What is in this article?:
- 2010/2011 Pima crop sold out.
- One-third of the expected new Pima crop production has already been committed for export.
- Forward contract prices 2.25 per pound, already up from $1.70 per pound starting point at the end of last October.
Current Pima crop sold out
With the current crop virtually sold out, no new supply of American Pima cotton will be available to spinners until the 2011-2012 crop is harvested in November this year.
If spinning mills were unable to secure enough cotton to meet their demand through November of this year, then there will be early pressure on new crop cotton sales as mills will want to ensure that they are able to secure early shipments of the new crop. This seems to be the case already as 267,700 bales of the new crop have already been sold.
This situation puts additional pressure on the supply side as it is foreseeable that about 30 percent of the new crop will already be sold by the time plantings start. With most new crop sales probably booked for prompt shipments and for top quality cotton, merchants are going to become ever more hesitant to offer bales for sale into the market as they themselves will not be willing to take on more risk on a yet unplanted crop and uncertainty about production and quality.
Additionally, with most of the early sales for prompt shipment, that means any spinning mill coming to the market now will be looking at cotton from a purchase made today, potentially not making it on a vessel for shipment until February/March of 2012. As mentioned earlier, a total of 278,900 bales had been shipped of the current crop as of Feb. 25. That number is very similar to the quantity of bales that have already been sold for the new crop.
As this tight supply situation continues to play out, it is having a significant impact on prices. Quotations from Cotton Outlook for American Pima prices had risen to a level of $3.05 per pound on a CNF Far East basis before the quotation was dropped from the daily report; presumably because supply has basically run out.
For the new crop quotation, Cotton Outlook’s recent report places the American Pima quotation at $2.25 per pound already up from $1.70 per pound starting point at the end of last October.
Even with prices having set new record highs, demand for American Pima and ELS cotton continues to remain consistent. Weekly sales continue to register sales of approximately 10,000 bales per week for the current crop and slightly more for the new crop. Now with the current crop basically sold out, the focus will shift more squarely upon the 2011-2012 crop and its tightening supply.