Weekly Cotton Market Review

MEMPHIS - Sep 14/07 - SNS -- The USDA released its latest review of cotton market conditions in the United States, reviewing conditions through the week ending 8 14.

Average spot cotton quotations averaged 79 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 54.88 cents per pound for the week ended Thursday, September 13.  The weekly average was up
from 54.09 cents reported last week and 47.29 cents reported the corresponding period a year ago.  Daily
average quotations ranged from a low of 53.71 on Friday, September 7 to a high of 55.89 cents on
Thursday, September 13.  Spot transactions reported in the Daily Spot Cotton Quotations for the week
ended September 13 totaled 38,914 bales compared with 38,914 last week and 14,691 a year ago.  Total
spot transactions for the season were 138,790 bales compared to 111,172 bales the corresponding week a
year ago.  The New York October futures settlement price ended the week at 60.25 cents compared to
58.16 cents reported last week.
Prices are in effect from September 14 through September 20,  2007

Adjusted World Price (AWP)  51.25    ELS Competitiveness payment          0.00
Loan Deficiency Payment (LDP)  0.75 Coarse Count Adjustment (CCA)       0.00

Southeastern markets.     Spot cotton trading was moderate.  Supplies were light.  Demand was moderate.
Average local prices were firm.  Trading of CCC-loan equities was moderate.

>	A moderate volume of color 31 and 41, leaf 3 and 4, staple mostly 34 and longer, mike 43-52,
strength 27-29, and uniformity 80-82 sold for 350 to 400 points off New York December
futures, FOB car/truck, Georgia terms (Rule 5, compression charges paid, 30 days free
storage).
>	Mixed lots of color mostly 41, leaf 3 and 4, staple mostly 35 and longer, mike 35-49, strength
27-29, and uniformity 80-82 sold for around 450 points of New York December futures, FOB
warehouse (compression charges not paid).
>	Similar lots of color 52 and better traded for 525 to 625 points off New York December
futures, same terms as above.
>	A moderate volume of CCC-loan equities traded for two to four and one-half cents.

Scattered thundershowers brought around one-half of an inch of precipitation to Alabama and Georgia late in
the period.  The rainfall interrupted harvesting activities in areas of north Alabama.  Two gins had begun
operations in north Alabama and initial yield reports ranged from 200 to 400 pounds an acre in the north east
portion of the state.  Hard-locked bolls were reported surfacing throughout Alabama and areas of Georgia.
Later-planted cotton in Georgia benefited from the rainfall and one gin had begun operations for the season.
Producers applied growth regulators and defoliation was underway in areas of Georgia and the Carolina’s.
Insect pressure was light and easily controlled with pesticide applications.

South Central markets.    Spot cotton trading was slow.  Available supplies were light.  Demand was light.
Average local spot prices were higher.  Inquiries from representatives of domestic and foreign mills were
light.  No sales were reported.

>	A light volume of color 41 and better, leaf 4 and better, staple 35 and longer, mike 35-49,
strength 28-34, and uniformity 80-85 traded at around 60.50 cents per pound, FOB car/truck
(Rule 5, compression charges paid).
>	A light volume of mixed lots, color mostly 41 and 42, leaf mostly 3 and better, staple 32 and
longer, mike 42-55, strength 27-33, and uniformity 79-83 traded at around 57.75 cents, same
terms as above.
>	A light volume of certified stock, color 41 and better, leaf 4 and better, staple 33, mike 36-49,
strength 25-31, and uniformity 78-82 sold for 57.50 cents, same terms as above.
>	A light volume of color 51 and better, leaf 5 and better, staple 35 and longer, mike 35-49,
strength 27-32, and uniformity 80-84 traded at around 54.00 cent , same terms as above.
>	A light volume of 2007-crop cotton for CCC-loan equities of three cents.


According to the NASS Crop Progress report for the week ending September 9, 90 percent of the crop had
bolls opening in Tennessee, 88, Missouri, 84, Mississippi, 78, Louisiana, and 75 percent in Arkansas.
Harvesting was well underway in Missouri, where 11 percent of the crop was reported to be picked.
Harvesting activities were slowed in other parts of the North Delta due to heavy rains early in the reporting
period.  Accumulations of up to 3 inches were reported in Arkansas, Tennessee, and Louisiana.  There were
no reports of crop damage.  Most cotton-growing areas in Mississippi reported less than one inch of rain.
Defoliation and picking were briefly interrupted, then resumed on a limited scale toward the end of the
reporting period.  Hurricane Humberto made landfall late in the period in eastern Texas, then quickly moved
into Louisiana.   Rainfall accumulation  totaled up to  three inches  in parts  of the state.   Most  of the cotton-

producing areas received two inches or less.  Winds were light and no damage to the crop was observed.
Defoliation was expected to expand; very little harvesting was underway.

Southwestern markets.  Spot cotton trading was slow in the East Texas/Oklahoma and West Texas
markets.  Trading of CCC-loan equities was slow in the east Texas/Oklahoma market and moderate in the
west Texas market.  Old and new-crop supplies were light.  Demand was moderate for color 41 and better,
leaf 4 and better, and staple 34 and longer.  Average local spot prices for east Texas/Oklahoma and west
Texas were higher.  No forward contracting was reported.  No domestic or export mill inquiries were
reported.
West Texas

>	A moderate volume of 2006-crop cotton, color mostly 31 and better, leaf 4 and better, staple
35 and longer, and mike mostly 33-49 traded at around 60.00 cents per pound, FOB car/truck
(compression charges not paid).
>	A light volume of CCC-loan equities, color 31 and better, leaf 3 and better, staple 34 and longer, and mike 35-48 traded at a zero equity.
>	A light volume of CCC-loan equities, color 31 and better, leaf 3 and better, staple 34 and
longer, and mike mostly 29-35 traded at a negative equity.

Hot weather conditions and timely rains helped advance the crop.  Stands were good with minimal boll
shed.  According to the NASS Crop Progress report for the week ending September 9, the condition of the
crop was 55 percent good to excellent.  Squaring was complete in Texas and 98 percent of the crop was
setting bolls, 27 percent had bolls opening, and 7 percent was harvested.

East Texas / Oklahoma

>	A light volume of 2007-crop cotton, color mostly 41 and better, leaf 4 and better, staple 33 and
longer, and mike 43-51 traded in south Texas at around 52.50 cents per pound, FOB
warehouse (compression charges not paid).
>	A light volume of color 41 and 51, leaf mostly 3-5, staple 34 and 35, and mike mostly 43-50
traded in south Texas at around 52.50 cents, same terms as above.
>	A light volume of color mostly 12 and 22, leaf 3 and better, staple 34 and longer, and mike
mostly 30-39 traded in Oklahoma at around 51.75 cents, FOB car/truck (compression charges
not paid).
>	A light volume of equities traded in Oklahoma at a negative equity.

Oklahoma received a series of strong storms bringing beneficial rain showers to most of the state.
Accumulations were around one inch.  According to NASS, the crop had 18 percent bolls opening.  The
condition of the crop was 76 percent good to excellent.  Plant progress in Kansas was good with some of the
more mature fields starting to cutout.  NASS reported that the condition of the crop was 55 percent good to
excellent.  Daytime temperatures were in the mid 80s and dropped into the high 60s to low 70s after a cool
front passed through.  Ginning in the Rio Grande Valley slowed as gins worked down backlogs of modules.
Most gins were in operation.  Some producers were able to re-enter previously wet fields in the Coastal
Bend and apply chemical defoliates.  Harvesting gained momentum.  Daytime temperatures were in the
lower 90s.  Rainfall accumulations were minimal.  Producers applied harvest aid chemicals in preparation
For harvesting in the Upper Coastal Bend, as weather conditions allowed.  Daytime temperatures were in
the lower 90s for most of the period.



Western markets.   Spot trading of Upland cotton was inactive in the San Joaquin Valley (SJV).  Supplies
were light.  Demand was light.  Average local spot prices were firm.  No forward contracting was reported.
No domestic or export mill activity was reported.  Producers applied chemical defoliates on a limited scale
but was expected to increase rapidly in the next few weeks.  Plant development was good.  Daytime
temperatures were in the lower 90s.  Whitefly and aphid pressure was light and easily controlled.    The
NASS Crop Progress report for the week ending September 9 reported 50 percent of the crop had bolls
opening and 98 percent of the crop was in good-to-excellent condition.

Spot trading of Upland cotton was inactive in the Desert Southwest (DSW).  Supplies were light.  Demand
was light.  No forward contracting was reported.  No domestic or export mill activity was reported.  Average
local spot prices were higher.  Ginning and harvesting were in the early stages and expected to increase
rapidly in the next few weeks.  Yuma County reported backlogs of modules on local gin yards.  Daytime
temperatures were in the low-to-mid 100s for most of the period.  No rain was reported in the cotton growing
regions.  According to NASS, 68 percent of the crop had bolls opening and the condition of the crop was 70
percent good to excellent.

American Pima spot cotton trading was inactive.  Supplies were light.   Demand was moderate.  Average
local prices were steady.  No forward contacting was reported.  No domestic or export mill inquires were
reported.  The crop made good progress under mostly ideal weather conditions. Harvesting and ginning
gained momentum in the DSW.

Textile mill report.  Domestic mill buyers purchased a moderate volume of color 53, leaf 5, and staple 33
for November/December delivery.  Buyers for domestic mills also booked a heavy volume of 2007-crop
cotton color 42 and 51, leaf 5 and better, and staple 33 and 34 for January 2008 through December 2008
delivery.  Representatives for domestic mills also booked a moderate volume of 2007-crop cotton color 41,
leaf 4, and staple 33 for January 2008 through March 2008 delivery.  Some mills have taken additional down
time in recent weeks to work down finished product inventories and some additional down time may be
planned in the months ahead.  Inquiries through export channels were moderate.  Chinese mill buyers
purchased a moderate volume of color 31, leaf 3, and staple 36 for October shipment.  Demand was good
throughout the Far East for any type of discounted or low-grade styles of cotton for immediate to nearby
shipment.
	
AMERICAN  PIMA  WEEKLY  EXPORT  REPORT

A total of 1,900 bales in new net sales were reported this past week (September 7) versus 28,600 bales in
sales reported the previous week, according to the Foreign Agricultural Service, FAS). Current registered
export sales for the 2007/08 crop year are now 313,000 versus 311,000 bales last week. This level of sales is
291.7% of the sales level at the same time last year when 107,300 bales in sales had already been registered.
Current shipments stand at 234.5% of last year with 52,300 bales shipped versus 22,300 bales shipped at the
same time last year.  This week’s purchases were made by China (700), Pakistan (600), Bangladesh (300)
and India (300).  There were 300 bales in destination changes this past week from Japan (-300) to Thailand
(300).  There were no cancellations this past week.
    Export shipments totaled 9,200 bales this past week versus 3,600 bales the previous week. Shipments
this past week went to Pakistan (3,100), China (2,600), Italy (2,000), India (800), Indonesia (400) and Japan
(300).
    The top five leading importers for the 2007/08 crop year are led by China with purchases of 78,600
bales. Indonesia, Pakistan, India and Japan round out the top five with purchases of 62,800 bales, 42,800
bales, 35,000 bales and 23,000 bales respectively. These five nations account for 77.4% of all the export
based purchases of U.S. Pima made to date this year.
    There were no new forward net sales. The current new crop sales totals stand at 8,800 bales and zero
bales respectively for 2008/09 and 2009/10.


7






All cotton production was forecast at 17.8 million 480-pound bales, up 3 percent from last month but down
17 percent from last year’s 21.6 million bales, according to the Agricultural Statistics Board, NASS, USDA.
Yield was expected to average 811 pounds per harvested acre, up 28 pounds from last month but down 3
pounds from 2006.  Harvested area was expected to total 10.5 million acres of all cotton, down 1 percent
from last month and down 17 percent from last year.  Upland cotton production was forecast at 17.0 million
480-pound bales, up 3 percent from last month but down 18 percent from last year.  Compared with last
month, lower upland production forecasts in the Delta and Southeast were offset by the 15 percent increase
in Texas production to 7.00 million 480-pound bales.  American Pima production was forecast at 793,000
bales, down 2 percent from last month but up 4 percent from last year. American Pima harvested area was
expected to total 289,000 acres, down 1 percent from last month and down 11 percent from 2006.
    Upland cotton harvested area, at 10.3 million acres, was down 1 percent from last month and down 17
percent from last year.  Based on administrative data, planted area was revised to 10.6 million acres, down 2
percent from the June estimate and down 29 percent from last year.  Area for harvest was expected to total
10.5 million acres, down 1 percent from last month and down 17 percent from 2006.  Upland producers plan
to harvest 10.3 million acres, down 1 percent from last month and down 17 percent from last year. American Pima harvested area, at 289,000 acres, was down 4,000 acres from last month and down 11 percent from
last year.
    In the southeastern states, Alabama, Florida, Georgia, North Carolina, South Carolina, and Virginia,
producers battled intense heat and lack of moisture during the month of August.  Some producers expressed
concern about plants wilting, shedding squares, and dropping bolls due to the drought conditions.  However,
the crop developed ahead of normal under the hot weather conditions.  During the latter part of the month,
the region did receive some scattered showers but not enough to offer any relief to the stressed crop.  As of
September 2, crop condition ratings were mostly fair to poor except in Alabama, where the crop was rated
mostly poor to very poor.
    The cotton crop in the Delta States matured rapidly due to continual hot, dry weather during August.
The crop was reported to be in mostly fair-to-good condition. By late August, defoliation was underway
with harvest beginning throughout the region.  In Mississippi, data from objective yield survey show the
bolls per acre slightly below the 5-year average.  In Louisiana and Arkansas, boll counts were above the 5-
year averages.  The High Plains of Texas finally received the high temperatures during August needed to
promote crop growth and development at a normal pace.  As of September 2, eighteen percent of the crop
had bolls opening; still lagging normal due to the late start of the crop. T he crop condition was rated mostly
fair to good.  By mid-August, harvesting in the Rio Grande Valley was underway later than normal, due to
the cool temperatures and rain received during July.  Data from the objective yield survey indicated that the
Texas boll weight was the third heaviest in the last five years.  In Oklahoma and Kansas, the crop was
progressing behind normal but was rated in mostly good condition.
    California upland cotton producers experienced ideal weather which helped promote cotton development.  The crop was rated in mostly good-to-excellent condition.  Harvesting began during the latter part of
August in Arizona.  Objective yield measurements in California showed the bolls per acre to be the highest
in the last five years, while boll weight was the lowest in the last five years.
    American Pima production was forecast at a record high of 793,000 bales, down 2 percent from August
but up 4 percent from last year.  The U.S. yield was forecast at 1,317 pounds per harvested acre, down 8
pounds from the August forecast but up 181 pounds from 2006.  California growers were expected to
harvest a record high production at 740,000 bales, down 1 percent from last month but up 8 percent from
last year.
    Ginnings totaled 182,250 running bales prior to September 1, compared with 405,500 running bales
ginned prior to the same date last year and 592,050 running bales in 2005.

The following information was excerpted from the Cotton and Wool Situation and Outlook Report,
released September 13, by the Economic Research Service, USDA:



The latest U.S. Department of Agriculture (USDA) cotton projections for 2007/08 indicate that the global
cotton ending stocks ratio compared with use is expected to decline about 6 percentage points, from
2006/07?s 46 percent to 2007/08?s 40 percent.  If China’s stocks are excluded from the world total, the decline is about 4 percentage points, from 34 percent to 30 percent. For 2007/08, USDA is forecasting the
lowest level of stocks relative to use in at least a decade.
    The decline in the 2007/08 global ending stocks-to-use ratio is in large part attributable to the United
States. U.S. ending stocks rose sharply in 2006/07, giving the United States its largest global share of stocks
since the mid-to late-1980?s.  Two-thirds of 2007/08?s global 5.2-million-bale decline in stocks is expected
to occur in the United States.
Domestic Outlook
DOMESTIC OUTLOOK

2007/08 Production Forecast Higher in September
    During the previous 20 years, the September forecast has been above final cotton production 7 times
and below 13 times. Past differences between the September forecast and the final production estimate
indicate that chances are two out of three that the 2007 U.S. cotton crop will range between 16.6 and 19.0
million bales.
    Compared with last season, upland production is expected to be lower in three of the Cotton Belt
regions. Only the Southwest region is forecast to produce a larger crop in 2007 than in 2006. Southwest
production is projected at nearly 7.3 million bales, 19 percent above last season but 22 percent below the
2005 crop of nearly 8.9 million bales.
    In the Delta, cotton production is estimated at about 5.4 million bales, the lowest since 2000/01 as
cotton area declined this season. Alternative crop plantings this spring forced cotton area to its lowest since
1986/87. Similarly for the Southeast, cotton area was reduced this season to its lowest since 1994/95, while
production is estimated at about 3.2 million bales, the lowest since 1993/94.
In the West, upland area continues to decline as acreage moves into ELS or tree crops. Upland production in
the region is forecast at nearly 1.2 million bales, the least since 1946/47.  In contrast, ELS production is
dominated by the region and California in particular. The total ELS crop is forecast at a record, with
California accounting for 93 percent of the total. The national ELS yield is estimated at 1,317
pounds per harvested acre.
    Total area planted to cotton is estimated at nearly 10.85 million acres, with harvested acreage estimated
at 10.5 million acres, both the lowest since 1989/90.  The implied abandonment is estimated at a historically
low 3 percent, well below last season but similar to the 2005 crop. The national yield is currently projected
at 811 pounds per harvested acre, slightly below last season and the lowest in 4 years.

U.S. Textile Trade Higher
U.S. textile imports rose during June 2007, to 1.7 billion (raw-fiber equivalent) pounds, 11 percent above
May but 5 percent below June 2006. Imports of cotton, wool, and manmade fiber textiles increased in June
compared with a month earlier.  Imports of all major end-use categories increased in June with apparel
imports, at 1.1 billion pounds, accounting for most of the increase. Cotton imports, at 981 million pounds,
accounted for 57 percent of the total. Imports of cotton rose 10 percent from May but were 6 percent below
a year ago. Imports from Asia accounted for 70 percent of the June total, while shipments from other North
American countries provided another 22 percent.
    Overall, the U.S. textile trade deficit for the first half of 2007 reached 7.1 billion pounds, 6 percent
higher than in the first half of 2006. The cotton textile trade deficit, at 4.2 billion pounds, rose 5 percent
above January-June 2006. However, cotton’s share of the total trade deficit was 59 percent, the same share
as during the first 6 months of 2006.





INTERNATIONAL OUTLOOK

World Economic Growth Sustains Cotton Consumption Gains
World cotton consumption prospects remain strong in 2007/08. Despite recent volatility in world credit
markets, the outlook for above-average global income growth remains good. Furthermore, although cotton
production is falling in 2007/08, cotton supplies are expected to remain plentiful, and while cotton prices
have risen in recent months, polyester prices have also risen.
    World cotton production in 2007/08 is forecast about 2 million bales lower than in 2006/07, at 117
million bales. Beginning stocks in 2007/08 are estimated 1 million bales lower than in 2006/07, but the
volume of global cotton from unaccounted sources is forecast to be about 1 million bales higher. The
volume of cotton available in 2007/08 is therefore forecast at 179 million bales, its second highest ever, and
only 1.7 million bales lower than in 2006/07.1 World cotton consumption in 2007/08 is expected to increase
4 percent from the year before, to 128 million bales.
    World cotton consumption’s annual growth rate averaged over 5 percent during 1996-2006. This is
more than double its long run growth rate of 1.8 percent. Favorable prices relative to polyester account for
some of this strength, but a prolonged period of above-average income growth is an important factor.
During the 1980s, world gross domestic product (GDP) growth averaged 3.3 percent annually, and during
the 1990s it averaged 3.2 percent.2 However, since 2000, the world economy has grown 4.3 percent each
year on average. The lowest annual rate reported by the International Monetary Fund (IMF) since 2004 has
been 4.9 percent. For 2007 and 2008, the IMF forecast growth of 5.2 percent in its July 2007 update to its
World Economic Outlook.   While some GDP forecasts for the United States have been scaled back in recent
months, the likely impact of credit volatility on total global economic activity has been less certain.

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STAT News Service