Cotlook “A” Index: 91.70 (-0.10)
DTN Cotton Close: Finishes Mixed Ahead of Export Report
By Duane Howell DTN Cotton Correspondent
February 28, 2018 (Source: Agfax.com)
May gained 5.8% for the month. Another round of healthy U.S. weekly export sales generally expected, though some looking for a drop from the prior week. China’s imports last month rose by 16.4% from a year ago. Cotton futures settled mixed Wednesday, up 68 points to down 13 points in traded contracts, with benchmark May up the most, as traders awaited the U.S. weekly export sales report.
May settled at 82.93 cents, its highest close since Jan. 22 and near the high of its 125-point range from down 45 points at 81.80 to up 80 points at 83.05 cents. It gained 457 points or 5.8% for the month. Maturing March closed down 11 points to 81.65 cents, July finished up 50 points to 83.29 cents and December edged up six points to 77.11 cents after hitting another new contract high at 77.50 cents. The last trading day for March is next Wednesday. Volume increased to an estimated 34,200 lots from 26,364 lots the prior session when spreads accounted for 9,703 lots or 37%, EFS 177 lots and EFP 35 lots. Options volume quickened to 13,386 lots (9,043 calls and 4,343 puts) from 7,036 lots (2,674 calls and 4,362 puts).
The USDA’s export report on Thursday is generally expected to show another round of healthy sales after those of the prior week topped expectations for the umpteenth time this season. Still, some traders expect net upland sales for the week ended Feb. 22 to slow from the prior week’s 399,100 running bales, which were up 40% from the previous four-week average. Prices during that latest reporting week ranged from 76.47 to 80.52 cents, basis May, hitting the highest intraday price at the time since Feb. 1.
The four-week average of net upland sales is 367,400 RB. All-cotton commitments are within roughly 681,000 RB of the USDA export estimate. Upland shipments the last four weeks have averaged 348,900 RB. Movement of a backlog of Texas High Plains cotton booked for export has been hampered by short truck and rail supply availability, sources said.
China, the leading export customer of U.S. cotton thus far this season, imported 133,747 metric tons of cotton (614,289 480-pound bales) in January, up 33.7% from the prior month and 16.4% from a year ago, according to custom figures released earlier this week. Imports for the first six months of the 2017-18 marketing year have totaled 560,536 tons (2.574 million bales), 51% of the latest USDA forecast. Through Feb. 15, China had booked 2.33 million statistical bales of U.S. cotton for shipment this season, 17% of the sales to all destinations.
China is scheduled to resume its auctioning of government-held stocks in March. While sales in 2017-18 are expected to be well below last season’s 14.3 million bales, government stocks are projected to fall to the lowest since a price support program backed by purchases for the national reserve was introduced in 2011.
Futures open interest increased 198 lots to 259,538 on Tuesday, with March’s down 18 to 113, May’s down 1,041 lots to 128,903 and July’s up 1,041 lots to 58,126. Certified stocks grew 234 bales to 103,640. Awaiting review were 437 bales at Galveston. (Source: Agfax.com)
Cotton prices sharply up on strong demand
RECORDER REPORT | 1 March, 2018 (Source: Business Recorder)
KARACHI: Strong demand for quality lint pushed the rates sharply up on the cotton market on Wednesday in the process of modest trading, dealers said.
The official spot rate after maintaining a stable trend, went up by Rs 100 to Rs 7000, they added. In Sindh and the Punjab, seed cotton prices were at Rs 2400-3000, they said. In the ready session, approximately, 5000 bales of cotton changed hands between Rs 7000-7400, they said.
According to the market sources, prices gained momentum on fresh buying interest by the spinners to replenish their stocks. As a whole, tone is firm as the cotton season nears its close. The rising trend on the world's leading cotton market played an important role in keeping prices steady in the local market, some experts said.
Cotton analyst, Naseem Usman said that small spinners were conspicuous by their absence because most of them have covered their long position.
Cotton prices were almost firm in the international markets, as in India, Shankar-6 gained Rs 1000 to Rs 40800 per candy (356 kg), J-34 rose by Rs 200 to Rs 39700 and MECH-1 gained Rs 600 they said. The following deals reported: 3900 bales of fine cotton from Sadiqabad done at Rs 7400, 600 bales from Khanpur at Rs 7275 and 200 bales from Rajanpur at Rs 7000, they said.
(Source: Business Recorder)
COTLOOK’S INITIAL SUPPLY AND DEMAND FORECASTS FOR 2018/19
by Stamatis Kouroudis | March 1, 2018 (Source: thrakika.gr)
Cotton Outlook forecasts world production in 2018/19 at 26,126,000 tonnes, marginally lower than in the current season. The area devoted to cotton next season is expected to increase modestly. However, a return to yields closer to the recent average, rather than a repeat of the excellent outcomes seen in 2017/18, is anticipated and has resulted in the lower figure. Global consumption is expected to increase by around 2.6 percent, to 26,709,000 tonnes. Growth is anticipated in some major consuming countries, including China, India, Bangladesh and Vietnam. The rise is mainly owing to continued investment and increased capacity.
As a result, world stock levels are expected to contract. The overall fall is once again attributable to China, where a decline of 1.84 million tonnes appears in prospect. Stocks outside that country are expected to rise by 1.258 million tonnes. Global stock levels are therefore expected to decrease by 583,000 tonnes. (Source: thrakika.gr)
Gins seeing record cotton crops
Hanaba Munn Welch, | For the Times Record News
Feb. 24, 2018 (Source: timesrecordnews.com)
Cotton gins and their perfunctory water towers once gave credibility to the skylines of many rural communities across North Texas and Southwest Oklahoma. Some still do. But many of the hulking structures are now shells of their former selves – no longer operational. It’s progress.
Many of the gins that once sent the sounds and dust of their industry into the air, day and night, are now dark and silent. Cotton still rolls into gins across the region – just not into as many gins. Most are cooperatives. Like mom and pop retail on Main Street, independent gins have mostly vanished, much the way retail has evolved into big-box operations. Economy of scale. But no matter the size of the gin, it’s still the same business with the same product – bales of cotton fiber, each weighing about 500 pounds or coming close.
Today’s bales are smaller and wrapped in tough plastic instead of burlap. But a bale is still a bale. Across the areas, lots of picked and stripped cotton has been rolling into gins and lots of bales have been coming out – a plus, along with livestock, for an otherwise lackluster area farm economy, although both cotton and cattle are facing tough times in 2018 for lack of moisture. In the world of ginning, Jud Byars of Wilbarger County is an independent gin owner-operator, making him an exception to the rule.
“The number of independent gins in Texas is, I would say, holding,” Byars said, taking time for an interview at the office of Fargo Gin, 10 miles north of Vernon. Staying in business depends on “how well they’re run, the commitment they’ve made,” he said. The same holds true for all sorts of gins. “Cooperatives also have to be well run,” Byars said.
It’s a business with ups and downs and breakdowns, even when the equipment is new. Byars is still working out the kinks in an off-season upgrade he made in 2017. “We had a lot of old machinery in the gin,” he said. “I thought it was time to upgrade.” Byars not only installed new gin stands but also remodeled the building to accommodate the new equipment – the machinery that separates the lint from the bolls and seeds.
He left the old brick wall that separates one end of the gin from the other, both for sentimental reasons and because tearing it down would have added one more expense to the project. Byars believes the old wall dates from the turn of the previous century, when the gin was established by three brothers who’d moved to Texas from Minnesota.
At the time they bought the land and built the gin, Fargo was making its transition from the next-to-the-last village on the cattle trail before Indian Territory to a farming town dependent on cotton. “This gin has a rich history going way, way back,” he said. Byars bought the gin in 1976 from the Wall family. They’d owned it for decades. Now his own son, Emory Byars, helps him run it. Both men also farm.
Did her ever look back?
“I’ve looked back a lot of times,” Byars said, smiling. “If I didn’t have Emory, I couldn’t do this any more.” If the day ever comes when the two men give up ginning, Fargo could turn into one more community with an abandoned gin. Meanwhile, things are humming and will be into April or May, processing the bountiful 2017 crop. “Last year we ginned 11,320 bales,” Byars said.
“That was the most we’d ever ginned. I thought farmers wouldn’t plant as many acres this year as they did last year, but they did.” The bale count at Fargo will probably reach 17,000 – another record. “We were blessed with a good crop,” Byars said. “Divinity intervened considering the hard shape farmers are in.” It was the second year for a good crop across the whole region.
At Rhineland in Knox County, the co-op gin wound up the season early in February with a bale count of 53,600, compared to 46,000 the year before. Rhineland gins cotton from Baylor, Haskell, Knox and Throckmorton counties. At O’Brien in northern Haskell County, the O’Brien Co-Op finished ginning on Feb. 12 with a count that nearly matched the total the year before – 19,310 bales compared to last year’s 19,760. O’Brien receives cotton from roughly the same area plus Stonewall County.
“It was a good crop – about the same as last year,” said Terry Utley, gin manager, working late on a February night. At Elliott in eastern Wilbarger County, just across the Wichita-Wilbarger border, Elliott Producers Gin is having a good year.
“An excellent year,” said Justin Butler, manager. “Double the production.” The gin handles cotton from both Texas and nearby Oklahoma. It’s the easternmost Texas gin along the Texas-Oklahoma border for a long stretch – from Elliott to Honey Grove, which is about 200 miles away in Lamar County.
Producers ginned 26,502 bales last year – close to the 2010 record of 27,918. This year the count was 33,757 on Feb. 15, with ginning expected to continue at least till the end of April. “We’ll finish out close to 60,000,” Butler predicted. “We’ve had good luck.
Harvest conditions have been good.” At the Farmers Co-op Gin in Vernon, the bale count was 19,641 on Feb. 15 with the gin still running long hours and module-hauling trucks still crossing the scales and ginning expected to last at least through March.
The gin yard is a typical scene: rectangular and round modules, taped and packaged in an array of colors, awaiting their turns to go into the maw of the loudly purring gin. It’s the kind of linty landscape that captures the energy of a good ginning season – a time when the forces of nature and mankind and machinery combine to boost agriculture-dependent economies. Some years it’s not much of a boost. This year it is. (Source: timesrecordnews.com)
Turkmenistan harvests over 1.1M tons of cotton
By Huseyn Hasanov – Trend
Ashgabat, Turkmenistan, Feb. 23 (Source: en.trend.az)
Turkmen farmers harvested and supplied more than 1.1 million tons of cotton in 2017, Turkmen government said in its message. Turkmen President Gurbanguly Berdimuhamedov recently ordered regional administrations to organize coordinated cooperation of structures related to the cotton harvesting and ensure promotion of agrotechnical activities.
Cotton planting in Turkmenistan usually begins in the late March. Cotton is an important export item in Turkmenistan and is a highly demanded raw material for tens of businesses in dynamically developing textile industry. Total cultivated area in Turkmenistan exceeds 500,000 hectares.
Cotton Production of Turkmenistan and World Market international fair-exhibition and conference is annually held in Ashgabat. The event is held with participation of Water and Agriculture Ministry, State Commodity Exchange and Trade Industrial Chamber of Turkmenistan. (Source: en.trend.az)
African countries ban secondhand clothes imports
African countries are trying to support their domestic textile industries, but pressure from the US and a flood of cheap clothing from China are making it difficult.
by Malcolm Webb
23 Feb 2018 (Source: aljazeera.com)
Rwanda, Tanzania and Uganda have agreed to ban second-hand clothing, mostly imported from the US and UK, in order to support their own textile industries. They hope local factories will create much-needed jobs and increase exports.
The three countries are now facing threats of trade sanctions from the US who says the ban violates free-trade agreements. Al Jazeera's Malcolm Webb reports from Uganda's capital Kampala. (Source: aljazeera.com)
USDA Crops Outlook: Expect a Change in Exports – DTN
By Chris Clayton, DTN Ag Policy Editor
February 23, 2018 (Source: Agfax.com)
USDA sees corn production down 1% and soybean production down 2% in the 2018-19 crop years as farmers won’t quite match the yields they achieved in 2017-18. USDA released various commodity outlooks on Friday morning as part of the annual Agricultural Outlook Forum. The forecasts give the first look at USDA’s projections for crops and livestock in the 2018-19 marketing year. USDA’s initial forecast for the 2018-19 crop also sees a bump in U.S. soybean exports by 200 million bushels while corn exports will fall 150 million bushels and wheat exports will fall by 25 million bushels.
USDA sees that global cotton consumption will exceed production in 2018-19 bringing global stocks down by 6 million bales, more than offsetting the increased production from 2017-18 of 900,000 bales. World production will decline by 3.6%, USDA forecasts.
U.S. cotton farmers will increase planted area 5.5% to 13.3 million acres, but USDA forecasts harvested acres will decline 0.4% from last year to 11.3 million acres. The average pounds per acre will fall 7.9% to 828 pounds an acre and the abandonment rate will increase. That will lover overall U.S. cotton production to 19.50 million bales, down 8.3$ from the 2017-18 crop.
USDA on Friday projected a 2018-19 corn yield of 174 bushels per acre, down 2.6 bushels from 2017-18 record yield. With 90 million acres planted, that projects production at 14.39 billion bushels, down 214 million bushels from the 2017-18 crop. Ethanol use would reach 5.65 billion bushels of corn and up 125 million bushels from the old crop. USDA cited higher fuel use domestically overall, as well as projected growth in U.S. ethanol exports.
Exports are projected to fall 150 million bushels to 1.9 billion bushels. Total corn use would be 14.52 billion bushels, down 75 million bushels overall. Competition from Argentina, Brazil and Ukraine are expected to limit U.S. export prospects. That would leave corn ending stocks for the 2018-19 crop at 2.27 billion bushels, down 3% from the 2017-18 crop, with stocks-to-use pegged at 15.6%. The average season farm-gate price is pegged at $3.40 a bushel.
USDA projects soybean yield for 2018-19 at 48.5 bushels an acre, down 0.6 bushels from last year’s crop. With 90 million acres planted, production is pegged at 4.32 billion bushels, down 2% from a year ago. With an old-crop carryover of 530 million bushels projected, USDA stated the combined production and beginning stocks will lead to record supplies of 4.875 billion bushels, 3% higher than 2017-18.
Domestic use is projected up 1% in 2018-19 to 2.115 billion bushels. Domestic crush is projected to increase 30 million bushels to 1.98 billion bushels with an expansion in domestic use and exports of soymeal. Crush margins are expected to grow because of a slight decline in soybean prices while prices for soybean meal and oil remain steady.
Soybean exports are projected at 2.3 billion bushels, up 200 million bushels from the 2017-18 crop. Rising global demand, along with a decline in the South American harvest, is expected to ease some competition pressures for U.S. soybeans. Global trade will continue to be driven by China, which accounts for about two-thirds of the soybean trade.
Total soybean use is projected at 4.415 billion bushels, up 227 million bushels from the 2017-18 crop. That will lower ending stocks to 460 million bushels for 2018-19 with a stocks-to-use ratio of 10.4%. The average farm-gate price will drop 5 cents to $9.25 a bushel.
Wheat production will increase by 98 million bushels, or 6% higher than 2017-18. USDA sees a 47.4 bushel-per-acre yield to go with 46.5 million acres seeded, up about 500,000 acres from the old crop. USDA bumped up overall wheat acres even though the 2018 winter wheat crop was 32.6 million acres, the lowest in 109 years.
Overall production is pegged at 1.839 billion bushels, even though USDA cites the potential of increased abandonment in the Southern Plains because of drought conditions hitting the winter wheat crop. With 1.009 billion bushels of carry-in from the 2017-18 crop, USDA sees 135 million bushels of imports and total supplies at 2.983 billion bushels for 2018-19, down 93 million bushels from the 2017-18 supplies.
Total domestic use is pegged at 1.127 billion bushels while exports for 2018-19 are projected at 925 million bushels, down 25 million bushels from last year. Wheat is expected to face strong international competition for exports as the European Union will have a larger crop and Argentina will expand wheat acres. Both Australia and Canada also are expected to have larger export supplies as well as they rebound from lower 2017-18 yields. Ending stocks for 2018-19 are expected to decline roughly 8%, or 78 million bushels to 931 million bushels. The average farm-gate price is projected at $4.70 a bushel. (Source: Agfax.com)
Optimistic Marketing – With a Dose of Caution
By: Jim Steadman |
February 22, 2018 (Source: cottongrower.com)
As the calendar turned to 2018, the cotton industry was almost giddy with optimism. Prices had moved back in to the mid-70 cent range, as demand and consumption are up around the world. And the new seed cotton program approved by Congress as part of bipartisan budget legislation on February 9, moved cotton back into the Farm Bill as a Title I commodity – and helped push the excitement level even higher.
USDA’s January World Agricultural Supply and Demand Estimates report reinforced the optimism. Although the agency lowered expectations for U.S. production to (only) 21.3 million bales with a carryover of (a mere) 5.7 million bales, the big news came in global consumption. USDA now forecasts that world consumption will grow at a 5.2% annual rate in the 2017/18 marketing year – more than double its long-run level.
Yet in spite of the excitement and optimism, Dr. John Robinson says there are still watch-outs to keep an eye on. “Officially, the USDA balance sheet for the 2017 crop looks awful,” says Robinson, AgriLife Extension economist. “We’re doubling ending stocks year over year, and it’s been that way in every report and forecast for the past six months. The fundamental conclusion from that is that price weakness is coming.
“I may be the lone voice in the wilderness on that,” he quips. “It’s wonderful now that prices have climbed to where they are, because we’re starting to establish the crop insurance price by the average of these settlements. I think that’s great, and I hope I’m wrong, and that prices will stay above 70 cents.” Increased demand should continue to drive exports higher, notes Robinson. That means the balance sheet is likely to remain neutral and help keep prices where they are. Plus, early acreage projections for 2018 peg the U.S. crop in the 12.9-13.1 million acre range.
“We’re going to plant more cotton in Texas,” says Robinson. “And it’s dry, so there will be some trade-offs in terms of production. But if we just have an average crop following a big crop in 2017, we’re going to be chewing through ample supplies. And, to my way of thinking, it just keeps the possibility of price weakness in the mix. It could come very unexpectedly, when you consider that spec buying has given us this rally since November. A major risk event could cause them to back off their positions quickly.”
Start Marketing Moves Now
With good prices on the board this early in the year, Robinson believes growers should consider hedging earlier than normal. “Even before the market rally in October and early November, the volatility in the market was actually pretty low,” he says. “Option premiums were not that high because of low volatility. I was penning examples of buying puts and put spreads on December 2018, and they were amazingly affordable considering how early and far out we are.
“If your marketing plan is to contract bales, try to do some of that at these levels,” he adds. “If you do your own hedging, consider doing some. Basically, it’s not too early, prices are at a good level now, and the future is always uncertain.” Robinson cautions, however, that any outlook is just an educated guess. Should prices drop from where they are to the lower 60s, nothing will protect producers from that loss. “This is a zone of unprotected price risk, and, with prices being good now, I would be doing something with a portion of my expected production,” he notes.
What Will China Do?
The longer term solution to market prices could come from China, where the government has been whittling down the cotton reserve they built up from 2011-2013. “There’s an emerging issue in China,” says Robinson. “And when it emerges, it’ll be positive and uplifting. They had 60 million bales in reserve, and we were all worried about what might happen when they finally started letting it move to market. They cut back on their imports and started using what they had in the reserve. They have now pulled the reserve down to 20-something million bales. And their imports have been only in the 5 million bale range for the past two years.”
At some point, Robinson believes two things are likely to happen. First of all, the Chinese are going to pull the reserve number down to a level they want to maintain. When that happens, they will still have a 14-15 million bale gap every year of excess consumption over production, and they’ll get back into the import business.
“Just as a recollection, they used to import 15 million bales annually – half of which would come from the U.S.,” recalls Robinson. “That’s when they were our number one export destination. When they get back to being the top buyer, it will lift the market. And that will be a very positive thing.” The second consideration is that the bales left in the reserve will likely need to be rotated. That translates into extra buying to cover what China wants for mill use and for what they want to store. “There’s definitely a bullish picture of the return of China as a major importer,” says Robinson. “It will step us back up to a more permanent higher level.”
Things to Remember
The year-in, year-out advice from a farm management economist still holds true moving into 2018 production, states Robinson. “Cotton is just another commodity, and we have to be the most efficient low-cost producer,” he says. “In the U.S., the only way we can be the low-cost producer is to have really good yields, but still know the worth of inputs and input purchases.
We have to be efficient across the board. “The way it’s been measured in surveys of top farmers is that the most successful people tend to be about 5% better on everything,” he notes. “They sell at a 5% higher price, and save about 5% on production. We try to cast it in a doable way. “Do small improvements across your whole operation to be the least-cost, efficient operator. It’s the only way to make it with a commodity product.” (Source: cottongrower.com)
A balancing act for the U.S. cotton market
Depending on the level of U.S. exports, the U.S. balance sheet might then be at risk of a historically large level of ending stocks. Such an outcome is generally associated with weaker prices.
John Robinson 1 | Feb 23, 2018 (Source: southwestfarmpress.com)
As the new crop season begins to take shape, we have already reached some important milestones.
The National Cotton Council released itd early season snapshot of grower intentions to plant 13.1 million acres of all cotton. The NCC then projected a supply and demand balance sheet at their annual meeting, circa Feb. 10, that suggested a healthy supply could result from such levels of planting and production.
Depending on the level of U.S. exports, the U.S. balance sheet might then be at risk of a historically large level of ending stocks (Table 1, Column 2). Such an outcome is generally associated with weaker prices.
The USDA Agricultural Outlook Forum (Feb. 23) was another anticipated milestone, and it offered a similar outlook for U.S. cotton (Table 1, Column 3). It is useful to compare and contrast these two outlooks.
First, they both have the same bearish implication for prices. If either is realized, I expect Dec’18 would have 10 cents to 15 cents of downside price risk. The timing of such weakness, while always uncertain, could be reasonably expected to weigh in when the production risk premium fades from this market, often following USDA’s September Supply and Demand report (see below). If you consider that a reasonable possibility, what steps will you take now to deal with it? A second aspect of the two forecasts in Table 1 is how they differ — mainly in their assumption about U.S. exports.
Foreign demand for U.S. cotton will be the wild card. This list of uncertain influences includes Chinese reserve stock policy, foreign production, and economic growth. Yet, I am still struck by the fact that although the NCC and the USDA differ in their U.S. export forecast by 1.7 million bales, both outlooks still result in burdensome ending stocks. Bullish developments will doubtless unfold over the next year, but it will take an extra dose of them to change the market conclusion from Table 1.
Here are some more important milestones over the next few months. In March, the USDA will survey U.S. growers for their March 31 Prospective Plantings report. In May, the USDA will revise their forecasted balance sheet of U.S. cotton, along with their first comprehensive world cotton projections for 2018/19. Then on June 30, the USDA will release their Planted Acreage report. The market will digest about six weeks of weather and crop condition information, during which time I would not be surprised to see at least one good weather rally. Finally, the USDA’s first production estimate based on field sampling (circa Friday, Aug. 10) will begin to pull back the curtain on the supply question. The USDA report in September can be influential in either confirming or contradicting what the USDA measured in the field in August. (Source: southwestfarmpress.com)