November Cotton Market Update

Monday’s Crop Production and World Agricultural Supply and Demand Estimates reports from USDA reversed last month’s changes and increased the expected size of the U.S. crop. Total U.S. production is forecast at 16.4 million bales, up 140,000 from October. The national yield was raised to 797 pounds per acre, up from 790 last month, due to higher projected yields across Atlantic states and states in the southwest. Mississippi’s yield and production estimates were trimmed, though, to 1,143 pounds per acre yield (compared to 1,154 last month) and production of 1.0 million bales (1.001 million projected last month).

Cotton use was remained unchanged for the second month in a row, with total projected use at 13.80 million bales. Domestic demand remains at 3.80 million bales and exports are projected at 10.00 million. A stronger U.S. dollar did not deter USDA forecasters, which makes sense given the early stage of the current marketing year.

The higher production level added 200,000 bales to ending stocks, pushing the amount of cotton expected to be held in inventory at 5.10 million bales, or 37.0% of total use. Projected farm price continues to average 60 cents per pound, however, the price range was narrowed one cent per pound on each end.

Globally, few changes were made at the top line (all global supply and use), but offsetting changes for individual countries were made. The changes to U.S. supply and use are noted above. China’s production was lowered by 50,000 bales but their use was lowered by the same amount. Overall, total global ending stocks were raised marginally ro 107.36 million bales, compared to 107.11 projected last month. These stocks are 94.3% of total global use. China’s stocks account for 57.9% of global stocks.

Nearby December took the brunt of the report’s bearish news, ending the day down 1.53 cents per pound to 62.43. All 2015 contracts were down more than a penny a pound as well, with all of these down between 1.10 to 1.29 cents.