November 11 2014

Traders were not surprised by yesterday’s modest hike in avg. U.S. cotton yield (797 lbs. vs 790 last month) which pushed the production estimate for the November WASDE report to 16.4 million bales from 16.26 million last month. That’s less than a 1% increase (to 16.4 million bales).

However, with export sales YTD running 600,000 bales ahead of the pace needed to warrant USDA’s current export forecast of 10 million bales, few analysts were expecting today’s hike in ending stocks to 5.1 million bales from last month’s 4.9 million. Most expected a hike in exports would more than cover any slight increase in the production estimate.

As for USDA’s forecast range for average farm price, they narrowed it 1 full point at both ends, to 56.0 to 64.0 cents per lb and a midpoint of 60 cents; the same as last month.

Globally, the seeming never-ending uptrend in projected ending stocks continues; albeit only a modest hike this month. USDA raised estimated beginning stocks by 170,000 bales, hiked global production by 240,000 bales and raised expected global use by just 17,000 bales for a net increase of about 250,000 bales – to 107.36 million from last month’s 107.11 million.

That’s less than a 1% increase, but stocks that high represent an 11.5-month supply to be left over at the end of the marketing year. Even if you exclude China’s stocks and usage due to their reserve policy, global stocks-less-China would still represent over a 7-month supply at current rates of global usage-less-China.

And with said stocks not considered to be “getting tight” unless they fall below a 90-day supply, the U.S. and global cotton fundamentals can only be seen as bearish unless there is a substantial reduction in global acreage and stocks in store for 2015-16. (Source: