Cotton Incorporated economist Jon Devine reports that for the most part, the U.S. cotton crop has held up fairly well in the wake of the two most recent hurricanes, Harvey and Irma…
“A few percentage points have migrated out of the good or excellent categories, and few more have show up in the poor or very poor ratings, but we still have more than 60% of the crop rated either good or excellent, and that ranks our ratings as the highest in nearly a decade.
“For comparison; when yields were pretty good and quality was great, we only had 48% of the crop rated good or excellent at this time of year.
“At present, we’ve had a little less than one million bales make it all the way through the USDA classing process. Data from classing is showing a higher percentage of the crop as having white grades than last year, but length and strength are slightly lower. USDA data indicates that about 15% of the crop has been harvested which puts us ahead of schedule relative of the five year average. However, we are slightly behind average in terms of the crop with bolls open.”
Since China started its massive sales back in March, nearly 14.5 million bales have been moved out of their inventory and into the hands of mills and traders…
“Movement of so much cotton out of Chinese reserves is healthy for a long term outlook. The Chinese could return to a higher level of imports sooner, rather than later. None the less, China still has a lot of reserves on its hands, and it could be a couple of years until China increases its imports in a meaningful way.
“China’s crop is looking to be a bigger one than last year, and a bigger harvest will not be helpful in terms of building the scarcity needed to motivate more import quota. Relative to last year, committed sales to China are up nearly 300%, that increase has been driven by the US taking market share from other exporters rather than China simply allowing more cotton in.
“A test for the market will be how well our export sales hold up after the harvest. Whether or not China will hold the export door open a little wider will a factor affecting the sales down the line.”
Cotton Incorporated economist Jon Devine.