USDA Report Boosts Cotton Futures

Cotton prices have surged the past couple of days. Cotton Incorporated economist Jon Devine says last week’s revised USDA forecast is what likely drove that increase…

“The report featured a 10% reduction in the US crop number which dropped the projected harvest from 14.5 to 13.1 million bales. Behind the reduction was lower planted acres, increased abandonment and reduction in estimated yields. It is not uncommon for their to be significant revisions in August because the USDA transitions from analysts based estimates to those built off of field surveys. Substantial revisions could be expected due to heavy rainfall throughout the cotton belt this spring and how it would affect planting and yields.”

Devine says revisions were also made by USDA to cotton export figures…

“The old crop estimate was slightly increased. This lowered carry out into the 2015 season. For the new crop year, the export figure was lower in response to the big drop in the production number. The decrease in the harvest number was larger than the reduction in exports and implies a decrease in ending stocks. The current forecast for ending stocks is tight and likely to generate that prices need to pick up a bit. This month’s changes do alter the outlook for prices.”

While US stocks look to be limited, there is still a lot of cotton in other countries…

“China can supply the country with cotton from its warehouses for nearly two years without growing or importing any cotton. India still has some of last year’s cotton and must work that into the market before the next crop is collected. Production forecast for both China and India decreased. In China it was tied to excessive heat and in India to delays in planting. While lower global production forecasts are helpful for the price outlook it will likely take a sustained increase in global demand to get prices back up.”

That’s Cotton Incorporated economist Jon Devine.

 


A native of the Texas Panhandle, Rhonda was born and raised on a cotton farm where she saw cotton farming evolve from ditch irrigation to center pivot irrigation and harvest trailers to modules. After graduating from Texas Tech University, she got her start in radio with KGNC News Talk 710 in Amarillo, Texas.