CN206 March 12, 2010 Spot cotton quotations averaged 114 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 26.5-28.4, uniformity 81) in the seven designated markets averaged 74.24 cents per pound for the week ended Thursday, March 11, 2010. The weekly average was down from 75.38 cents reported last week, but up from 37.59 cents reported the corresponding period a year ago. Daily average quotations ranged from a high of 75.66 cents on Friday, March 5 to a low of 72.55 cents on Thursday, March 11. Spot transactions reported in the Daily Spot Cotton Quotations for the week ended March 11 totaled 22,944 bales, compared with 28,381 bales last week and 32,609 bales a year ago. Total spot transactions for the season were 798,971 bales, compared to 753,955 bales the corresponding week a year ago. The ICE May futures settlement prices ended the week at 78.77 cents compared to 81.82 cents reported last week. Prices are in effect from March 12-18, 2010 Adjustment World Price (AWP) 68.21 ELS Competitiveness Payment 11.97 Loan Deficiency Payment (LDP) 0.00 Fine Count Adjustment 2008 Crop 1.75 Coarse Count Adjustment (CCA) 0.00 Fine Count Adjustment 2009 Crop 1.55 Source: Farm Service Agency, FSA, USDA Southeastern Markets Spot cotton trading was moderate. Producer offerings were moderate. Demand was light. Average local spot prices were lower. Supplies were light. Trading of CCC-loan equities was moderate. Fieldwork was limited early in the period as many fields remained inaccessible, due to standing water and soggy conditions. Producers shredded stalks and plowed fields that were dry enough to support equipment in preparation for spring planting. Outside activities were further delayed as wet weather returned to the region late in the week and brought several inches of precipitation to cotton-growing areas from Alabama to the Carolinas. A period of dry weather is needed to allow fieldwork to expand in preparation for spring planting. Several gins in south Alabama and many in Georgia remained on gin days as they waited to receive cotton from the last isolated fields that remained to be picked. South Central Markets North Delta Spot cotton trading was moderate. Supplies were light. Demand was moderate. Average local spot prices were lower. Trading of CCC-loan equities was slow. Temperatures fluctuated widely throughout the reporting period. Daytime temperatures were in the upper 50s to the mid 70s and nighttime temperatures were in the low 20s to low 50s. A series of fast moving frontal systems brought more rain, mixed with brief periods of clear weather. Precipitation totaling about one and one-half inches was reported in most areas. Soil moisture was rated at mostly surplus. Most fields had areas of standing water and some low-lying fields, especially those close to levees, were completely flooded. Producers looked for a period of warm, dry weather to firm cold, saturated soils. No outside activities were reported. South Delta Spot cotton trading was inactive. Supplies were light. Demand was light. Average local spot prices were lower. Trading of CCC-loan equities was inactive. Overnight temperatures in the upper 20s and low 30s were about 10 degrees below average. Daytime highs in the upper 60s were about 10 degrees below average. Rain showers produced up to three-quarters of an inch of moisture. Many fields had areas of standing water and some fields were completely flooded. No fieldwork was accomplished due to the cold, wet soil conditions. Some producers reported that they would shift some corn acres to cotton, as a result of the unfavorable planting conditions. No outside activities were reported. Southwestern Markets East Texas/Oklahoma Spot cotton trading was moderate. Producer offerings were moderate. Demand was moderate. Average local spot prices were weak. Supplies were moderate. Trading off CCC-loan equities was slow. Portions of east Texas received around one-quarter to one-half of an inch of light scattered precipitation during the period and daytime temperatures were in the high 60s to low 70s. Land preparation for spring planting continued to be delayed throughout central and east Texas due to lingering wet weather. A period of breezy and sunny conditions is needed to help soft soils to firm. More favorable weather prevailed in south Texas and planting was underway in areas of the Coastal Bend and Rio Grande Valley. Cotton seedbed preparations were underway in Oklahoma. West Texas Spot cotton trading was slow. Supplies and demand were light. Average local spot prices were lower. Trading of CCC-loan equities was slow. No forward contracting or domestic mill activity was reported. Wind advisories were in effect for the region late in the period. Daytime highs were in the mid 60s, with nighttime lows in the high 30s to mid 40s. Scattered showers delivered traces of rainfall with the San Angelo area receiving just over one-tenth of an inch. The week ended with isolated showers and some snow into the South Plains. Producers resumed with fieldwork applying fertilizer and pre-plant chemicals in between rain events. Western Markets San Joaquin Valley (SJV) Spot cotton trading was inactive. Supplies were light. Demand was steady. Average local spot prices were steady. Foreign mill inquiries were lower. Domestic mill inquires increased. Interest was best for color qualities 32 and 41. Winter weather kept temperatures in the mid 50s and produced light showers in the Valley. Rainfall accumulations were around one-tenth of an inch and mostly in the southern Valley. Snowfall was also recorded in the southern Sierra Nevada Mountain range. Fields were ready with planting beds. Producers were applying aerial herbicides. Desert Southwest (DSW) Spot cotton trading was inactive. Supplies and demand were light. Average local prices were lower. Temperatures averaged in the high 50s for most of southern Arizona. Approximately one-half of an inch of rain was recorded for central Arizona early in the reporting period. The Yuma, Arizona area received almost one-half of an inch of rainfall. Moderate temperatures in the mid 60s to mid 70s were the norm for New Mexico and El Paso, Texas and traces of rain were received. These areas received traces of rain. Extreme windy conditions followed after light showers. Wind advisories were posted late in the period for parts of New Mexico and El Paso, Texas. Industry representatives reported loss of sub-soil moisture. Fields were ready for planting which could begin in seven to ten days. American Pima Spot cotton trading was inactive. Supplies were light. Demand was steady. Average local spot prices were steady. Foreign mill inquiries were steady. Pre-plant preparations were completed. Textile mill report Buyers for domestic mills purchased a light volume of color 31, leaf 3, and staple 35 for April through July delivery. Domestic mill buyers also purchased a moderate volume of color 41 and 51, leaf 5 and better, and staple 32 and longer for April through December delivery. Demand for additional raw cotton for fill-in needs developed as finished product orders increased. Most mills operated on a five-to-seven day schedule. Inquiries through export channels were moderate. Several merchants reported that higher ICE futures prices and competitively priced foreign growths made sales difficult to consummate. Demand was best throughout the Far East for any type of discounted styles of cotton. USDA ANNOUNCED SPECIAL IMPORT QUOTA #88 FOR UPLAND COTTON March 11, 2010 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 March 18, 2010, allowing importation of 15,235,940 kilograms (69,978 bales) of upland cotton. Quota number 88 applies to upland cotton purchased not later than June 15, 2010 and entered into the U.S. not later than September 13, 2010. The quota is equivalent to one week's consumption of cotton by domestic mills at the seasonally-adjusted average rate for the period November 2009 through January 2010, 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. Southeastern markets * Even-running lots containing color 31 and 41, leaf 2 and 3, staple 35, mike 35-49, strength 28- 30, and uniformity 79-81 sold for around 80.25 cents per pound, FOB car/truck (Rule 5, compression charges paid). * A moderate volume of color 31 and 41, leaf mostly 3 and 4, staple 34 and longer, mike 43-49, strength 29-31, and uniformity 80-82 sold for around 78.75 cents, same terms as above. * A moderate volume of color mostly 31 and 41, leaf 3-5, staple 34 and longer, mike 35-49, strength 27-29, and uniformity 78-80 sold for 76.00 to 76.25 cents, same terms as above. * Similar lots sold for 375 to 425 points off ICE May futures, same terms as above. * A moderate volume of CCC-loan equities traded for 15 to 26 and one-quarter cents. South Central markets North Delta * A heavy volume of color 41 and better, leaf 5 and better, staple 34 and longer, mike 35-49, strength 27-32, and uniformity 78-82 sold for around 78.25 cents per pound, FOB car/truck (Rule 5, compression charges paid). * A light volume of CCC-loan equities traded for around 21 cents. South Delta * No trading activity was reported. Southwestern markets East Texas/Oklahoma * In Oklahoma, a moderate volume of color mostly 31 and better, leaf 4 and better, staple 33-35, mike 35-49, strength 27-29, and uniformity 79-81 sold for around 72.75 cents per pound, FOB car/truck (compression charges not paid). * A moderate volume of color 41, leaf 5 and 6, staple 35 and 36, mike 30-35, strength 27-29, and uniformity 79-81 sold for around 66.25 cents, same terms as above. * Mixed lots containing color mostly 41, leaf 4 and 5, staple mostly 34 and 35, mike 32-38, strength 26-28, and uniformity 78-80 sold for around 64.50 cents, same terms as above. * A light volume of color mostly 41, leaf 5-7, staple 37 and 38, mike 30-37, strength 32-34, and uniformity 81-83 sold for 58.00 to 58.50 cents, same terms as above. * A light volume of CCC-loan equities traded at around 18 and one-quarter cents. West Texas * A light volume of mostly color 31 and 41, leaf 4 and better, staple 33 and longer, mike average 27-36, and strength averaging 28.0 traded for around 66.00 cents per pound, FOB car/truck (compression charges not paid). * Mixed lots containing mostly color 31 and better, staple 35 and longer, mike 35-48, strength 30.0, with 75 percent extraneous matter (grass and cracked seed) sold for around 74.00 cents, same terms as above. * A moderate volume of CCC-loan equities traded for around 18 cents. Western Markets San Joaquin Valley * No trading activity was reported. Desert Southwest * No trading activity was reported. American Pima * No trading activity was reported. The U.S. cotton estimates for 2009/10 include higher domestic mill use and lower ending stocks this month. Production and exports were unchanged. Domestic mill use was raised 100,000 bales to 3.5 million, reflecting higher consumption in the months of November through January. Ending stocks were forecast at 3.2 million bales, 20.6 percent of total use. The range for the marketing-year average price received by producers was raised 1.5 cents on the lower end and 0.5 cents on the higher end to 60.50 to 65.50 cents per pound. A combination of slightly lower production and slightly higher consumption was reducing forecast world cotton 2009/10 ending stocks from last month. Production was reduced for China and Uzbekistan, but raised for Brazil and Turkmenistan. Consumption estimates were raised for Turkey, Vietnam, and the United States, partially offset by a reduction for Pakistan, which was based on a recent policy change to limit yarn exports. World trade was raised two percent, reflecting higher imports by China, Turkey, and Vietnam, which more than offset a decrease for Pakistan. World stocks were reduced nearly 700,000 bales, a decline of just over one percent from last month. The following information was reported by the International Cotton Advisory Committee, (ICAC) released March 1, 2010 Cotton Prices Surge in February Cotton prices increased sharply in February 2010. The Cotlook A Index rose from 75.35 cents per pound on February 1 to 85.55 cents per pound on February 26. Cotton prices were supported by strong fundamentals: reduced production and rebounding mill use are expected to generate a 15 percent drop in global cotton stocks. Based on the expected change in the ratio of ending stocks to use outside China and the average Cotlook A Index to date, the ICAC Price Model is projecting the 2009/10 Cotlook A Index at 74 cents per pound, 21 percent higher than in the preceding season. The 95 percent confidence level extends from 69 cents to 79 cents per pound. The daily Index could remain above 80 cents per pound for some time, but competition with polyester and the expected increase in 2010/11 cotton production could cause prices to return to lower levels for the last few months of the 2009/10 season. Higher prices paid for 2009/10 cotton, combined with the recent decline in prices of grains and oilseeds and relatively stable production costs, will encourage farmers to increase cotton plantings in 2010/11. World cotton production is forecast to rebound by 10 percent to 24.4 million tons. World cotton mill use is expected to continue to recover in 2010/11, growing by 3 percent to 24.8 million tons, driven by continued improvement in global economic growth. World cotton trade is projected to increase slightly in 2010/11 to 7.5 million tons. A small reduction in cotton ending stocks is expected in 2010/11. The following information was excerpted from the Cotton and Wool Situation and Outlook Report, released March 11, 2010, by the Economic and Research Service. .S. Net Textile and Apparel Imports Decline in 2009 U.S. net textile and apparel trade decreased in calendar year 2009 for the second consecutive year for all fibers. Total fiber product imports reached 16.2 billion raw-fiber-equivalent pounds in 2009, the lowest since 2006 when a similar amount was imported. Meanwhile, fiber product exports continued its decline to 3.1 billion pounds, the lowest in 15 years. As a result, net fiber product imports were only 13.1 billion pounds in 2009, nearly 7 percent below 2008 and the lowest in 5 years. Cotton products continued as the largest component of net textile trade in 2009, accounting for 56 percent of the total. Manmade fiber contributed 38 percent, while the other fibers combined for the remaining 6 percent. In 2009, U.S. cotton product imports declined 10 percent to 8.8 billion pounds, while textile exports decreased nearly 19 percent to 1.5 billion pounds, reducing net cotton product imports to 7.3 billion pounds and the lowest since 2004. Domestic Outlook U.S. Cotton Supply Unchanged; Demand Revised Slightly The U.S. cotton crop for 2009/10 remains estimated at 12.4 million bales (upland at 12 million bales and extra- long staple (ELS) at 390,000 bales), compared with last season’s 12.8-million-bale production. USDA will release final production estimates for the 2009 season on May 11th. Based on the current production estimate and beginning stocks of 6.3 million bales, this season’s U.S. cotton supply totals 18.7 million bales, 18 percent below 2008/09 and the lowest since 1998/99. While the cotton supply was unchanged in March, the 2009/10 U.S. cotton demand projection was revised slightly, the U.S. mill use estimate was increased while the export forecast was unchanged. Total U.S. cotton demand is currently forecast at 15.5 million bales, 8 percent below 2008/09 and the lowest since 1998/99?s 14.7 million bales. U.S. cotton mill use in 2009/10 was raised 100,000 bales this month to an estimated 3.5 million bales, as recent data have indicated some rebound in cotton mill use. One measure of improvement is the reduction in textile inventories relative to shipments. As illustrated, the inventory-to-shipments ratio has declined dramatically from a year earlier and is back in the ?normal? range. While inventories have been reduced over the past year, a recent rebound in the seasonally adjusted annual rate (SAAR) of monthly cotton consumption also has been noted. Based on data from the latest three months (November 2009-January 2010), the SAAR has averaged over 3.6 million bales; for the August-January period, the SAAR has averaged above 3.4 million bales. Despite the recently improved mill activity, 2009/10 cotton mill use remains below last season and is still expected to be at its lowest in nearly 115 years. Stocks To Decline; Season-Average Price Higher With 2009/10 U.S. cotton demand projected to be above production, stocks are expected to decrease for the second consecutive season. In 2009/10, U.S. ending stocks are currently projected at 3.2 million bales, about half the level of last season. In addition, the implied stocks-to-use ratio is estimated near 21 percent for 2009/10, compared with approximately 38 percent for 2008/09. As a result, upland cotton farm prices are expected to be higher than a year ago. The average farm price for 2009/10 is currently forecast to range between 60.5 and 65.5 cents per pound, compared with the 2008/09 average of 47.8 cents per pound. U.S. Retail Cotton Consumption Continued Lower in 2009 U.S. domestic cotton consumption (mill use plus net textile imports) declined for the third consecutive calendar year, reaching only 8.9 billion (raw-fiber-equivalent) pounds in 2009. The latest decrease represented an 11- percent reduction from 2008, which followed a 7-percent decline a year earlier. The 2009 decrease was largely the result of lower cotton product imports, as U.S. mill use and product exports, while both lower, were nearly offsetting. U.S. imports reached 8.8 billion pounds in 2009, their lowest since 2003; meanwhile, product exports slipped to 1.5 billion pounds, their lowest since 1996. Consequently, the per capita estimate of retail consumption also fell in 2009 to a 17-year low of 29 pounds per person. International Outlook Global Production Down in 2009/10 World cotton production in 2009/10 is estimated to decline 5 percent from the previous year to 102.2 million bales. Although production increases in 2009/10 are expected in some major cotton-producing countries, such as India, Pakistan, Brazil, and Australia, production declines in other countries are expected to more than offset the gains. In 2009/10, China’s cotton production is estimated to decline 14 percent from the previous year to 31.5 million bales. In that same period, Uzbekistan is expected to reduce production 11 percent to 4.1 million bales, while the United States? crop is estimated to have declined 3 percent from a year earlier. The reduction in 2009/10 global cotton production is driven in large part by the 2008 financial crisis and rising production costs that reduced area devoted to cotton. World cotton area in 2009/10 is estimated at 30.4 million hectares, down 1 percent from the previous year and the lowest area in more than two decades. With the exception of India, most major cotton- producing countries, such as China, Brazil, and Uzbekistan, have decreased area in 2009/10. The African Franc Zone is also expected to reduce area 8 percent to 1.4 million hectares in 2009/10. Global yields are estimated at 733 kg/ha, down 4 percent from 2008/09. World Cotton Trade Expected to Recover in 2009/10 World cotton imports in 2009/10 are estimated at 34.4 million bales, up 15 percent (4.4 million bales) from a year earlier. Significant rebounds are expected in major cotton importing countries, such as China, Pakistan, and Turkey. China is expected to increase its 2009/10 imports 36 percent to 9.5 million bales from the previous year. If realized, China’s expected imports are a further sign that the impact of the 2008 financial crisis has significantly diminished. Pakistan is expected to import 2.5 million bales, up 28 percent from the previous year. Turkey’s 2009/10 imports are forecast at 3.5 million bales, up 21 percent from a year ago. Increases in trade are also expected in Bangladesh, Indonesia, and Mexico, where cotton imports are estimated to rise, respectively, 5 percent to 4 million bales, 4 percent to 2.1 million bales, and 14 percent to 1.5 million bales from the previous year. While exports in the United States and Brazil are estimated to decline 10 percent and 27 percent to 12 million bales and 2 million bales, respectively, increases are expected for some other major cotton exporting countries. India is expected to increase its 2009/10 exports by nearly threefold to 6.1 million bales from the previous year. Australia’s exports are estimated at 1.8 million bales, up 50 percent from the previous year. Uzbekistan and the African Franc Zone are expected to increase 2009/10 exports by 30 percent and 3 percent, to 3.9 million bales and 2.3 million bales, respectively, from a year earlier. Global Mill Use Expected to Increase in 2009/10 Global cotton consumption in 2009/10 is estimated at 115.7 million bales, up 5 percent from the previous year as the global economic outlook brightens for 2010. A significant mill use increase is forecast for China, where consumption is expected to rise 8 percent from the previous year to 47.5 million bales. India is expected to consume 19.2 million bales, up 7 percent from a year earlier and the highest annual consumption on record. Cotton mill use is also expected to rise 2 percent to 11.8 million bales in Pakistan. Turkey is expected to consume 5.3 million bales in 2009/10, a 6-percent increase from a year ago. Meanwhile, 2009/10 U.S. consumption is estimated to decline 2.5 percent to 3.5 million bales. Global Cotton Prices Soar as Stocks Continue Slide in 2009/10 World ending cotton stocks in 2009/10 are estimated at 51.4 million bales, down 18 percent from a year earlier. This is the third consecutive annual decline in world stocks, and the largest year-to-year decline both in terms of size and percent seen in over a decade. Tightening global stocks have resulted in rising cotton prices as seen in figure 5. The Cotlook Far East A-index in 2009/10 is currently projected at 78 cents per pound, up 28 percent from a year ago. Rising global cotton consumption and declining production in recent years have squeezed stocks and propelled cotton prices.