Jeanne Reeves Cotton Incorporated June 4, 2013

Transcription

1 Jeanne Reeves Cotton Incorporated June 4, 2013

2 Cotton Incorporated s mission is to increase the demand for and profitability of cotton through research and promotion.

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4 Market Notes 2011, highest prices we ve ever seen Incredible shortages How would we get through the year? World needed cotton Record expansion in cotton area

5 Market Notes $2+ cotton, worst thing??????? Complete and total demand destruction How? Why Demand lost, or deferred Evidence points to deferred

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7 Cotton: A Index and World Stocks/Use, August 1999 May 2013 Ratio Stks/Use A Index Aug-99 Jan-00 Aug-00 Jan-01 Aug-01 Jan-02 Aug-02 Jan-03 Aug-03 Jan-04 Aug-04 Jan-05 Aug-05 Jan-06 Aug-06 Jan-07 Aug-07 Jan-08 Aug-08 Jan-09 Aug-09 Jan-10 Aug-10 Jan-11 Aug-11 Jan-12 Aug-12 May Price

8 U.S. Stocks/Use vs. Nearby Futures Settlement Price August 1995 May 2013 Cents/Lb. and Percentage Dec-95 May- Oct-96 Mar-97 Aug-97 Jan-98 Jun-98 Nov-98 Apr-99 Sep-99 Feb-00 Jul-00 Dec-00 May- Oct-01 Mar-02 Aug-02 Jan-03 Jun-03 Nov-03 Apr-04 Sep-04 Feb-05 Jul-05 Dec-05 May- Oct-06 Mar-07 Aug-07 Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May- Oct-11 Mar-12 Aug-12 Jan-13 Marketing Year U.S. Stks/Use Nearby Futures

9 Cotton Prices: A index vs. Nearby Futures Cents/Lb A Index Nearby Futures 1/2/09 2/2/09 3/2/09 4/1/09 5/1/09 6/1/09 7/1/09 8/3/09 9/3/09 10/1/09 11/2/09 12/1/09 1/4/10 2/1/10 3/1/10 4/1/10 5/3/10 6/1/10 7/1/10 8/2/10 9/1/10 10/1/10 11/1/10 12/1/10 1/3/11 2/1/11 3/1/11 4/1/11 5/2/11 6/1/11 7/1/11 8/1/11 9/1/11 10/3/11 11/1/11 12/1/11 1/3/12 2/1/12 3/1/12 4/2/12 5/1/12 6/1/12 7/2/12 8/1/12 9/4/12 10/1/12 11/1/12 12/3/12 1/2/13 2/1/13 3/1/13 4/1/13 5/20/13 Daily January 2, 2009 May 20, 2013

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11 Lower U.S. & Chinese Cotton Areas* set to Pull Total World Lower in 2013/14 India Brazil Argentina Zambia Rest of World Greece Turkey China United States -1,200-1, Thousand Acres Source: USDA. * Harvested acres

12 U.S. Cotton Area* set to Shrink in most States in 2013/14 Georgia Florida South Carolina New Mexico Kansas Alabama Virginia Arizona Louisiana Missouri California Tennessee North Carolina Oklahoma Mississippi Arkansas Texas Source: USDA. -1,200-1, Thousand Acres * Planted acres

13 Balance Sheet: U.S. Cotton Millions of 480-lb. bales 2012/ /2014* Beginning stocks Production Total Supply Mill Use Exports Ending stocks Consumption/production gap may widen further in 2013/14 Source: USDA. * Forecast

14 Balance Sheet: World Cotton Millions of 480-lb. bales 2012/ /2014* Beginning stocks Production Consumption Ending stocks Record ending stocks anticipated for 2013/2014 Source: USDA. * Forecast

15 With China s State Reserve Cotton Procurement Approaching 3.0 Million-Ton Target Million 480-lb. Bale Equivalents

16 Chinese Reserve In 2009 and 2010, China sold off 16.6 million bales. The old adage was in 15 months, they sold 15 million bales. That left their reserve alarmingly low and it left China with no way to manipulate market price. They announced in Sept. 2011, that they would build their reserve by buying from the producers at way above market price. Keep textile mills running and buy for the reserve. Even though this was announced in Sept., no cotton came into the reserve until Oct. because of price relationships. It was to end at the end of March They pulled in a substantial portion of their crop and the U.S. and India discuss later is an even bigger building of the reserve. Even before that was over, they announced their new buying plan. Price is same as prior year.

17 Chinese Reserve Chinese Put Artificial tightness How they cycle that cotton back, has questions. WTO quota 894,000 tons 1.1 million tons sliding scale quota Talk of another sliding scale quota?

18 Season-to-Date Reserve Procurement Volume* Million Metric Tons Inland Xinjiang 0.0 Source: CNCRC. Cumulative Season-to-Date Volume, as of: * Exclusive of purchases by large cotton groups.

19 Season-to-Date Reserve Auction Volume & Planned Volume Planned Volume Offtake Volume Million Metric Tons Source: CNCRC Cumulative Season-to-Date Volume, as of:

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22 India India reserve 2.5 million bales (170kg) or 1.95 million (480#) The state run CCI will oversee this reserve This may remove India as much of an exporter in future. Most mills in India only have financing for 1 month s inventory

23 Expectations for Indian Cotton Exports Double in Recent Months Million 480-lb. Bales USDA Forecasts for 2011/13 Indian Cotton Exports, as of:

24 Market Analysis Fundamental S and D Size of crop Chinese crop Indian crop World supply World economy U.S. dollar value Prices of other commodities Corn-ethanol Technical Moving averages Charts

25 Who rules More volatility Different plays Technicals are the leading indicator Fundamentals will always rule long run

26 Conclusions Looser new-crop fundamentals imply softer price outlook, globally and in the U.S. Prices fall faster than they rise What to make of China s State Reserve? India Eurozone Demand Farm bill Production costs

27 Value of Production Less Total Costs* Cotton, Wheat, Corn, Soybean Cotton Wheat Corn Soybean *Variable Costs + Fixed Costs

28 What is Cotton Incorporated Doing? Cost of Production Risk Management

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30 AFPC ACRE Decision Aid

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34 Several Cost of Production Studies India China Brazil

35 Econ of Precision Farming Survey 2013? ? Denotes year started survey

36 Distribution of Pigweed Resistance to Herbicides Across the Cotton Belt Three primary areas where pigweed resistance to herbicides was reported. Each cluster is centered around the epicenter counties where resistance was first reported: Lauderdale County, TN; Edgecombe & Nash Counties, NC, and Macon County, GA. Limited instances of pigweed resistance to herbicides was also reported in Texas.

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44 What is Cotton Incorporated Doing? Cost of Production Risk Management

45 Risk Management If you don t know costs, you cannot successfully market

46 Cotton Marketing Why is this important? No control over market price Price too high Price too low Control when/how to price

47 Cotton Marketing (Print) Deliverables: Weekly Cotton Market Planner Newsletter Cotton Marketing Weekly Monthly Cotton Market Comments

48 Cotton Marketing (Radio) Why is this important? Weekly cotton wrap-up KFLP out of Floydada, TX Monthly Ag. Market Network Ag. Market Roundtable All available on

49 Cotton Marketing (Seminars) Why is this important? It s face to face Instant Q & A Attendance

50 Thank you