Weekly Cotton Market Review

MEMPHIS - Dec 15/06 - SNS -- The USDA released its latest review of cotton market conditions in the United States, reviewing conditions through the week ending 11 15.

Average spot cotton quotations were 88 points higher 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 49.56 cents per pound for the week ending Thursday, December 14.  The weekly average was up
from 48.44 cents last week and 48.74 cents from the corresponding week a year ago.  Daily average
quotations ranged from a new season high of 50.13 cents per pound on Thursday, December 14 to a low of
48.02 cents on Friday, December 8.  This was the highest reported daily average since April 7, 2006.  Spot
transactions reported in the Daily Spot Cotton Quotations for the week ending December 14 totaled 48,717
bales, compared with 54,535 a week earlier and 106,446 a year ago.  Total spot transactions for the season
were 473,881 bales compared to 711,240 the corresponding week a year ago. The New York March
futures settlement price ended the week at 55.18 cents, compared to 53.06 cents a week earlier.

The USDA announced on December 14 that the Adjusted World Price (AWP) was 45.05 cents per pound
for the period December 15 through December 21, the Loan Deficiency Payment (LDP) rate for Upland
cotton will be 6.95 cents per pound and the Extra Long Staple (ELS) Competitiveness Payment will be
1.39 cents per pound.

Southeastern markets.   Spot cotton trading was moderate.  Demand was good.  Supplies were moderate.
Average local prices were higher.  Demand was best for color 41 and better, leaf 4 and better, and staple
35 and longer.  Mixed lots of mostly 31 and 41, leaf 3 and 4, staple 35 and longer, mike 37-49, strength
29-31, and uniformity 80-82 sold for 175 to 200 points off New York March futures, FOB car/truck (Rule
5, compression charges paid, 30 days free storage).  A moderate volume of color 31 and 41, leaf 3 and 4,
staple 34 and longer, mike 37-49, strength 27-29, and uniformity 79-81 sold at around 300 points off New
York March futures, FOB car/truck (Rule 5, compression charges paid).  Even-running lots, mostly color
41, leaf 3 and 4, staple 34, mike 37-49, strength 28-30, and uniformity 79-81 sold for 300 points off New
York March futures, same terms as above.  Mixed lots, mostly color 31 and 41, leaf 3 and 4, staple 32 and
shorter, mike mostly 50-52, strength 25-27, and uniformity 79-81 sold for 45.00 cents per pound, same
terms as above.  A light volume of CCC-forfeited loan cotton, color 31 and 41, leaf 4 and better, staple
mostly 32 and 33, mike 37-49, strength 26-28, and uniformity 78-80 sold for 45.00 cents, FOB warehouse
(compression charges not paid).
    Harvesting activities were rapidly nearing completion.  Some producers in southwest Alabama
contemplated re-picking fields where later maturing bolls had opened.  A few gins in Alabama and
Georgia expect to finish operations next week.  Harvesting remained slightly behind normal in the
Carolinas.  Ginning continued.

South central markets.   Spot cotton trading was slow.  Available supplies were moderate.  Demand was
moderate.  Average local prices were higher.  A light volume of 2006-crop cotton, color 41 and better and
42 and better, leaf 5 and better, staple 32 and longer, mike 37-49, strength 26-33, and uniformity 79-83
sold at around 48.50 to 50.00 cents per pound, FOB car/truck (Rule 5, compression charges paid).  Mixed
lots of  CCC-forfeited loan cotton, color mostly 41 and better, leaf 4 and better, staple 33 and longer, mike
37-52, strength 25-36, and uniformity 78-84 sold at around 45.25 to 46.50 cents, FOB warehouse,
(compression charges not paid).  Domestic and foreign mill inquiries were moderate.  Buyers for domestic
mills purchased a light volume of color 41 and better, leaf 4 and better, staple 34 and longer, mike 40-49,
and strength averaging 27.0 for April through September 2007 delivery.  A light volume of similar
qualities, with mike 50-54 was purchased for January through July 2007 delivery.  A large volume of color
41 and better, leaf 4 and better, staple 36 and longer, mike 38-49, and strength averaging 32.0 sold for
March through December delivery.
    Cold, dry weather allowed producers to make excellent progress towards wrapping up outside
activities.  Some producers were able to prepare seedbeds for next season.  Virtually all crops had been
harvested.  A dozen gins continued to operate in Arkansas and Mississippi and five gins in Louisiana
continued pressing operations.  Approximately 25,000 bales of cotton were destroyed by a fire at the
Planters Gin and Warehouse in Memphis, Tennessee.

Southwestern markets.    Spot cotton trading was slow in the East Texas/Oklahoma market and active in
the West Texas market.  Supplies were heavy.  Demand was good for color 31 and better, leaf 4 and better,
staple 34 and longer, and mike 30-49.  Average local prices were higher.  No forward contracting was
reported.  No domestic or export mill inquiries were reported.

A light volume of 2006-crop cotton, color 31 and better, leaf 4 and better, staple 34 and longer, and mike
30-36 traded in west Texas at around 49.50 cents per pound, FOB car/truck (compression charges not
paid).  A light volume of 2006-crop cotton, mostly color 31, leaf 3, staple 33 and longer, and mike 45-52
traded at around 48.00 cents, same terms as above.  A moderate volume of 2006-crop equities, color
mostly 31 and better, leaf  4 and better, staple 35 and longer, and mike 30-49 sold for one to two cents.  A
moderate volume of  CCC-forfeited loan cotton, mostly color 31 and better, leaf 4 and better, staple 33 and
longer, and mike 33-49 traded at around 47.00 to 51.00 cents, FOB warehouse (compression charges not
paid).
	 Harvesting neared completion.  Ginning was in full swing as large backlogs of modules remained in
fields.  Producers shredded stalks and prepared beds for spring planting.  Some warehouses were full from
carryover stocks and needed more storage for the 2006 crop.

A light volume of 2006-crop cotton, mostly color 21, leaf 3 and better, staple 35 and longer, mike 43-50
traded in Oklahoma at around 52.00 cents per pound, FOB car/truck (compression charges not paid).  A
light volume of mostly color 41, leaf 5, staple 36 and longer, and mike 31-56 (averaging 43.5) traded at
around 47.00 cents, same terms as above.
	Harvesting neared completion. Ginning slowed.  Light rain fell in south Texas along the Gulf of
Mexico.  More moisture was needed to replenish sub-soil levels.  Producers prepared fields for spring
planting.  Reports indicated a small planting shift from cotton to corn due to higher prices and attractive
corn and grain forward contracts.

Western markets.    Spot cotton trading was inactive in the San Joaquin Valley (SJV).  Available supplies
were moderate.  Producer offerings were moderate.  Demand was light.   Inquiries were light.  Average
local prices were higher.  Merchant bids of 65.00 to 68.00 cents per pound, for color 31 and better, leaf 3
and better, and staple 36 and longer were rejected by most producers; however, a moderate volume of
Acala cotton was forward contracted.  Guaranteed minimum prices for color 21 and better, leaf 2 and
better and staple 36 and longer were steady at around 68.00 to 70.00 cents, all entitlements included.
Inquiries from foreign mills were slow with buyers? price ideas lower than merchant break-even prices.  A
light volume of Acala cotton and California Upland was sold to mills in Japan for prompt shipment.
    Cloudy skies and light showers were received in the area.  Snow was also visible on the Sierra Nevada
mountain range.  All fieldwork was completed.  Saw-ginning slowed as several gins were finished for the
season.  Some roller-gin managers were still debating whether to continue roller-ginning Acala cotton.

Spot trading of Upland cotton was inactive in the Desert Southwest (DSW).  Supplies were moderate.
Demand was light.  Average local prices were higher.  Brokers and producers waited for higher prices and
increased demand.   Shippers were waiting for China to get into the buying mode.  A light volume of
California/Arizona Upland was sold to mills in Japan for prompt shipment.
    Weather remained seasonal and dry.  Temperatures in Arizona ranged from the high 60s to mid 70s.
Daytime temperatures in New Mexico and El Paso, Texas were in the mid 50s to mid 60s.

American Pima spot cotton trading was inactive.  Supplies were moderate.  Producer offerings were light.
Demand was steady.  A light volume of SJV Pima was forward contracted at around 107.00 cents per
pound, UD free, gin yard subject to USDA, Spot Quotations differences.  Sales to foreign mills were light.
According to the NASS Crop Production report released December 11, forecasted Pima yields were at
1,080 pounds per harvested acre down 89 pounds from November’s report.  Lower yields were noted in
California and Texas production.

Textile mill report.   Domestic mill buyers purchased a light volume of color 31, leaf 3, and staple 31 for
immediate delivery and a heavy volume of color 41, leaf 4, and staple 34 and longer for April through
December delivery.  Mill buyers also purchased a moderate volume of color 41 and 42, leaf 4, and staple
32 for January through September delivery.  Reports indicated that load out dates at most warehouses were
booked two to four weeks out.  Most mills anticipated taking three to seven days off for the Christmas
holiday.  Mill buyers in China, Korea, Thailand, Turkey, and Vietnam inquired for a moderate volume of
2006-crop cotton for January/February shipment.  Demand was best for color 31, leaf 3, and staple 35 and
longer.  Demand was moderate for color 41 and 42, leaf 4 and better, and staple 33 and longer.  No sales
were reported.


World cotton supply and demand estimates.  According to the December 11, World Agricultural Supply
and Demand Estimates, this month's 2006/07 U.S. cotton supply and demand estimates include lower
domestic mill use and exports, resulting in higher ending stocks. Production is virtually unchanged, as a
significant increase for Georgia is about offset by lower estimates for the Carolinas, the Delta States, and
the California Pima crop. Domestic mill use is reduced to 5.1 million bales based on lower than expected
activity to date. Exports are reduced 200,000 bales to 16.0 million as export sales and shipments to China
continue to lag the year-ago level significantly. Ending stocks are raised 5 percent to 6.3 million bales.
    Slightly higher beginning stocks and production are raising the 2006/07 world ending stocks this
month. Beginning stocks are raised in India and the African Franc Zone due to adjustments in 2005/06
trade. Production for the current season is raised in China, Brazil, and Turkmenistan, but lowered in
Australia, Syria, and Uzbekistan. World consumption and trade are virtually unchanged. Ending stocks are
raised to 51.5 million bales, an increase of nearly 1 percent from last month.

All cotton production is forecast at 21.3 million 480-lb bales, virtually unchanged from the November
forecast but down 11 percent from last year’s record high production according to the Agricultural
Statistics Board, NASS, USDA. Yield is expected to average 798 pounds per acre, unchanged from last
month but down 33 pounds from last year. Compared with last year, yields are down in all states except
Arizona, Arkansas, California, Tennessee, and Louisiana with growers in Arkansas and Tennessee
expecting a record high production.
    Upland cotton harvested area, at 12.5 million acres, is unchanged from last month but down 8 percent
from last year. American Pima harvested area, at 324,000 acres, is also unchanged from November but up
21 percent from 2005.  In the southeastern region, favorable weather in Alabama, Georgia, and Florida
allowed harvest to advance rapidly with progress well ahead of last year and the 5-year average. While in
the Carolinas, continual wet weather during November delayed harvest activities. Objective yield measure
upland cotton harvested area, at 12.5 million acres, is unchanged from last month but down 8 percent from
last year. American Pima harvested area, at 324,000 acres, is also unchanged from November but up 21
percent from 2005.
    In the southeastern region, favorable weather in Alabama, Georgia, and Florida allowed harvesting to
advance rapidly with progress well ahead of last year and the 5-year average. While in the Carolinas,
continual wet weather during November delayed harvesting activities. Objective yield measurements in
Georgia showed boll counts to be the highest but boll weight to be the second lowest in the last ten years.
North Carolina boll counts remain near average.
    Cotton harvesting was complete in the lower Delta by the end of the month. Producers in Missouri and
Tennessee battled with rain delays during the first part of November but after mid-month, they were able
to make significant progress. In Missouri, harvesting was behind last year and the 5-year average due to
the rains received throughout the fall months. The objective yield boll counts and boll weight in Arkansas
are the highest in the last ten years. In Louisiana, boll counts are the highest in the last ten years. However,
in Mississippi, the boll counts and average boll weight are the lowest in the last five years.  Harvesting in
the Texas Plains gained momentum after the first freeze was received during the early part of the month.
Harvesting and ginning continued throughout the month under ideal conditions. In Texas and Oklahoma,
harvesting was ahead of the normal while Kansas growers were behind. Objective yield measurements in
Texas show boll counts to be the third largest and boll weight to be the heaviest in the last ten years.
    In California, cotton harvesting was wrapping up in the San Joaquin Valley. Arizona producers
received favorable weather for harvesting but were slightly behind the 5-year average. Data from the
objective yield survey show California boll weights to be lowest in the last ten years.
    American Pima cotton production is forecast at 729,000 bales, down 8 percent from the November
forecast but up 16 percent from last year. The U.S. yield is forecast at 1,080 pounds per harvested acre,
down 89 pounds from last month and down 47 pounds from last year. Harvesting progressed throughout
the month with favorable weather which allowed for second picking of the crop.
    Ginnings prior to December 1 totaled 15,141,600 running bales, compared with 15,991,200 running
bales ginned prior to the same date last year and 14,754,450 running bales ginned in 2004.






The following information was excerpted from the Cotton and Wool Situation and Outlook
Summary, released December 12, by the Economic Research Service, USDA:

International Outlook
World and U.S. Cotton Trade Falling in 2006/07
U.S. cotton exports are forecast at 16 million bales in 2006/07, 2 million bales lower than in 2005/06.
World trade is also forecast lower in 2006/07, down 3.7 million bales, to 41 million. While world trade is
falling more than U.S. trade, the U.S. share of world trade is expected to decline, from 40 percent to 39
percent.  With this decline, the U.S. trade share is forecast to return to the level last realized in 2002/03.
The United States and its major competitors have significantly increased their exports since 2002/03, and,
like the United States, these competitors are generally expected to export less than the year before in
2006/07.	World production in 2006/07 is forecast 1.7 million bales higher, at 115.9 million.  World
consumption is expected to rise 5 million bales in 2006/07, to 121 million.  Ending stocks are expected to
tighten in most non-U.S. markets, helping world trade to slow in 2006/07. World ending stocks are
expected to fall 2.7 million bales in 2006/07, to 51.5 million bales. Importing countries are largely
expected to draw down their stocks, reducing the need for exports.

Exports of all cotton from the United States totaled 752,300 bales during November, according to the
Foreign Agricultural Service, USDA.  A month earlier, 520,900 bales were shipped and 762,600 bales
were exported in November last year.  Shipments for the first four months (August-November) this
marketing year totaled 2,373,000 bales, compared to 3,444,000 bales exported through November last
year.

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STAT News Service