Weekly Cotton Market Review

MEMPHIS - Jan 5/07 - SNS -- The USDA released its latest review of cotton market conditions in the United States, reviewing conditions through the week ending 0 5.

January 5, 2007

Spot cotton quotations averaged slightly over one-half cents higher than the previous reported 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 50.76 cents per pound for the three-day week ending Thursday, January 4.
The weekly average was up from 50.23 cents reported two weeks ago and 49.85 cents from the
corresponding period a year ago.  Daily average quotations ranged from a high of 51.46 cents per pound on
Friday, December 29 to a low of 50.29 cents on Thursday, January 4.  Spot transactions reported in the
Daily Spot Cotton Quotations for the week ending January 4 totaled 21,980 bales, compared with 49,747
two weeks earlier and 92,022 a year ago.  Total spot transactions for the season were 591,832 bales
compared to 929,967 the corresponding week a year ago. The New York March futures settlement price
ended the week at 54.56 cents, compared to 55.37 cents reported two weeks earlier.

The USDA announced on January 4 that the Adjusted World Price (AWP) was 45.90 cents per pound for
the period January 5 through January 11, the Loan Deficiency Payment (LDP) rate for Upland cotton will
be 6.10 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.  Supplies and demand were moderate.  Average
local prices were higher for the week ending December 28, but were lower for the week ending January 4.
A moderate volume of color mostly 31 and 41, leaf mostly 3, staple mostly 34 and longer, mike 43-49,
strength 27-30, and uniformity 79-81 sold for around 375 points off New York March futures, FOB
car/truck, Georgia terms (Rule 5, compression charges paid, 30 days free storage).  Similar lots containing
approximately 50 to 75 percent mike 50-52 sold for 450 to 500 points off New York March futures, same
terms as above.  A light volume of color 21 and 31, leaf 2 and 3, staple mostly 35 and 36, mike 35-49,
strength 29-31, and uniformity 80-82 sold for 56.50 cents per pound, FOB car/truck (Rule 5, compression
charges paid).  Mixed lots containing color mostly 31 and 41, leaf 3 and 4, staple 33 and longer, mike 43-
49, strength 27-29, and uniformity 78-80 traded at 52.50 to 53.00 cents, same terms as above.  Some
producers inquired about forward contracts for 2007-crop cotton.  These inquiries were preliminary and no
sales were booked.
        Rain fell on much of the Southeast early in the period, replenishing soil moisture levels.  Precipitation
amounts ranged from one-quarter of an inch to three inches.  A few gins in south Alabama and Georgia
continued to operate around the clock.  Most gins have either gone to gin days or plan to finish next week
in the Carolinas and Virginia.

South central markets.   Spot cotton trading was slow.  Available supplies were moderate.  Demand was
moderate.   Average local prices were higher for the week ending December 28, but moved lower during the
week ending January 4.  Many producers in the mid-south continued to offer their current crop cotton for
equities of three cents per pound, but most merchants were only willing to bid one cent.  There was no
interest in 2007-crop contracts.  A light volume of 2005-crop cotton, color 51 and better, leaf 5 and better,
staple 34 and longer, mike 39-52, strength 26-34, and uniformity 80-84 sold at around 50.50 cents per
pound, FOB car/truck (Rule 5, compression charges paid).  Inquiries from representatives of foreign and
domestic mills were light.  No sales were reported.
	A cold front moved into the region midweek, bringing light and scattered showers.  More rain was
needed to replenish depleted soil moisture in parts of the Delta.  A few gins completed pressing operations
during the week.  Approximately 18 gins remained in operation in northern Arkansas, Missouri, and
Tennessee.   Several gins were expected to operate through the month of January.

Southwestern markets. Spot cotton trading was slow in the East Texas/Oklahoma market and moderate in
the West Texas market.  Supplies were heavy.  Demand was good for color 31 and better, leaf 5 and better,
staple 34 and longer, and mike 30-49.  Average local prices for east Texas/Oklahoma were firm for the week
ending December 28, but were higher for the week ending January 4.  Average local prices for west Texas
were higher for the two-week reporting period.  No forward contracting was reported.  No domestic mill
inquiries were reported.  Agents for foreign mills inquired for color 31, leaf 3, staple 35, and mike 35-49 for
February and March shipment.

A light volume of 2006-crop cotton, color 31 and better, leaf 3-5, staple mostly 33 and longer, and mike
mostly 42-54 traded in west Texas at around 49.50 cents, FOB car/truck (compression charges not paid).  A
light volume of 2006-crop cotton, color mostly 12 and 22, leaf 3 and better, staple 30 and 31, mike 34-44
traded at around 44.75 cents, same terms as above.  Current crop equities sold for one to three and one-half
cents per pound.  Harvesting was completed.  Smaller gins were finishing up, while larger gins were
expected to operate into February.  Backlogs of modules on gins yards dwindled as ginning caught up with
harvesting.  Scattered showers along with light snow and freezing rain delayed fieldwork.  Accumulations
ranged from a trace to three-quarters of an inch on the southern High Plains and one to one and one-half
inches on the northern Panhandle area.  More moisture was needed to help replenish sub-soil moisture levels
before early planting starts in April and May.  Central and south central Texas received beneficial rains that
ranged from a trace to over two and one-half inches in some cotton growing areas.

A light volume of 2006-crop cotton, color mostly 31 and better, leaf mostly 3, staple 33 and longer, and
mike 31-49 (averaging 42.2) traded in Oklahoma at around 50.50 cents per pound, FOB car/truck
(compression charges not paid).  A light volume of 2006-crop cotton, color 31 and 41, leaf 3-6, staple 30-34,
and mike mostly 47-50 traded at around 45.75 cents, same terms as above.  Harvesting was completed.
Ginning had slowed down with only larger gins still in operation.  Producers in South Texas readied
machinery and fields for spring planting.  Beneficial moisture was limited to areas of the Upper Coastal
Bend with accumulations ranging from a trace to one-half of an inch.

Western markets.  Spot cotton trading was slow in the San Joaquin Valley (SJV).  Supplies were moderate
and mostly in the CCC loan program.  Demand was light.   Average local prices were higher for the week
ending December 28, but ended the week of January 4 lower. A moderate volume of  mostly color 31 and
41, leaf 3 and 4, staple 36 and longer, mike 37?49, strength averaging 33.0, and uniformity averaging 82.0
traded in the price range of 59.00 to 65.00 cents per pound, UD free, FOB warehouse, all entitlements
included.  Daytime temperatures were in the mid to high 50s.  Approximately one half of an inch of rainfall
was reported throughout the valley last week.  Storms produced rain and snow in northern California.  The
central valley remained dry for this time of year.

Spot trading of Upland cotton was inactive in the Desert Southwest (DSW).  Supplies were moderate and
mostly in the loan.  Demand was light.  Average local prices were higher for the week ending December 28,
but were lower for the week ending January 4. Foreign mill demand was light.  Storms produced snow in
northern Arizona and New Mexico.  Areas of western and central Arizona remained dry.  The El Paso area
received light snow late in the period.  Approximately two inches of snowfall was reported in the Franklin
Mountains and about one inch of snow fell around the county.

American Pima (AP) spot cotton trading was inactive.  Supplies were moderate.  Demand was light.  No
forward contracting or domestic mill activity was reported.  Approximately one-third of the roller gins were
completed for the season.  The remaining gins will operate January through March.  Ginning resumed after
the holiday break.

Textile mill report. Domestic mill buyers purchased a light volume of 2005-crop cotton, color 41, leaf 4,
and staple 33 for February delivery.  Domestic mill inquiries were very light.  Demand was best for any
discounted styles of cotton for prompt to nearby fill-in needs.    Most mills took at least one week off for the
holidays; a few took up to two weeks.   Export inquiries were moderate.  Demand was good for color 31,
leaf 3 and staple 35, and also any low grade or discounted styles of cotton for immediate to nearby shipment.
Foreign mill buyers in Indonesia and Turkey inquired for a moderate volume of color 31, leaf 4, and staple
35 for prompt shipment.  Foreign mill agents in Taiwan inquired for a moderate volume of color 42, leaf 4,
and staple 34 for January shipment.  Foreign mill agents in Turkey inquired for a moderate volume of color
41, leaf 4, and staple 33 and 34 for prompt shipment.  No sales were reported.

USDA announced special import quota number 28 for upland cotton.  The Department of Agriculture's
Commodity Credit Corporation announced on January 4, 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 January 11, 2007, allowing importation of 21,253,330 kilograms (97,616 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 January 4.
     Quota number 28 will be established as of January 4, 2007, and will apply to upland cotton purchased
not later than April 10, 2007, and entered into the U.S. not later than July 9, 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 August 2006 through October 2006, the most recent three months for which data are available.
     Future quotas, in addition to the quantity announced January 4, will be established if price conditions
warrant.

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STAT News Service