Cotton: Pre-USDA estimates
This report is devoted to the world aspects of the upcoming USDA-WAOB release due out Fri, Dec 10 at 8:30 AM EST. Production in India and Pakistan may see changes in light of weather and/or arrivals whereas additional demand rationing should be evident by way of cuts to usage in the Far East and possibly Pakistan. The recent 25 cent rally in the March contract may be “pricing in” in additional friendliness in the USDA numbers or could prove to be a bear trap.
2010/11 World Cotton Production – I am lowering global production to 115.3 mln bales, a decrease of 1.4 mln bales due to part to a reduction in the US as discussed in my last report. Outside the US, arrivals continue to be disappointing in Pakistan as the full brunt of this year’s floods become clearer. Data as of Dec 1 show a total figure of 8.36 mln local bales vs a year ago of 10.45 mln, a decline of about 20%. Unless arrivals recover over the next 2-4 weeks, production is going to be shorter and perhaps by as much as another mln bales from the USDA figure of 9.1 mln 480-lb bales. I am easing my estimate down by 400K to 8.6 mln 480-lb bales. India is also experiencing lower arrivals as intermittent rainfall is enough to slow down harvest. As of Dec 5, arrivals stood at 7.02 mln locals bales, 3.8% below a year ago. Despite the delays, I am holding my production estimate at 27 mln 480-lb bales. When weather has cleared off in the past two weeks, daily arrivals have jumped especially out of the Central Zone. For instance, Cotlook indicated today daily figures were in excess of 200K. Whether the USDA raises its 26 mln bale figure is unknown, they have been very slow in bringing India’s crop number up the past few months and the slow pace of arrivals may prompt them to wait another month. Moving onto China, I am leaving them at 29.5 mln bales vs last month’s reduction to 30 mln. I continue to hear internal reports of a sub-29 mln figure but Washington may need something definitive such as an Ag Attaché report or a new update from the CCA before cutting their crop estimate. I am leaving my estimate for Uzbekistan at 5.0 mln but Cotlook cut their figure recently so the WAOB may do as well but any reduction should be modest 100-150K bales. Reports from various southern hemisphere countries not only show an increase in area but a huge jump. A substantially higher number is already known in the larger countries such as Australia, Brazil, etc but there are many small countries that will have a sizeable impact to area as they cash in on cotton’s record price. Weather is proving to be problematic in Australia with excessive rains. Almost all dams are full and there are concerns of levees being broken due to high river water levels. Some seedling disease is occurring as well resulting in a poor start in some instances to the crop. If weather improves quickly and no other problems occur during the growing and picking season, then yields may not be impacted. However, additional rain is in the forecast causing new worries for countries weather has been mixed but with fewer problems although rainfall has been erratic and worries re: La Nina will continue with grains, soybeans and cotton. Despite concerns with Australia, I am bumping up the “Others” which includes the southern hemisphere by 300K to 27.3 mln bales.