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January 2017 Cotton Leader

January 27th, 2017

Cotton Vs. Synthetics Video Bursts

Cotton Incorporated was created to drive cotton demand by positioning cotton as a better alternative to synthetic fibers, and this remains a top priority today. One timely example of their effort to combat this challenge comes from the Consumer Marketing division which has created a series of short, animated videos meant to be shared on social media. These animations are an engaging and competitive way to position cotton as superior to synthetics, while also reminding the consumer to check the fiber-content label.  The first of these animations uses humor to address odor retention in polyester and illustrate research that proves body odor washes out of cotton better than polyester. More videos highlighting cotton’s advantages will be released in 2017.  You can check out these videos on Cotton Incorporated's or The Cotton Board's Facebook and Twitter pages.

Large Slate of New Board Appointees Will Join The Cotton Board

In January, Agriculture Secretary Tom Vilsack announced the appointment of 17 members and 18 alternates to serve on The Cotton Board. The cotton producers and importers appointed by the Secretary are charged with working together to oversee the Cotton Research & Promotion Program (the Program).

The Cotton Board Chairman, Janet Ydavoy, an Importer from Portsmouth, NH  noted the large slate of appointees saying, “These emerging leaders in the cotton industry represent a wealth of untapped perspective and insight that will help guide The Cotton Research and Promotion Program forward. The large number of appointees this year gives us an incredible opportunity to cultivate a new era of leadership that will continue to inspire a renewed faith in our industry."

The newly appointed members are: Alisa Ogden, Producer - Carlsbad, NM; F. Guy Darby, Jr., Producer - Chester, SC; Helga L. Ying, Importer - Piedmont, CA; Joe D. Long, Importer - Irvine, KY; and, Monica J. Gorman, Importer - Winchester, MA.

The newly appointed alternate members are: Albert R. James, Producer - Sikeston, MO; Nathan H. Jurva, Producer - Carlsbad, NM; Don B. Wakefield, Producer - Jackson, SC; Shelley S. Butler Barlow, Producer - Suffolk, VA; Laurie A. Rando, Importer - Scotch Plain, NJ; Crystal A. Button, Importer - Great Neck, NY, and Gary E. Ross, Importer - Yardley, PA.

Secretary Vilsack also appointed Darren J. Hembree, Producer - Doerun, GA, as an alternate member to fill a vacant Georgia position with a term expiring December 31, 2018.

The re-appointed members are: Walter L. Corcoran, Producer - Eufoula, AL; David J. DeFelix, Producer - Campbellton, FL; James L. Webb, Producer - Leary, GA; Suzanne R. Drouhard, Producer - Danville, KS; Kim M. Mayberry-Holifield, Producer - Kennett, MO; Jess “Mark” M. Nichols, Producer - Altus, OK; Willie L. German, Producer - Somerville, TN; Madison "Matt" Farmer, Producer - Lamesa, TX; Lance V. Everett, Producer - Stony Creek, VA; Michael D. Wallace, Importer - Bentonville, AR; Peter M. McGrath, Importer - Addison, TX; and, Arlene M. Eastwood, Importer - Neptune, NJ.   

The re-appointed alternate members are:    Timothy J. Mullek, Producer - Robertsdale, AL; Alan J. Edwards, Producer - Jay, FL; Benjamin R. Grimsley, Producer - Weston, GA; Thomas L. Lahey, Producer - Moscow, KS; Clint D. Abernathy, Producer - Altus, OK; Catherine S. Via, Producer - Bells, TN; Sigifredo "Sigi" Valverde, Producer - Shallowater, TX; Sarah "Sally" M. Gilligan, Importer - San Francisco, CA; James C. Self III, Importer - Greenville, SC; and, Tara E. Hoffman, Importer - New York, NY.

"At our upcoming board meeting we include an orientation process for the new appointees that will educate them about the Program and guarantee they are able to immediately contribute to the Board. I look forward to building relationships with each of these future influencers of the industry," said Ydavoy.

The Cotton Research and Promotion Program is designed to advance the position of cotton in the marketplace.  It is funded by assessments on all domestically produced cotton and imports of foreign-produced cotton and cotton-containing products, and is authorized by the Cotton Research and Promotion Act of 1966.  USDA's Agricultural Marketing Service oversees operations of the Board. All appointees will serve three-year terms.

Recordings Available of Cotton Management Discussions from the 64th Annual West Texas Ag Chemicals Institute Conference

Cotton producers, researchers and industry professionals met at the Bayer Museum of Agriculture in Lubbock, TX on September 13, 2016, to discuss a wide range of scientific, management and policy related cotton topics at the 64th Annual West Texas Agricultural Chemicals Institute Conference.  The event’s sessions and panel discussions, organized by representatives from leading agricultural institutions, have been recorded and made available on the Plant Management Network (PMN) thanks to Cotton Incorporated. The presentations and the speakers’ accompanying slides are freely available through PMN’s ‘Focus on Cotton’ webcast resource. Session topics and speakers include:  

  • EPA’s Revisions to the Applicator Certification Rule (28 minutes) -- This presentation provides an overview of proposed changes to the EPA's pesticide certification and training requirements, discussing rationale behind the revisions and potential future amendments. Speaker: Dale Scott, Texas Department of Agriculture. 
  • UAV Use in Agriculture: Practical, Legal, and Technological Considerations (45 minutes) -- This talk discusses several key considerations for adoption and use of unmanned aerial vehicles (drones) to collect field imagery data. Speaker: Austin Bontrager, Servi-Tech Expanded Premium Services. 
  • Understanding the EPA Product Registration Review Process (33 minutes) -- This talk discusses how the EPA approaches risk evaluation, toxicity testing, exposure and other factors when evaluating and approving new active ingredients proposed for registration. Speakers: Dr. Jerry Wells & Cherilyn Moore, Syngenta Crop Protection, LLC. 
  • Politics and Policy Update (17 minutes) -- This presentations covers the state of the current political climate, including key issues such as farm bill appropriations, the Trans Pacific Partnership, loan programs, and more. Speaker: Kody Bessent, Plains Cotton Growers, Inc. 
  • Handling Agriculture-Related Legal Issues (40 minutes) -- This discussion helps producers and practitioners navigate the legal complexities related to statutory agriculture liens, government farm programs, spray drift, property rights and aerial management techniques. Speaker: Amber S. Miller, Crenshaw, Dupree & Milam, LLP. 
  • Old World Bollworm: Assessing a Potential New Threat (39 minutes) -- This presentation describes the biology, distribution, and management of old world bollworm and discusses the potential of microbe research to improve plant health and performance—specifically new findings about fungal endophytes. Speaker: Dr. Gregory A. Sword, Texas A&M University. 
  • Integrating Mobile Technology in Agriculture (36 minutes) -- This talk discusses the value and utility of several agriculture mobile applications, including Barchart, Farm Futures, CattleFax, Farm Logs, Tank Mix Calculator and others. Speaker: Dr. Blake Bennett, Texas A&M AgriLife Extension. 
  • Crop Management Update (33 minutes) -- This panel discussion provides an update of the 2016 growing season and discusses key issues such as irrigation, soil fertility and weed control. Moderator: Dr. Wayne Keeling, Texas AgriLife Research Center; Contributors: Katie Lewis, Jim Bordovsky and Seth Byrd. 
  • IPM Panel Discussion (34 minutes) -- This panel discussion covers important integrated pest management topics of the 2016 growing season, including bollworms, stink bugs, nematodes, cultural practices, sugarcane aphid and cloverworm. Moderator: Blayne Reed, Hale/Swisher; Contributors: Pat Porter, Katelyn Kowles, Kerry Siders and Suhas Vyavhare. 

Also available for viewing are recordings of the 2016 award and scholarship presentations hosted by Jane Denver, Texas A&M University, and Glen Ritchie, Texas Tech University and Texas A&M AgriLife Research. 

These and other resources are freely available courtesy of Cotton Incorporated at http://www.plantmanagementnetwork.org/focoThis presentation is available at no charge, courtesy of Cotton Incorporated, through the ‘Focus on Cotton’ webcast resource located at the Plant Management Network, http://www.plantmanagementnetwork.org/foco.  ‘Focus on Cotton’ contains over 35 webcasts on various aspects of cotton crop management. These talks--freely accessible 24 hours a day, 7 days a week--cover agronomic practices, crop protection, and ag engineering.  This resource also features a new and improved Cotton Extension Search tool, where users can conveniently search for extension resources across all U.S. land-grant universities serving cotton producers.  

January Economic Update

RECENT PRICE MOVEMENT

After easing slightly in December, many benchmark cotton prices ticked higher in early January. Chinese prices declined marginally over the past month.

  • Prices for the March NY futures contract rose from levels below 70 cents/lb in late December to as high as 75 cents/lb in intraday training in early January. The latest values have been between 72 and 74 cents/lb.
  • Movement in the A Index followed that of NY futures. The A Index held to values below 80 cents/lb through early January, but has risen to levels near 82 cents/lb more recently.
  • Mill-delivered prices for Chinese cotton (CC Index) edged lower in international terms over the past month (from 105 to 103 cents/lb). In domestic terms, the CC Index decreased from 15,950 to 15,800 RMB/ton.
  • Prices for the popular Indian Shankar-6 variety increased from the equivalent of 73 cents/lb in late December to 77 cents/lb recently. In domestic terms, prices rose from 39,000 INR/candy to 41,000 INR/candy.
  • Prices on the Pakistani spot market moved marginally higher, rising from 72 to 74 cents/lb. In domestic terms, the change was from 6,200 to 6,350 PRK/maund.

SUPPLY, DEMAND, & TRADE

This month's USDA report featured an increase in world cotton production, with the global figure rising 1.1 million bales to 105.3 million. The largest changes to country-level estimates were for China (+1.0 million bales, to 22.0 million), the U.S. (+435,000 bales, to 17.0 million), and Pakistan (-350,000, to 7.9 million).

The global mill-use figure was virtually unchanged (-155,000 bales, to 111.8 million). Nonetheless, there were several notable revisions at the country-level, including those for China (+500,000, to 36.3 million), Bangladesh (+100,000 bales, to 6.5 million), Turkey (-100,000, to 6.7 million), Mexico (-125,000, to 1.7 million), and India (-500,000, to 23.3 million).

Trade forecasts were increased slightly, with the figure for global imports rising 345,000 bales to 35.6 million. This was primarily a result of higher expectations for Pakistan (+350,000 bales, to 2.6 million) and Bangladesh (+150,000 bales, to 6.5 million) more than outweighing reductions for Mexico (-125,000 bales, to 1.2 million). In terms of exports, forecasts were lifted for the U.S. (+300,000 bales, to 12.5 million) and India (+200,000, to 4.4 million), which more than offset lower projections for Australia (-100,000, to 4.0 million) and Uzbekistan (-150,000, to 2.0 million).

A larger harvest number, combined with a stable use estimate, imply an increase in ending stocks and the projection for global ending stocks was lifted 1.5 million bales to 90.6 million. Although some of the increase in stocks is expected to occur in China (+500,000 bales, to 48.3 million), the majority of the addition is projected to end up in warehouses in exporting countries, including India (+300,000, to 12.1 million), Australia (+250,000, to 2.3 million), the U.S. (+200,000 bales, to 5.0 million), and Uzbekistan (+150,000 bales, to 1.1 million).

PRICE OUTLOOK

At some point, the increase in exportable supply could be expected to weigh on prices. There was tightening in stocks outside China this summer, due in large part to the difficulties associated with the 2015/16 Pakistani and Indian harvests. At the end of the current 2016/17 crop year, stocks outside of China are expected to be about 10% higher than they were at the end of 2015/16. Even with that growth, the level of 2016/17 ending stocks is projected to be lower than it was in 2014/15 (42.3 million bales in 2016/17 versus 44.8 million in 2014/15). However, the stocks-to-use ratio for the world-less-China in 2016/17 is expected to be slightly higher than it was in 2014/15 (52.9% in 2016/17 versus 52.3% in 2014/15) due to lower Chinese import demand (China imported 8.3 million bales in 2014/15 and is forecast to import only 4.5 million bales in 2016/17). In 2014/15, the A Index averaged 71 cents/lb. Thus far into 2016/17, the A Index has averaged 79 cents/lb.

Given the recent strength of cotton prices relative to prices for other crops, notably corn, planted cotton acreage can be expected to expand in 2017/18. A recent survey by a U.S. trade publication suggested that U.S. cotton acreage could increase around 10% next crop year. The National Cotton Council will release results from its comprehensive survey of U.S. growers at its annual meeting February 11th. Increases in acreage could also be expected in other major producing countries. An initial set of forecasts for global production, use, and trade will be released by the USDA at its outlook meeting February 24th. Global acreage and production can be expected to rise, while world mill-use can be expected to be stable. This suggests another increase in stocks outside of China in 2017/18, which could put additional downward pressure on prices.

However, prices have proven resilient to fundamental forces in recent months. This may be due in part to speculative activity. A possible motivation for speculator interest in cotton futures is the large volume of what is known as "unfixed on-call sales." Briefly, unfixed on-call sales represent short positions held by merchants for hedging purposes. As the prices are fixed, meaning that a merchant's deal with a mill is finalized, the merchant exits their hedging (short) position. This implies that the merchant buys an offsetting futures contract. Since there are a lot of unfixed on-call sales (up 80% relative to the level one year ago), there will be a lot of merchant buying whenever mills decide to fix their contracts. When this buying happens, there can be upward movement in prices, and that possibility may be what has attracted speculators to cotton futures. In the longer run, fundamentals tend to drive price direction, but the high level of unfixed on-call sales could lend some support to prices over the next few months.

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