Cotton prices have settled into a lower, but tighter, trading range, which has decreased volatility and created some marketing opportunities for producers. On the other hand, there is also some concern about weakening fundamentals, according to Ag Market Network analysts discussing USDA’s October supply and demand estimates.

In the reports released Oct. 12, USDA increased the U.S. cotton crop by 52,000 bales to 16.6 million bales, “but I think most people were looking for a crop of between 16 million to 16.3 million bales,” said O.A. Cleveland, professor emeritus, Mississippi State University, and featured speaker for the monthly conference call.

The higher estimated production came largely from a 180,000-acre increase in harvested acres. Yields were increased only slightly, 2 pounds, from last month. The estimate of U.S. ending stocks increased 500,000 bales, “a rather significant increase, and would suggest that we begin to push prices lower,” Cleveland said.

USDA lowered U.S. exports from 12 million bales to 11.5 million bales, another 500,000-bale decline. “The stocks-to-use ratio is still at 25 percent, so that’s a number that we’re still very comfortable with,” Cleveland said. “But USDA also projected that world carryover was going to increase by 3 million bales, from 52 million bales to 55 million bales, which is beginning to get on the high side.”

USDA dropped the Chinese cotton crop a half million bales, and dropped its forecast consumption by an equal amount. Worldwide, USDA increased production by 1.2 million bales and lowered consumption by 850,000 bales. Cleveland noted that USDA also released adjusted figures on stocks which bumped world stocks by 900,000 bales.

Cotton future prices dropped on the news, but bounced back in overnight trading, suggesting some resiliency in the market. “The market is sitting right back where it was before the report,” Cleveland said. “So it’s difficult for me to say it was a bearish report. We have a lot of work to do to understand what all this cash in the world is going to do, where traders have stepped out of both equities and commodities.”

Mike Stevens, a cotton analyst based in Mandeville, La., says the U.S. crop estimate may get smaller from here. “Last year, it was November before the USDA cut 600,000 bales from the Texas estimate. That was based on boll size, not boll count. I don’t think the Texas numbers are written in indelible ink by any stretch of the imagination. I have heard of some harvesters getting into the irrigated cotton, and it’s being abandoned, too.