United States

Rob Smith

Can Exports Hit 10 Million Bale Estimate?

INTL FCStone Inc.

EDITOR’S NOTE – The U.S. cotton industry is competing against several other cotton-producing countries in the world as it tries to maintain and increase global market share. This is the first of six reports from market analysts at INTL FCStone Inc., in Nashville, Tenn. In this report, Rob Smith examines U.S. cotton production. Other reports will follow on pages 10, 12 and 14.

[highlight]More articles in this series: Australia, Brazil, China, India, Uzbekistan[/highlight]

The U.S. cotton harvest was moving along rapidly at the time of this writing (early November). Although picking efforts in Texas lagged the normal pace, harvest across most of the Cotton Belt advanced well, producing a good quality crop.

The Memphis Territory (Ark., Ala., La., Miss. and Tenn.) is expecting about 3.3 million bales, and the USDA has classed 2.2 million to date. About 900,000 bales of the 2.8 million expected from Georgia and Florida have been classed to date, as have 1.9 million of TexaJan 2015 Cotton Farming_Page_08_Image_0001s and Oklahoma’s expected 6.6 million bales.

In the first third of classings to be completed this season country- wide, 73.2 percent are of tenderable qualities. We are in agreement with the USDA and believe the United States will produce 15.9 million bales in the 2014/15 season.

More noteworthy is the percentage of much sought after high grades with long staple. The Memphis territory has produced around 73 percent middling (31) and better color, and 44 percent
1 1/8-inch and better staple and 3.5-4.9 micronaire. Georgia has produced 58 percent middling (31) and better color and 46 percent 1 1/8-inch and better staple and 3.5-4.9 micronaire. Texas, although very early in the harvest, has produced 84 per- cent middling and better color, and 44 percent with staple 36/32nds and better and 3.5-4.9 micronaire. These higher grades seem to be the most desirable for export consumption and are currently bringing a fair premium in the export market.

If these percentages hold for the duration of the classing season, the 15.9 million-bale U.S. crop should be easy to market.

We expect domestic mill consumption to remain steady at 3.8 million bales. Season-to-date exports, however, are growing below the pace necessary to reach the USDA forecast of 10 million bales. While the USDA retained its 10 million-bale export estimate on the December report, we expect it to be lowered eventually.

The decrease in demand should help level out the flow of cotton on the overburdened U.S. logistics infrastructure. Trucks are in short supply due to tightened hours of service regulations and more stringent compliance, safety and accountability requirements. Moving oil and oil-related products have stretched railroads, as their equipment and infrastructure are the next best alternative to the blocked pipeline projects.

West Coast ports continue to have labor disputes, which have affected the movement of U.S. products to export customers and which many expect to worsen prior to the holidays. With lower demand for U.S. cotton exports, perhaps the flow from U.S. ware- houses will be more uniform and should not tax the infrastructure to its limits as it has seemed to do the past few years.

Contact Rob Smith via email at roberts.smith@intlfcstone.com. Comments in this article are market commentary and are not to be construed as market advice.

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