Declining cotton production will lead to higher prices in 2013-14

“Global cotton production will decrease by 11 percent to 23.2 million tons (106.56 million bales) in 2013-14 due to lower cotton prices and increased attractiveness of competing crops”, says the International Cotton Advisory Committee (ICAC) in its latest market outlook published this week.

Cotton values have fallen by two-thirds from their all-time highs reached in March 2011, depressed by the run-up in inventories encouraged by higher values. The prospect of a dip in cotton production follows assessments by US Department of Agriculture officials of the implications of low prices working their way through to southern hemisphere growers, in countries such as Australia and Brazil.

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Commodities Erase 2012 Gain on Global Economic Woes

Commodities declined, erasing this year’s advance, on speculation that demand for energy, industrial metals and some agricultural products will slump because of the sluggish global economy.

Cotton futures fell the most in 10 weeks, and crude oil dropped to the lowest since mid-July. Gasoline declined for the ninth straight session, the longest slump since at least October 2005. Copper dropped to the lowest since Sept. 7.

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Lumber at 18-month high; Cotton at 5-month

Lumber prices shot higher this week, reaching the highest price in over 18 months, spurred on by a stronger housing market.

On Wednesday, the US Commerce Department released figures showing that new home construction in September reached an annualized rate of 872,000, the highest figure in over four years.

Lumber rallied over $20 +7% per thousand board feet this week, reaching $318.70 on Friday morning.

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USDA releases new Crop Production report

USDA released today its October Crop Production report which shows corn production down slightly from September forecast, soybean production up 9% and cotton production up 1%.

Corn production is forecast at 10.7 billion bushels, down slightly from the September forecast and down 13 percent from 2011. This represents the lowest production in the United States since 2006. Based on conditions as of October 1, yields are expected to average 122.0 bushels per acre, down 0.8 bushel from the September forecast and 25.2 bushels below the 2011 average. If realized, this will be the lowest average yield since 1995. Area harvested for grain is forecast at 87.7 million acres, up less than 1 percent from the September forecast and up 4 percent from 2011. Acreage updates were made in several States based on administrative data.

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Cotton Glut Seen Extending Slump as Levi’s Costs Slide

Cotton warehouses from China to Australia are bulging with the biggest-ever glut, a year after record prices spurred farmers to expand output.

Prices tumbled 16 percent this year.

Harvests will exceed demand for a third year, swelling stockpiles by 10 percent to 74.67 million 480-pound bales by August, the U.S. Department of Agriculture estimates. Inventories in China, the biggest user, will triple over two years to a record as domestic demand slumps to the lowest since 2005, USDA data show. Cotton may drop 12 percent to 67.87 cents a pound by the end of the year, according to the average of 20 analyst and merchant estimates compiled by Bloomberg.

via Cotton Glut Seen Extending Slump as Levi’s Costs Slide – Bloomberg.

Cotton: Indian harvest may decrease up to 30%

The cotton crop in Gujarat, the largest producer in India, may plunge as much as 30 percent in the harvest starting Oct. 1 from 12 million bales of 170 kilograms each a year earlier, as the worst monsoon since 2009 parches fields and curbs planting, potentially cutting exports for the first time in three years.

Rainfall in some parts of Gujarat is as much as 81 percent below a 50-year average as more than 50 percent of India is threatened by drought, shriveling crops from rice to cotton and oilseeds.

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Cotton Futures Surge

Cotton futures surged 6% to the exchange-imposed upper limit Tuesday as investors with bets that prices would fall found themselves victims of a “short squeeze”—thanks largely to recent purchases by China.

A short squeeze occurs when investors who shorted the market, or bet on declining prices, are forced to pay higher prices to exit their wagers in a market where prices are rising rapidly.

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Plunging cotton prices cast pall on commodities outlook

The decline has been so sharp that the price of cotton is now at its lowest level since late 2009, when the global economy was still in the early stages of emerging from the frightening financial crisis the year before.

Prices have fallen to about 67 cents (U.S.) a pound in New York, down from a record high of nearly $2.20 a pound in March, 2011. That’s nearly a 70 per cent slide, and makes crude oil‘s recent troubles look comparatively tame.

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India Bans Cotton Exports

Front-month prices on ICE Futures U.S. rose 6%, or 5.25 cents, to settle at 92.71 cents a pound, while the more actively traded May-delivery contract surged by the exchange-permitted daily limit of four cents to settle at 92.23 cents a pound. The front-month contract, for March delivery, was exempt from the limit because it is in the period in which traders state whether they will deliver or accept physical cotton against the contract.

India is once again pulling the strings in the cotton market.

The world’s second-largest producer of the fiber after China unexpectedly announced an immediate ban on cotton exports, sending benchmark futures prices soaring.

via India Bans Cotton Exports – WSJ.com.

Record Cotton Crop Spurs Goldman to Predict Declining Prices: Commodities

Cotton prices may decline 15 percent to 77 cents a pound on ICE Futures U.S. in New York by the end of next year, from 90.91 cents now, based on the median of 12 analyst estimates compiled by Bloomberg.

The combination of a record cotton crop and falling consumption will expand global stockpiles by the most since 2005, driving further declines in the price of this year’s worst-performing commodity.

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