Bullish Weather Pattern to Continue
May 9, 2011 By Dr. O. A. Cleveland
Professor Emeritus, Mississippi State University
For Bayer CropScience
The selloff in cotton was large last week as the Chinese holiday took its toll in the marketplace. December dipped below its important support level at 125.00 cents and the nearby July is nearly down to 145.00.
Exports sales were in the negative territory for the sixth consecutive week, although just by a tad. Net sales were a negative 6,500 running bales (RB) as the appearance of both buy backs and cancellations were evident.
The very bullish weather pattern in both the Southwest and the Mid-South continues to pump up the bulls, while the Georgia cotton production area is beginning to see drought problems of its own. Additionally, export shipments exceeded 425,000 RB last week as net exports to date is essentially 12 million bales with another three months left in the 2010-11 marketing year. The pace of shipments is above that needed to meet the USDA export projection for the U.S. of 15.75 million bales. The market is ignoring Mother Nature at present, but she will have her day on the trading floor.
The 100- year drought in Texas, coupled now with what is becoming 100- year flooding along the Mississippi River is set to reduce U.S. yield by 100 pounds or more, per acres, not to mention a substantial increase in abandonment. The U.S. Drought Monitor, http://drought.unl.edu/dm/monitor.html indicates that virtually 100% of the cotton acreage in Texas and Oklahoma is facing an extreme to exceptional drought. Cinco de Mayo has come and gone without moisture in the Rio Grande Valley. While that crop is not as large as in past years, it can now be all but written off. Too, planting in the Coastal Bend has ceased, except for insurance planting, as much of the crop will now be lost. The High Plains and Rolling Plains have some time yet, particularly the Rolling Plains, but noting will make up for the lack of subsoil moisture. Granted, much of West Texas is irrigated, but most growers require rainfall to supplement weak irrigation wells. For the season to date, the total is a big zero!
If that were not enough, the Texas drought has jumped the Mississippi River and landed square in the Southeast where significant pockets of severe drought now exist in Georgia and Alabama. Too, the more droughty areas of those two states are also the areas with the least irrigation.
While that could prove to be a very significant loss of production, the potential larger problem exists from Missouri south to Arkansas, Tennessee, Mississippi, and into Louisiana. Hydrologists are predicting that flooding along the Mighty Mississippi will exceed the 1937 flood and rival the great floods of the 1920’s. Flooding along the river will take out hundreds of thousands of acres. Yet, the larger problem would be if the tributary rivers, Tallahatchie, Yazoo, White, Big Black, and others, overflow their levies due to backup along the Mississippi River – a possibility prevalent in most scenarios. Additional rain is expected this week, a situation that will exacerbate the flooding problem.
The new-crop December is near bottom feeding and should find excellent support at current levels.
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