-end yarn was moderate; ring-spun demand had improved. The undertone from mill  buyers remained cautious as they attempted to balance raw cotton needs with intermittent additional finished  product orders.

Inquiries through export channels were moderate. Representatives for mills in Japan and Taiwan purchased  a moderate volume of color 31, leaf 3, and staple 36 for May/June shipment. Additional demand centered around  any discounted or low-grade styles of cotton.

 Regional Price Information

Southeastern Markets

 No trading activity was reported.

South Central Markets  

North Delta

 No trading activity was reported.

South Delta

 No trading activity was reported.

Southwestern Markets  

East Texas

 In Texas, a moderate volume of color 11, leaf 2 and 3, staple mostly 36, mike averaging 45.2, strength  averaging 30.1, and uniformity averaging 81.5 sold for around 78.50 cents per pound, FOB warehouse  (compression charges not paid).

 A light volume of color 21 and better, leaf 2 and better, staple mostly 33, mike 51-53, strength 26-28,  and uniformity 79-81 sold for around 71.00 cents per pound, same terms as above.

 In Oklahoma, a light volume of mostly color 42, leaf 3, staple 33, mike 35-36, strength 24-27, and  uniformity 77-78 with 50 percent bark sold for around 72.50 cents, FOB car/truck (compression  charges not paid).

 A light volume of CCC-loan equities traded for around 15.00 cents.

West Texas

 A light volume color 21, leaf 2, staple 37, mike 42-44, strength 30-32, and uniformity 80-82 sold for  around 88.00 cents per pound, FOB car/truck (compression charges not paid).

 A light volume color 21, leaf 2, staple mostly 35, mike 46-48, strength 28-30, and uniformity 79-81  sold for around 80.00 cents, same terms as above.

 A light volume of color mostly 21, leaf 2, staple 32, mike 41-42, strength 26-30, and uniformity 78-79  sold for around 75.00 cents, same terms as above.

 A moderate volume of mostly color 31 and better, leaf 3 and better, staple 33 and longer, mike 25-53,  strength averaging 29.5, uniformity averaging 80.3, and all extraneous matter (a combination of seed  coat fragments and grass) sold for around 70.50 cents, same terms as above.

Western Markets

Desert Southwest

 No trading activity was reported.

San Joaquin Valley

 No trading activity was reported.

American Pima

 A light volume of color 2 and better, leaf 2 and better, and staple 48 and longer was purchased for  around 135.00 cents per pound, UD free, FOB warehouse.

 The following information was excerpted from the World Agricultural Supply and Demand Estimates,  released on May 10, 2012.

The U.S. cotton projections for 2012/13 include higher supply, demand, and ending stocks compared with  2011/12. Projected production is raised 9 percent based on Prospective Plantings and average yields. Above- average abandonment is projected at 20 percent due to continued drought on the Texas High Plains. Domestic  mill use is projected at 3.5 million bales, 100,000 bales above 2011/12.

Exports are projected at 12.0 million bales, 5 percent above last season due to the larger available supplies.  Ending stocks are raised to 4.9 million bales. The projected stocks-to-use ratio of 32 percent is well above the  last three seasons, but only slightly above the 10-year average of 30 percent. The forecast range for the market- ing-year average price received by producers is 65 to 85 cents per pound, compared with 91.0 cents estimated  for 2011/12.

The initial 2012/13 world cotton projections show record world ending stocks for the second consecutive  season, resulting from an expected 6.7-million bale surplus of production over consumption. World production  is projected 5 percent lower than last season at 116.7 million bales, with reductions predicted for nearly all major  cotton-producing countries except the United States. World consumption is expected to rise 3.3 percent due  to modest growth in both world GDP and cotton’s share of world fiber demand, as lower cotton prices relative  to polyester improve cotton’s competitive position. World trade is expected to fall 10 percent, as sharply lower  imports by China are partially offset by increases for other countries where cotton demand is projected to rise.

 China’s national reserve stocks are currently estimated at nearly 20.0 million bales. The government of China  has announced a 2012/13 support price above both the 2011/12 support price and the anticipated world  price; therefore, the reserve is likely to acquire a significant proportion of the 2012 crop. China’s government  has not indicated how it will manage the expected deficit in production relative to consumption.

 Source: USDA

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