COTTON DIVISION

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

September 16 – 20, 2002

Speculative selling coupled with continued lackluster performance and reduced volume moved the New York futures market lower throughout this past week. There was virtually no fresh news emerging from the market, allowing it to take a more decisive direction. While lower prices sparked fresh sales to a certain extent, keeping prices at a level around 45 cents for the trading month of December 2002, the still burdensome supply situation does not allow values to break out on the upside either. The U.S. Department of Agriculture crop progress report released late Monday showed almost no change from last week. The report, for the week ending September 15, showed that 19 percent of the crop was deemed in “poor to very poor” condition compared with 18 percent the previous week. Figures also showed that 53 percent of the crop remained in “good to excellent” condition, unchanged from the prior week. Meanwhile, net upland sales for the week ending September 12 totaled 179,400 running bales, or 51 percent less than the prior week, but 13 percent more than the four-week average. Actual exports of 118,800 bales were 13 percent below the previous week and 14 percent under the four-week average. Hurricane ‘Isidore’ is expected to enter the southern-central Gulf of Mexico this weekend and could bring some heavy rainfall to the Delta region next week, according to a Global Weather Services report, which may well negatively impact cotton quality should this storm affect the region in a substantial manner. Wet weather already affected the Delta through Friday of with showers and thunderstorms dumping up to at least 2.00 inches across the cotton-growing regions, leading to further worries over conditions of open bolls in the Delta. The Southeast is also eyeing the storm, but current indications are that it will bypass the region to the west by next week. 

Despite hurricane ‘Isidore’ and continuous questions about the large discrepancy of ending stocks between the USDA figures and the Census Bureau, prices simply have not been able to pick up much steam. We are of the opinion that the market will not fall substantially below 45 cents and instead find proper justification to move beyond 50 cents by early next year.

Pima farmers are finishing their present fieldwork, spraying for whiteflies and aphids to avoid a repeat of last year’s disastrous situation, while treating few fields with defoliants. The fist round of picking in the Southern end of the San Joaquin Valley is expected at the end of the first half of October with actual shipments to commence late October or more realistically early November. The far majority of Pima fields are showing good progress with open bolls and good boll retention. Daily temperatures have remained in a range from normal to several degrees above normal. What if any impact the pending strike of the Los Angeles harbour workers will have on exports remains to be seen.  The situation remains tense and although negotiations continue, it is doubtful that a solution is imminent, though not impossible. Pima export sales gained modest speed with new sales for the week ending of September 12 of 7,200 bales, bringing the cumulative total to 180,000 bales for the current season. The official opening of the Egyptian season has so far had just as little impact on US Pima prices as last week’s reduction of current season production of 60,000 bales. It remains, however, very frustrating to US growers’ sales efforts that the ‘official’ prices announced by the Egyptian officials once again do not reflect the ‘actual’ level of sale prices, which seem to stand 2 to 4 cents lower. Until the Cotton Outlook publication, the unofficial basis for the USDA ELS step 2 calculation recognizes this practice, the one tool in US farmers’ hands to entice sales of their harvest will remain ineffective.  

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