COTTON DIVISION

WEEKLY REPORT
by Alex Gansch -- Vice President / Senior Trader

May 19 - 23, 2003

This past week provided little excitement or direction to the cotton trade. While many participants made their way to the American Cotton Shippers’ Association Annual Meeting in Boston, others were planning their extended Memorial Day weekend. The crop, though still behind schedule, is making good progress now as reported in this week’s progress report. For the entire US, 58 percent of the anticipated acreage has now been planted versus 44 percent last week, 66 percent at the same time last year and the five-year average of 64 percent. States that show a delay of 15 percent or more versus their respective five-year average are Arkansas, Louisiana, Missouri, South Carolina and Tennessee. Despite the continued and increasing loss of value in the U.S. Dollar, the demand for American grown cotton has actually fallen off. Weekly export sales revealed that 169,400 bales were registered to overseas buyers for the week ending May 15 or 45 percent less than during the previous week. Exports of 269,100 bales were within their anticipated range yet still 21 percent below the prior week and 3 percent under the 4-week average. The market clearly remains undecided about its direction and there is no message, which way it will ultimately move. The speculators are waiting to see which way to turn, and although their long and short positions are relatively balanced, they are leaning more towards the short side. The trade also appears to be on the sideline, and this is leaving the market locked within a 53.00- to 55.00-cent range. While the market is certainly facing crop concerns, it is equally occupied considering the serious questions
 

about demand. Cotlook's Cotton Outlook cut its consumption forecast for the 2002/2003 season this week by 92,000 metric tons to 21,067,000 tons, as announced this past Thursday. In its May world supply/demand report, Cotlook said that doubts as to the robustness of raw cotton consumption have increased. This is because world textile trade appears to have been impacted by the weakening U.S. dollar and the effect of severe acute respiratory disease.

At the same time, U.S. Pima growers in California are beginning to feel better about their young crop. The past week has provided nearly ideal conditions and although it is evident that this year’s production will very likely be harvested later than usual, the potential for a successful season has been resurrected. It remains to be seen, if and how the weather will permit the plants to develop from hereon forward while growers are still withholding fresh offers from the marketplace. The question on everybody’s mind is not so much when new crop offerings will resume, however, at what level as the answer will very strongly shape the level of activity from this point onwards. Weekly exports reflected only modest increases in US commitments by 4,400 bales for the current crop year to 596,000 b/c total and 1,100 bales for the new season to 54,600 b/c, which is still well above last year’s level of only 20,100 b/c at the same time. Meanwhile, the USDA accepted bids on another 21,666 bales of previously forfeited 2001/2002 crop California Pima, which left merely 231 b/c of that particular catalogue unsold and only 7,000 bales in total of this particular crop year. The USDA has published its most likely final catalogue today for these 7,000 bales, with bids due by June 3, 2003. Outstanding LOAN inventory of 2002/2003 crop Pima currently stands at 140,000 bales.

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