The bearish reaction to yesterday’s June WASDE report was tied exclusively to USDA’s failure to raise projected exports. The hike in production was expected and tied to raising the estimate of planted acreage that will get harvested now that there’s been substantial rain relief in Texas cotton country and an apparent shift in the drought pattern that promises further relief through the early growth stages for cotton. The forecast stocks-to-use ratio for cotton at 4.3 million bales is now the highest in 6 years.
In revisions to the global balance sheet for cotton, beginning stocks were raised due to higher imports by China and higher production for India for the 2013/14 season. On top of that the production estimate was raised, but consumption the same amount. So it was the bump in beginning stocks that raised projected ending stocks.
Today’s export sales report for the week was disappointing and supportive of USDA’s decision not to raise its export forecast. In fact, sales YTD are running below the 5-year average as a percentage of the current export forecast so it would have defied evidence and logic for USDA to raise exports after cutting its estimate of Chinese cotton imports (the biggest U.S. customer) to 8.0 million bales from 8.5 million last month.