Jeanne Reeves Cotton Incorporated June 4, 2013
Cotton Incorporated s mission is to increase the demand for and profitability of cotton through research and promotion.
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
Market Notes $2+ cotton, worst thing??????? Complete and total demand destruction How? Why Demand lost, or deferred Evidence points to deferred
Cotton: A Index and World Stocks/Use, August 1999 May 2013 Ratio 120 110 100 90 80 70 60 50 40 30 20 10 0 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-13 240 220 200 180 160 140 120 100 80 60 40 20 0 Price
U.S. Stocks/Use vs. Nearby Futures Settlement Price August 1995 May 2013 Cents/Lb. and Percentage 220 200 180 160 140 120 100 80 60 40 20 0 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
Cotton Prices: A index vs. Nearby Futures Cents/Lb. 260 240 220 200 180 160 140 120 100 80 60 40 20 0 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
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 -1,200-1,000-800 -600-400 -200 0 200 400 600 Thousand Acres Source: USDA. * Harvested acres
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. -1,200-1,000-800 -600-400 -200 0 200 Thousand Acres * Planted acres
Balance Sheet: U.S. Cotton Millions of 480-lb. bales 2012/2013 2013/2014* Beginning stocks 3.4 4.0 Production 17.3 14.0 Total Supply 20.7 18.0 Mill Use 3.4 3.5 Exports 13.25 11.5 Ending stocks 4.0 3.0 Consumption/production gap may widen further in 2013/14 Source: USDA. * Forecast
Balance Sheet: World Cotton Millions of 480-lb. bales 2012/2013 2013/2014* Beginning stocks 71.2 84.78 Production 121.0 117.8 Consumption 108.2 110.43 Ending stocks 84.78 92.74 Record ending stocks anticipated for 2013/2014 Source: USDA. * Forecast
With China s State Reserve Cotton Procurement Approaching 3.0 Million-Ton Target 16 14 Million 480-lb. Bale Equivalents 12 10 8 6 4 2 0
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 2012. They pulled in a substantial portion of their crop and the U.S. and India discuss later. 2012-13 is an even bigger building of the reserve. Even before that was over, they announced their new 2013-14 buying plan. Price is same as prior year.
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?
Season-to-Date Reserve Procurement Volume* 6.0 5.0 Million Metric Tons 4.0 3.0 2.0 1.0 Inland Xinjiang 0.0 Source: CNCRC. Cumulative Season-to-Date Volume, as of: * Exclusive of purchases by large cotton groups.
Season-to-Date Reserve Auction Volume & Planned Volume 3.5 3.0 Planned Volume Offtake Volume Million Metric Tons 2.5 2.0 1.5 1.0 0.5 0.0 Source: CNCRC Cumulative Season-to-Date Volume, as of:
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
Expectations for Indian Cotton Exports Double in Recent Months 10 9 8 Million 480-lb. Bales 7 6 5 4 3-2 1 USDA Forecasts for 2011/13 Indian Cotton Exports, as of:
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
Who rules More volatility Different plays Technicals are the leading indicator Fundamentals will always rule long run
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
Value of Production Less Total Costs* Cotton, Wheat, Corn, Soybean 300.00 Cotton Wheat Corn Soybean 200.00 100.00 0.00 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012-100.00-200.00-300.00 *Variable Costs + Fixed Costs
What is Cotton Incorporated Doing? Cost of Production Risk Management
AFPC ACRE Decision Aid
http://www.afpc.tamu.edu/models/acre/index.php
Several Cost of Production Studies India China Brazil
Econ of Precision Farming Survey 2013? 2005 2013? 2005 2001 2005 2005 2001 2009 2005 2001 2001 2001 2001 Denotes year started survey
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.
What is Cotton Incorporated Doing? Cost of Production Risk Management
Risk Management If you don t know costs, you cannot successfully market
Cotton Marketing Why is this important? No control over market price Price too high Price too low Control when/how to price
Cotton Marketing (Print) Deliverables: Weekly Cotton Market Planner Newsletter Cotton Marketing Weekly Monthly Cotton Market Comments
Cotton Marketing (Radio) Why is this important? Weekly cotton wrap-up KFLP out of Floydada, TX Monthly Ag. Market Network www.agmarketnetwork.com Ag. Market Roundtable All available on www.cottoninc.com
Cotton Marketing (Seminars) Why is this important? It s face to face Instant Q & A Attendance
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