USDA increased its 2016-17 export forecast by 200,000 bales to 12.7 million of U.S. cotton in its monthly World Agricultural Supply and Demand Estimates report that came out Thursday (Feb. 9).
While that may not seem like much, the increase – which occurred with July cotton futures trading around 78 cents per pound– was seen as almost a lone ray of sunshine among all of the commodity markets reflected in the February WASDE numbers.
“Literally just 60 days ago, USDA was at 12 million bales of exports, and in the last three reports they’ve increased those by 700,000 bales,” said O.A. Cleveland, professor emeritus at Mississippi State University. “In 60-plus days, that’s a pretty huge increase. I think this tells us this U.S. crop is so competitive worldwide that these exports are just flying out of here.”
Dr. Cleveland, a panel member on the monthly Ag Market Network Conference call on Friday (Feb. 10), said he expected the current pace of exports, which totaled 200,000 bales in USDA’s latest weekly report, would continue for at least another two months.
“I think we have more positives on the up side, and increasing it another 200,000 bales is very positive,” he said. “I would just like to see them take a bigger bite out of that pie and not just piecemeal it month after month.”
‘Have to be impressed’
“I think 200,000 bales last week with May at contract highs – you have to be impressed with that,” said H.W. “Kipp” Butts, director of energy services and senior analyst, cotton at Informa Economics in Memphis, Tenn. “I don’t know how much more we need to increase it, but the evidence says it’s more likely to go up than down at least in the short term.”
What was even more impressive than the 200,000 bales in last week’s report was that China was on a holiday for its lunar New Year, said Dr. Cleveland. “They bought about 3,000 bales of that 200,000.”
Jarral Neeper, president of Calcot Ltd., in Bakersfield, Calif., and another panel member, said he could see 2016-17 exports going as high as 13.3 million bales by the end of the marketing year on July 31. “I don’t know if it will hit 13.5 or not, but I think 13.3 is very doable.”
That could take ending stocks down, but any decline might be offset by increased production in Texas where the crop on the High Plains is still being ginned. He said he would not be surprised if the Texas crop was increased by 200,000 to 300,000 bales.
“I continue to hear about record yields in the area west of Lubbock around Seminole,” said Butts. “I wouldn’t be surprised at seeing a higher number, which, again, supports Jarral’s thoughts about 13.3 million in exports. The surprise has been how strong the demand is at these price levels. Sales have been slowing down, but not to the degree you might think.”
Ending stocks reduced
USDA reduced its forecast of ending stocks from 5 million to 4.8 million bales because its production and mill use estimates were unchanged at 16.96 million bales and 3.3 million bales for the year ending July 31.
The Agriculture Department did increase its season average price range forecast from 65 to 69 cents per pound to 67 to 71 cents per pound.
In other highlights of the February report:
- USDA raised its estimate of U.S. wheat exports 50 million bushels to 1.03 billion reflecting a strong pace to date. Food use is lowered 3 million bushels to 960 million following the Feb. 1 release of NASS’ Flour Milling Products report. These changes resulted in a net 47-million-bushel reduction in ending stocks, now projected at 1.14 billion bushels, which would still be the largest since the late 1980’s. The season-average farm price is raised $0.05 at the midpoint of the range to $3.85 per bushel on strengthening cash prices.
- The Department of Agriculture said the 2016/17 U.S. corn outlook is for increased food, seed and industrial use and reduced stocks. “Corn used to produce ethanol is raised 25 million bushels to 5.35 billion based on the most recent data from the Grain Crushings and Co-Products Production report, and strong pace of weekly ethanol production during January as indicated by Energy Information Administration data. Non-ethanol FSI is raised 10 million bushels. Corn ending stocks are lowered 35 million bushels from last month. The projected range for the season average corn price received by producers is narrowed 10 cents on each end to $3.20 to $3.60 per bushel, with the midpoint unchanged at $3.40.
- Forecast U.S. sorghum exports are lowered 25 million bushels from last month, reflecting the slow pace of export commitments through January, particularly to China. Offsetting is a projected increase in feed and residual use. Grain sorghum prices are projected to average $2.50 to $2.90 per bushel, down 20 cents at the midpoint to $2.70 reflecting the current weak relationship to corn prices in interior markets.
- S. 2016/17 rice exports are lowered 2.0 million cwt to 110.0 million. Long grain milled rice exports account for the entire reduction and reflect the sales and shipment pace to date. U.S. ending stocks are raised by an equal amount and are the highest since 1985-86. The 2016/17 all rice season-average farm price range is raised $0.10 per cwt at the midpoint to $10.50. The long-grain, and the medium- and short-grain season-average prices are both increased.
- S. soybean supply and use projections for 2016/17 are unchanged this month, leaving ending stocks at 420 million bushels. Soybean exports are projected at 2.05 billion bushels, up 114 million from last year. Although soybean export commitments through January are significantly higher than a year ago, competition from expected record South American exports will limit U.S. shipments to well below last year’s record levels this summer. The U.S. season-average soybean price range for 2016/17 is projected at $9.10 to $9.90 per bushel, unchanged at the midpoint from last month. Soybean oil prices are forecast at 34 to 37 cents per pound, and soybean meal prices are projected at $310 to $340 per short ton, both unchanged at the midpoint from last month.
For more on the February WASDE numbers, visit https://www.usda.gov/oce/commodity/wasde/latest.pdf