The price erosion continues with substantial improvement in soil moisture for Texas cotton country and forecasts for more. NASS put out weekly crop progress yesterday and cotton planting is now 89% complete, only 2 pts shy of the 5-year average and 2 pts ahead of last year. Ditto for “squaring” where the figure is 8% vs. 5-year average of 10% and last year’s figure at 6%
NASS has resumed reporting condition ratings with yesterday’s report. Right at 50% of the nation’s cotton crop is rated good to excellent, ahead of last year’s figure of 42%. Similary, only 13% is rated poor to very poor, down from last year when 22% fell into one of those two categories.
Trade estimates for tomorrow’s June WASDE report from USDA are out. The average production estimate is 15 million bales, up from USDA’s 14.5 million estimate in May. Estimates range from 14.4 to 15.2 million. The average trade estimate for exports is 10 million bales, up from USDA’s 9.7 million in May. But it still nets out to average expected ending stocks of 4 million bales, up from 3.9 million in May and a big jump from 2.8 million for 2013/14. The range of private ending stocks estimates is huge, from as low as 3.6 million to as high as 4.3 million.
We think the risk is to the bearish side. USDA’s May figure was based on a very conservative estimate of acreage harvested of only 76% of acreage planted. All it would take would be for USDA to hike that figure to a more normal 80% to put production at 15.2 million bales, even if they don’t boost their yield forecast despite the improved Texas conditions. And if they boosted their yield assumption by just 5% on top of raising the harvested acreage percentage you could be looking at a 16 million bale crop. Is that possible? Yes. A 5% hike in yield would put the U.S. average at 865 lbs per acre, still below the 887 lbs. per acre harvested in 2012.
Be sure to check the website about noon central time tomorrow for our review of the June WASDE, market reaction and any advice changes.