Weekly Cotton Market Review

MEMPHIS - Sep 8/06 - SNS -- The USDA released its latest review of cotton market conditions in the United States, reviewing conditions through the week ending 8 8.

September 8, 2006

Average spot cotton quotations averaged lower than the previous week, according to the USDA,
Agricultural Marketing Service’s Cotton Program.  Quotations for the base quality of cotton (color 41,
leaf 4, staple 34, mike 35-36 and 43-49, strength 26.5-28.4, uniformity 81) in the seven designated
markets averaged 47.29 cents per pound for the week ending Thursday, September 7.  The weekly
average was down from 48.38 cents last week and compares to 47.33 cents for the corresponding week a
year ago.  Quotations ranged from a high of 47.61 cents on Friday, September 1 to a low of 46.99 cents
on Thursday, September 7.  The New York October futures settlement price ended the week at 51.19
cents, compared to 53.05 cents a week ago.

The USDA announced on September 7 that the Adjusted World Price (AWP) was 44.18 cents per pound
for the period September 8 through September 14, the Loan Deficiency Payment (LDP) rate for Upland
cotton will be 7.82 cents per pound, and the Extra Long Staple (ELS) Competitiveness Payment will be
zero.

Southeastern markets. Spot cotton trading was inactive.  Supplies and demand were light.  Average
local prices were lower.  Mixed lots of old-crop cotton containing color 42 and better, leaf 3 and 4,
staple 31 and longer, mike 36-49, strength 27-29, and uniformity 79-81 sold for 40.75 cents per pound,
FOB car/truck (Rule 5, compression charges paid).  No forward contracting was reported.  No domestic
mill inquiries were reported.  Reports indicated that most mills have covered their needs through fourth
quarter 2006.
    Producers in North Carolina and Virginia were assessing the damage from Tropical Storm Ernesto.
Initial reports indicated that the strong winds had blown plants down in some fields and localized
flooding occurred where the heaviest rains fell.  Producers would welcome a period of hot, dry weather
to reinvigorate plants and dry fields.  In contrast, producers in some of the drier areas of South Carolina
welcomed the wet weather.  Scattered thundershowers delayed defoliation in some areas of Alabama
and Georgia.  Limited picking was underway in north Alabama and Georgia.  Limited ginning was
underway in portions of Georgia where power rate changes took effect on September 1.  Picking and
ginning was expected to gain momentum in Georgia in the next two weeks.  According to the NASS
Crop Progress report for the week ending September 3, Alabama had 49 percent bolls open, Georgia 54,
Virginia 50, South Carolina 32, and North Carolina 19 percent.

South Central markets.  Spot cotton trading was slow.  Available supplies were moderate.  Demand
was light.  Average local prices were lower.  A moderate volume of color 41 and better, leaf 4 and
better, staple 34 and longer, mike 42-52, strength 25-33, and uniformity 78-83 sold at around 50.00
cents per pound, FOB car/truck (Rule 5, compression charges paid).  Alight volume of CCC forfeited
loan cotton of color mostly 31, 41, and 32, leaf 4 and better, staple 33 and longer, mike 35-50, strength

25-30, and uniformity 70-83 sold at around 47.50 cents, FOB warehouse. Inquiries from representatives
of domestic and foreign mills were light.  Agents for mills in the Far East purchased a moderate volume
of color 31, leaf 3, staple 35, mike 35-49, and strength averaging 29 for prompt through November
shipment.   Agents for foreign mills purchased a light volume of color 41, leaf 4, staple 34, mike 35-49,
and strength averaging 28 for prompt shipment.
	Defoliation progressed rapidly under good weather conditions in Louisiana, Mississippi, and
Arkansas.  Reports indicated that a few fields had been defoliated in Tennessee. Harvesting was well
underway in Louisiana and Mississippi but was limited in Arkansas.  About ten to fifteen gins were
operating in Louisiana, along with several in Mississippi.  According to the NASS Crop Progress report
for the week ending September 3, Mississippi had 88 percent bolls open, Louisiana 83, Arkansas 47,
Tennessee 34, and Missouri 26 percent.  All of these percentages were ahead of the five-year average,
with the exception of Missouri, which was slightly behind.

Southwestern markets. Spot cotton trading was slow in the East Texas/Oklahoma and West Texas
markets.  Supplies of producer-owned cotton were light.  Demand was good for color 31 and better, leaf
3 and better, staple 33 and longer, and mike 35-49.  Average local prices were lower compared to last
week.  No forward contracting was reported.  No domestic or export mill inquiries were reported.

A light volume 2005-crop cotton of color mostly 21 and 31, leaf mostly 3 and 4, staple 34 and longer,
and mike 28-36 (averaging 31.3) traded in west Texas at around 46.00 cents per pound, FOB car/truck
(compression charges not paid).  Heavy rain showers brought large amounts of moisture across all of the
High Plains over the weekend.  Accumulations ranged from around three inches to as much as six inches.
Some producers reported heavy flooding in area cotton fields.  Cooler than normal temperatures caused
heat unit accumulations to drop, and was expected to stunt maturity of late maturing seed varieties.  Boll
retention was fair.  Producers began early defoliation in some earlier planted and some of the drought
stressed fields.  Cotton bolls have started popping open.  Hot, dry weather was needed to advance the
crop to full maturity.

A light volume of color mostly 31 and better, leaf mostly 3-5, staple 33 and longer, and mike 36-50
(averaging 42.9) traded in south Texas at around 47.00 cents per pound, FOB warehouse (compression
charges not paid).  Ginning slowed down in the Coastal Bend.  Harvesting and ginning in the Upper
Coastal Bend and south central Texas gained momentum.  Heavy machinery was not able to get into
fields due to recent rains.  Producers in Oklahoma and Kansas readied machinery for harvest.  The crop
was progressing normally. Insect pressure was light and easily controlled.  Cooler than normal daytime
temperatures, in the lower 70?s, slowed crop maturation.

Western markets. Spot trading of upland cotton was inactive in the San Joaquin Valley (SJV).
Supplies and demand were light.  Average local prices were lower.  No forward contracting or domestic
mill activity was reported.  Temperatures ranged from the high 90s to low 100s, which helped finish up
the top crop.  Open bolls were more evident throughout the valley.  Defoliation was expected to begin in
approximately two weeks on the more mature fields.  Pest control treatments continued.  Producers
prepared equipment for harvest.  Industry representatives rated the crop as mostly average.

Spot cotton trading was inactive in the Desert Southwest.  Supplies and demand were light.  Average
local prices were lower compared to last week.  No forward contracting was reported.  A very light
volume of old-crop cotton, mostly color 31, leaf 3 and 4, and staple 33 and longer sold for around 35.00
cents per pound, FOB car.  Seasonal monsoon activity, along with the remnants of Hurricane John,
affected weather patterns in the DSW.  Parts of New Mexico and El Paso, Texas areas received from
three to five inches of rain this week.  More than 15 inches of rain has fallen in El Paso this year; most
since the end of July.  Normal, average rainfall for the year was estimated at around 9.43 inches.
Producers considered the extra rainfall beneficial as it recharged aquifers and reservoirs in these drought
stricken areas.  The down-side was that steady rain and very little sunshine slowed plant maturation.
Some producers reported signs of wilt and some boll rot on the plants.  Hot, dry weather was needed.

American Pima spot cotton trading was inactive.  Supplies and demand were light.  New-crop prices
trended lower to 110.00 to 112.00 cents per pound.  No forward contracting was reported.    Producers
were reluctant to forward contract at this time because it was too early in the season to do so.  Many
were just finishing last round of irrigations.  San Joaquin Valley producers were hoping for a clear and
open fall to help finish out the top crop.  Parts of eastern Arizona, New Mexico, and El Paso, Texas
received three to five inches of rain early in the reporting period.  Periods of wet weather and cooler
temperatures slowed plant growth.  Hot, dry weather was needed to help get the crop finished.

Textile mill report.  Domestic mill inquiries were very light.  Reports indicated that most mills have
covered their immediate to nearby raw cotton needs.  The bulk of domestic interest centered on any type
of discounted cotton that could be blended into lay down mixes.  Demand for ring spun yarn was good;
open end yarn was moderate.  Demand for denim fabric was light to moderate.  Reports indicated that
Swift Galey will be closing a denim manufacturing plant in Columbus, Georgia. West Point Mills
announced that they will be closing two fabric weaving mills located in Lanett and Opelika, Alabama.
    Mill buyers in Taiwan inquired for a moderate volume of color 31, leaf 3, and staple 34 and longer
for October shipment.  Representatives for mills in Bangladesh and Indonesia inquired for a moderate
volume of 2006-crop cotton for fourth quarter shipment.  Demand was best for color 31 and better, leaf
3, and staple 36, and also color 42 and 51, leaf 4, and staple 34 and longer. Mill agents in Turkey
inquired for a moderate volume of color 41 and better, leaf 4, and staple 34 and longer for
November/December shipment.  No sales were booked.

Prices received by farmers for upland cotton averaged 47.20 cents per pound in mid-August, according
to the National Agricultural Statistics Service, USDA.  This compares with 47.10 cents for the entire
month of July and 42.10 cents in August 2005.  These prices include cotton delivered against forward
contracts.

USDA announces special import quota #23 for upland cotton.  The Department of Agriculture's
Commodity Credit Corporation announced on September 7, a special import quota for upland cotton
that permits importation of a quantity of upland cotton equal to one week?s domestic mill use. The quota
will be established on September 14, 2006, allowing importation of 23,276,125 kilograms (106,906
bales) of upland cotton.
    This action is being carried out under the authority of PL 107-171, enacted May 13, 2002, which
requires that a special import quota be determined and announced immediately if, for any consecutive 4-
week period, the U.S. Northern Europe price exceeds the Northern Europe price by more than 1.25
cents per pound. This condition was met during the consecutive 4-week period ending September 7.
Quota number 23 will be established as of September 14, 2006, and will apply to upland cotton
purchased not later than December 12, 2006, and entered into the U.S. not later than March 12, 2007.
The quota is equivalent to one week's consumption of upland cotton by domestic mills at the seasonally-
adjusted average rate for the period May 2006 through July 2006.
    Future quotas, in addition to the quantity announced September 7, will be established if price
conditions warrant.

Forward contracting of 2006-crop cotton.  Upland cotton growers in the United States had booked
about 6 percent of their expected acreage by the end of August this season.  This was below the 8
percent booked through the same period last year.  Contracting has been most active in the south central
states where about 11 percent of the crop was under contract by the end of August and compares with 13
percent a year earlier.  Southeastern states' growers had forward contracted 4 percent, compared with 11
percent in 2005.  In the southwestern states, 3 percent of the crop had been booked, down from 4 percent
last year.  Growers in the western states had not forward contracted any acreage in 2006 and 2005.
These estimates were based on the National Agricultural Statistics Board's August Acreage for Harvest
report and informal surveys made by the USDA, Agricultural Marketing Service’s Cotton Program.

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STAT News Service