The USDA raised its estimate for US cotton crop to 300,000 bales. The crop size was increased based on USDA increasing the average US yield to 900 pounds per acre. All states in the Southeast averaged at least 900 pounds per acre and all states in the Midsouth averaged above 1000 pounds per acre.
US carryover was increased 300,000 bales, up to 6.1 million. Certainly a few more hands must be played, but the odds favor a somewhat smaller final crop size and bigger export number. Thus, a carryover closer to 5.5-5.6 million bales is likely on the horizon.
With futures between 67 and 72 cents mills will continue to flock to the US for cotton. US cooperatives and merchants are aggressively offering strong basis bids to potential mills and that has encouraged excellent sales. It is a far more economical trade for mills versus other cottons. Mills can take advantage of the basis offers, buy On-Call and fix prices at later date. Granted, mills have not been very astute at fixing the price the past two years, but possibly they will begin to finally pay attention this season.
USDA raised its estimate of world cotton demand 1.3 million bales over last month’s estimate, and is now up to 119.3 million bales, more than 5.0 million bales more than last year. Being redundant, demand moves markets and the demand for cotton will continue to grow. Driven by consumer preferences, and the rapid increase in polyester prices due to massive worldwide pollution issues that are still seemingly denied by the casual wear brands like Nike and Adidas, as well as some of the big box retail groups, cotton has become much more price competitive versus polyester and other plastic fibers.