Weekly Cotton Market Review

MEMPHIS - Mar 7/08 - SNS -- The USDA released its latest review of cotton market conditions in the United States, reviewing conditions through the week ending 2 7.

March 7, 2008

Average spot cotton quotations were 590 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
76.93 cents per pound for the week ended Thursday, March 6.  The weekly average was up sharply from 71.03
cents reported last week and 49.31 cents reported the corresponding period a year ago.  This is the highest
weekly average since the week ending July 9, 1998 when the weekly average was 77.35 cents.  Daily average
quotations ranged from a low of 74.58 cents on Friday, February 29 to a new season high of 79.16 cents on
Wednesday, March 5.  Spot transactions reported in the Daily Spot Cotton Quotations for the week ended March
6 totaled 56,161 bales compared with 96,034 bales last week and 21,425 a year ago.  Total spot transactions for
the season were 1,393,025 bales compared to 905,901 bales the corresponding week a year ago.  The ICE May
futures settlement prices ended the week at 85.28 cents compared to 79.33 cents reported last week.

Unusual levels of interest in the commodity markets led to season-high prices on four
consecutive days, which included two limit-up days in ICE futures trading.


Southeastern markets.   Spot cotton trading was slow.  Demand was very light late in the period due to
sharply higher ICE futures prices.  Supplies were moderate.  Average local prices were significantly higher.
Trading of CCC-loan equities was inactive.  Producers took advantage of higher ICE December futures to
fix prices on a heavy volume of 2008-crop cotton.  Merchant interest in booking additional 2008-crop
cotton was non-existent at the current ICE December futures levels.

>	Mixed lots containing mostly color 31 and 41, leaf 3 and 4, staple 34 and shorter, mike 37-
49, strength 27-29, and uniformity 79-81 traded at around 650 points off ICE May futures,
FOB warehouse (compression charges not paid).

Severe thunderstorms produced heavy wind gusts and heavy precipitation across the Southeast during the
period.  Scattered storm damage and flash flooding was reported in some areas.   Rainfall amounts ranged
from one-half of an inch to two inches.  Drought conditions improved in Alabama and Georgia.  Producers
welcomed the moisture in North Carolina, but additional rainfall is needed as exceptional drought
conditions persist in much of the state.



South Central markets.   Spot cotton trading was inactive.  Available supplies were light.  Demand was
light.  Average local spot prices were significantly higher.  Trading of CCC-loan equities was light.
Producers offered new-crop cotton at 600 points off ICE December futures.  Inquiries from representatives
of domestic and foreign mills were light.  No sales were reported.

>	A light volume of 2008-crop cotton was contracted at 550 points off ICE December futures.
>	A light volume of CCC-loan equities traded for 11 cents per pound.

A winter storm brought heavy rain and light snow flurries to the area near the middle of the reporting
period.  Rainfall totals measured two to three and one-half inches throughout the region.  Snow
accumulations of several inches were reported in parts of the North Delta late in the period.  The moisture
received helped to alleviate the abnormally dry soil conditions in central and northern Mississippi.
Although many fields had standing water in low-lying areas, more rainfall is needed to restore the
subsurface water table.

Southwestern markets.   Spot trading was slow in the East Texas/Oklahoma and West Texas markets.
Trading of CCC-loan equities was slow in east Texas/Oklahoma and moderate in the west Texas market.
Supplies were moderate.  Demand was light for color 31 and better, leaf 3 and better, staple 34 and longer,
and mike 35-49.  Average local spot prices for east Texas/Oklahoma and west Texas were significantly
higher.  No domestic or export mill inquiries were reported.

East Texas/Oklahoma

>	A light volume of color 31 and 41, leaf 4-7, staple 34-37, mike 31-40, strength 27-32, and
uniformity 78-82 traded in Oklahoma for around 60.00 cents per pound, FOB car/truck
(compression charges not paid).
>	A light volume of color 41, leaf mostly 4 and 5, staple 31-34, mike 40-45, strength 28-32, and
uniformity 78-82 traded in Oklahoma at around 64.00 cents, same terms as above.
>	A light volume of CCC-loan equities traded in Oklahoma for seven and one-half to nine cents.
>	A light volume of CCC-loan equities traded in south Texas for nine and one-quarter cents.

Ginning in Kansas and Oklahoma were entering the final stages.  Planting in the Rio Grande Valley was
limited.  Daytime temperatures were in the mid-to-low 80s.  Most producers in the Coastal Bend need rain
before wide-scale planting could begin.
West Texas

>	A light volume of color 31 and 41, leaf mostly 3, staple 33 and longer, mike 35-41, strength
26-33, and uniformity 76-82 traded for around 64.75 cents per pound, FOB car/truck
(compression charges not paid).
>	A light volume of color 21 and better, leaf 3 and better, staple 33 and longer, mike 33-49,
strength 24-32, and uniformity 77-82 traded at around 67.00 cents, same terms as above.
>	A light volume of 2004, 2005, and 2006-crop cotton, color 41 and better, leaf 4 and better,
staple 34 and longer, mike 30-52, strength 24-32, and uniformity 77-83 traded at around 40.00
cents, same terms as above.
>	A moderate volume of CCC-loan equities traded for 9 to 11 cents.

Ginning in the Lubbock area neared completion and is expected to continue for another month or so.
Storage of modules in fields and on gin yards remained in areas south of Lubbock.


Western markets.  Spot cotton trading was inactive in the San Joaquin Valley (SJV).   Supplies were
moderate.  Demand was light.  Average local spot prices were significantly higher.  Merchants reported that
local offers, trading, and export mill demand was non-existent as ICE futures increased sharply during the
period. Temperatures were in the mid-to-high 60s.   Field activity was brisk.  Cotton-planting season was
about two weeks away.  On March 4, the SJV Cotton Board approved Phytogen 72, a new Upland standard
for the Valley.

Spot trading of Upland cotton was inactive in the Desert Southwest (DSW).  Supplies were moderate.
Demand was light.  Average local spot prices were higher.   Brokers reported that many merchants were out
of the market at this time, mostly due to sharp increases in ICE futures.  Sunny, clear skies prevailed.
Temperatures were in the high 60s to mid 70s.  Producers were busying preparing fields.  Some planting
was reported in Yuma, Arizona.

American Pima spot cotton trading was inactive.  Supplies and demand were moderate.  Merchants reported
an increase of export mill inquiries mostly in response to ICE futures prices.  Sales were reported to mills in
India and Pakistan.

Textile mill report.   Inquiries from domestic mill buyers were very light.  Reports indicated that demand
was non-existent for additional raw cotton for immediate-to-nearby delivery, due to sharply higher ICE
futures prices during the period.   Mill buyers were cautiously assessing their position in the market.  Denim
sales were sluggish.
    Inquiries through export channels were moderate.  Demand was good for USDA Green Card Class,
color 31 and 41, leaf 4, and staple 34 and longer for immediate-to-nearby shipment.  No sales were
reported.  Reports indicated that foreign mill buyers were sourcing cotton from other countries due to
sharply higher U.S. cotton prices.




Exports of all cotton from the United States totaled 842,500 bales during February, according to the
Foreign Agricultural Service, USDA.  A month earlier, 980,800 bales were shipped and 756,900 bales were
exported in February 2007.  Shipments for the first seven months (August-February) this marketing year
totaled 6,918,400 bales, compared to 4,471,300 bales exported through February last year.





Forward contracting of 2008-crop cotton.  United States upland cotton growers had forward contracted
about 759,487 acres of the 2008 crop by February 29.  This compares with 8,567 acres booked by the end
of February 2007.  In the south central states, growers had contracted around 330,307 acres and
southwestern states' growers had booked around 287,000 acres.  In the southeastern states, around 139,401
acres were had booked and growers in the western states had about 2,779 acres under contract.  These
estimates were based on informal surveys made by the USDA, Agricultural Marketing Service’s Cotton Program.


USDA ANNOUNCES SPECIAL LIMITED GLOBAL IMPORT QUOTA FOR UPLAND COTTON

The U.S. Department of Agriculture announced March 3, a special quota that will allow additional U.S.
imports of up to 196,793,560 pounds (89,263,986 kilograms) of upland cotton. The quota will be in effect for
90 days.
	The quantity of upland cotton that may be imported is in addition to the 20,581,400-pound (9,335,558-
kilogram) quota established pursuant to section 22 of the Agricultural Adjustment Act of 1933, as amended.
The quota is in effect from March 6 through June 3, 2008.  To be counted under this quota, cotton must be
imported within this time period.
	The Agricultural Act for 1949, as amended, requires the President to establish an import quota program
which provides that, whenever the Secretary of Agriculture determines and announces that the average price
of the base quality of upland cotton in the designated spot markets for a month exceeded 130 percent of the
average price of such quality of cotton in such markets for the preceding 36 months, a special limited global
import quota shall take effect.
	In February, the average spot market price for Strict Low Middling (SLM) 1-1/16 inch (leaf grade 4,
micronaire 3.5-3.6 and 4.3-4.9, strength 24-25 grams per tex) upland cotton was 65.9 cents per pound, which
was 131 percent of the February 2005 through January 2008 average price.
	The 1949 Act also requires the amount of the special quota to be equal to 21 days of domestic mill
consumption of upland cotton at the seasonally-adjusted average rate of the most recent three months for
which data are available.  The figure of 196,793,560 pounds (89,263,986 kilograms) was based on
consumption from August 2006 through October 2006.
	The special quota was not specific as to staple length or country of origin and it does not affect tariff
rates or phytosanitary regulations.


The following information was reported by the International Cotton Advisory Committee, (ICAC)March 3, 2008

World Cotton Prices Surge in February to the Highest Since August 1997
The Cotlook A Index averaged 70 cents per pound during the first seven months of 2007/08, 11 cents higher
than during the same period last season.  The average 2007/08 Cotlook A Index as of the end of February
2008 was the highest since 1997/98 and equals the 30-year average recorded between 1973/74 and 2002/03.
    As a result of the gap between world production and consumption, world cotton ending stocks were
projected to decline during 2007/08 by 1.1 million tons (9%) to 11.5 million tons.  World mill use was
projected to exceed production again in 2008/09, and a further reduction in world ending stocks could take
place to an estimated 10.7 million tons (-7%).
    The fundamentals of cotton supply and use alone would suggest a season-average Cotlook A Index of
less than 70 cents per pound in 2007/08.  However, based on trends in prices during the first seven months
of2007/08, it is obvious that prices will be higher.  During February 2008, the Cotlook A index rose from
72cents per pound to 81 cents, the highest level since August 1997.  The price increase during February was
not caused by changes in estimates of fundamental factors of cotton supply and use during the past month.
Increases in prices of competing crops and the increasing role of commodity investment funds may be
affecting cotton prices in ways that are not reflected in fundamental measures of cotton supply and use.
    Considering trends in the Cotlook A Index during the first seven month of 2007/08 and assuming that the
Cotlook A Index fluctuates between 76 and 83 cents per pound during the rest of the season, the Secretariat
projected that the Cotlook A Index will average 74 cents per pound during 2007/08.  Given that world ending
stocks are expected to fall further during 2008/09, the upward trend in cotton prices is expected to continue.

---

STAT News Service