cotton economic update national cotton council mid-year board meeting amelia island, florida august...
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Cotton Economic Update
Cotton Economic Update
National Cotton Council
Mid-Year Board Meeting
Amelia Island, Florida
August 24-26, 2009
National Cotton Council
Mid-Year Board Meeting
Amelia Island, Florida
August 24-26, 2009
Has the Economy Bottomed?Has the Economy Bottomed?
• Fed Chairman Bernanke thinks so– “After contracting sharply over the past
year, economic activity appears to be leveling out, … ,and the prospects for a return to growth in the near term appear good.”
– “the economic recovery is likely to be relatively slow at first...”
• Fed Chairman Bernanke thinks so– “After contracting sharply over the past
year, economic activity appears to be leveling out, … ,and the prospects for a return to growth in the near term appear good.”
– “the economic recovery is likely to be relatively slow at first...”
Percent
-8
-6
-4
-2
0
2
4
6
8
06 07 08 09
US World (Source: IMF)
% Change in Real GDP% Change in Real GDP
3rdQ?
Cotton & Textile DemandCotton & Textile Demand
Billion Dollars
0
10
20
30
40
50
60
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Billion Dollars
0
10
20
30
40
50
60
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Textile Trade Declined thru May(Totals as reported by Global Trade Atlas)
Textile Trade Declined thru May(Totals as reported by Global Trade Atlas)
Million Bale Equivalents
0
5
10
15
20
25
00 01 02 03 04 05 06 07 08 09f
US Cotton Domestic ConsumptionUS Cotton Domestic Consumption
% Change from Previous Quarter
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
05 06 07 08 09
More Modest Drop in US Spendingfor Clothing & Shoes
More Modest Drop in US Spendingfor Clothing & Shoes
US Cotton Mill UseMillion 480-Lb. Bales
0
1
2
3
4
5
6
7
08-0
5
02-0
6
08-0
6
02-0
7
08-0
7
02-0
8
08-0
8
02-0
9
08-0
9
Monthly Mill Use, Annualized
Crop Year Total
International MarketsInternational Markets
Update on Key CountriesUpdate on Key Countries
• W Africa – Lower production & exports
• Brazil – Some quality concerns with current harvest; expected shift to soybeans
• Central Asia – Smaller crops due to reduced area
• Pakistan – No widespread concerns on production; new support to textile industry & some improvements in spinning margins
• W Africa – Lower production & exports
• Brazil – Some quality concerns with current harvest; expected shift to soybeans
• Central Asia – Smaller crops due to reduced area
• Pakistan – No widespread concerns on production; new support to textile industry & some improvements in spinning margins
Million Bales
0
10
20
30
40
50
60
70
02 03 04 05 06 07 08 09f
Net Imports Production Use/Unacct Stocks
Million Bales
0
10
20
30
40
50
60
70
02 03 04 05 06 07 08 09f
Net Imports Production Use/Unacct Stocks
China Cotton Supply & UseChina Cotton Supply & Use
Cen
ts/P
ou
nd
40
50
60
70
80
90
100A
ug
-05
No
v-05
Mar
-06
Jun
-06
Sep
-06
Jan
-07
Ap
r-07
Au
g-0
7
No
v-07
Mar
-08
Jun
-08
Oct
-08
Jan
-09
Ap
r-09
China Index A (FE)
China Cotton Price vs. A Index
Rupees per Metric Ton
0
5,000
10,000
15,000
20,000
25,000
30,000
02 03 04 05 06 07 08 09
Rupees per Metric Ton
0
5,000
10,000
15,000
20,000
25,000
30,000
02 03 04 05 06 07 08 09
India’s Min Support PriceIndia’s Min Support Price
Million Bales
-5
0
5
10
15
20
25
30
02 03 04 05 06 07 08 09f
Net Exports Production Use Stocks
Million Bales
-5
0
5
10
15
20
25
30
02 03 04 05 06 07 08 09f
Net Exports Production Use Stocks
India Cotton Supply & UseIndia Cotton Supply & Use
Million Bales
0
4
8
12
16
20
24
28
32
02 03 04 05 06 07 08 09
U.S. Rest of World
Cotton ExportsCotton Exports
US ProductionUS Production
Million Acres
0
1
2
3
4
5
6
7
8
00 01 02 03 04 05 06 07 08 09e
SE Mid-South SW West
Million Acres
0
1
2
3
4
5
6
7
8
00 01 02 03 04 05 06 07 08 09e
SE Mid-South SW West
‘09 Cotton Acres @ 9.05 Million‘09 Cotton Acres @ 9.05 Million
Cotton Area vs Relative Prices
0
3
6
9
12
15
18
01 02 03 04 05 06 07 08 09e
Mil
lio
n A
cre
s
0.00
0.05
0.10
0.15
0.20
0.25
0.30
Ra
tio
of
Fu
ture
s P
ric
es
Planted Cotton/Corn Cotton/Soy
Cotton Area vs Relative Prices
0
3
6
9
12
15
18
01 02 03 04 05 06 07 08 09e
Mil
lio
n A
cre
s
0.00
0.05
0.10
0.15
0.20
0.25
0.30
Ra
tio
of
Fu
ture
s P
ric
es
Planted Cotton/Corn Cotton/Soy
US Acres & Relative PricesUS Acres & Relative Prices
Million Bales
17.1
20.2 21.3 20.4
17.3
13.2
18.3
23.3 23.921.6
19.2
13.8
12.8
0
5
10
15
20
25
30
03 04 05 06 07 08 09
August Estimate Final
US Cotton Production
% Rated Good & Excellent
30
35
40
45
50
55
60
6/14 6/28 7/12 7/26 8/9 8/23 9/6 9/20
2006 2007 2008 2009
Cotton Crop ConditionsCotton Crop Conditions
US Supply & DemandUS Supply & Demand
2009/10
Beg Stocks 6.10 6.0-6.2
Production 13.21 13.2-14.0
Total Supply 19.31 19.2-20.2
Mill Use 3.50 3.2-3.5
Exports 10.20 10.0-11.0
Ending Stocks 5.60 4.7-7.0
Cen
ts/P
ou
nd
35
45
55
65
75
85
95Ja
n-0
6
Ap
r-06
Au
g-0
6
Dec
-06
Ap
r-07
Au
g-0
7
Jan
-08
May
-08
Sep
-08
Dec
-08
Ap
r-09
Au
g-0
9
Nearby NY A (FE)
Cotton Prices
SummarySummary
Percent Change in World Mill Use
-15%
-10%
-5%
0%
5%
10%
15%
00 01 02 03 04 05 06 07 08 09
Recovery in Mill Use?Recovery in Mill Use?
Million Bales
-12
-9
-6
-3
0
3
6
9
12
15
02 03 04 05 06 07 08 09
Projected Stock Change atBeginning of Year
Actual Stock Change
Drawdown in World Stocks?Drawdown in World Stocks?
Cotton Area vs Relative Prices
0
3
6
9
12
15
18
01 02 03 04 05 06 07 08 09e 10?
Mil
lio
n A
cre
s
0.00
0.05
0.10
0.15
0.20
0.25
0.30
Ra
tio
of
Fu
ture
s P
ric
es
Planted Cotton/Corn Cotton/Soy
Cotton Area vs Relative Prices
0
3
6
9
12
15
18
01 02 03 04 05 06 07 08 09e 10?
Mil
lio
n A
cre
s
0.00
0.05
0.10
0.15
0.20
0.25
0.30
Ra
tio
of
Fu
ture
s P
ric
es
Planted Cotton/Corn Cotton/Soy
Have US Acres Bottomed?Have US Acres Bottomed?
’10 ratios based on current Dec & Nov ’10 futures contracts
MerchantsMerchantsGinnersGinners CottonseedCottonseed
ProducersProducers
CooperativesCooperatives
WarehousesWarehousesManufacturersManufacturers