Weekly Cotton Market Review

Mp_cn812 Weekly Cotton Market Review Cotton and Tobacco Program Cotton Market News Division 3275 Appling Road Memphis, TN 38133 901.384.301 Vol. 100 No. 11 October 12, 2018 Inside this Issue Market Overview Price Support Spot Quotations ICE Futures Average spot quotations were 59 points higher than the previous week, according to the USDA, Agricultural Marketing Service s Cotton and Tobacco Program. Quotations for the base quality of cotton (color 41, leaf 4, staple 34, mike 35-3 and 43-49, strength 27.0-28.9, and uniformity 81.0-81.9) in the seven designated markets averaged 73.25 cents per pound for the week ending Thursday, October 11, 2018. The weekly average was up from 72. last week and from 7.04 cents reported the corresponding period a year ago. Daily average quotations ranged from a low of 72.49 cents Friday, October 5 to high of 73.94 cents Monday, October 8. Spot transactions reported in the Daily Spot Cotton Quotations for the week ended October 11 totaled 1,783 bales. This compares to 3,510 reported last week and,513 spot transactions reported the corresponding week a year ago. Total spot transactions for the season were 22,572 bales compared to 50,440 bales the corresponding week a year ago. The ICE December settlement prices ended the week at 7.81 cents, compared to 7.00 cents last week. A Index Southeastern Textile Mill Report South Central Southwestern Western Crop Production Supply & Demand Ginnings Pima Quotations Cotton Market Reports Subscribe to this report Subscribe to all Cotton Market reports Sources: USDA, AMS, Cotton and Tobacco Program, 1/ Cotlook

Southeastern Markets Regional Summary Danny Pino Macon, GA Danny.Pino@ams.usda.gov Spot cotton trading was inactive. Supplies and producer offerings were light. Demand was moderate. Average local spot prices were higher. Trading of CCC-loan equities was inactive. Hurricane Michael made landfall on the Florida Panhandle early Wednesday afternoon between Mexico Beach and Tindall Air Force Base as a category 4 storm. This is the first time on record that a category 4 storm has made landfall on the Florida Panhandle. Sustained wind gusts of 130 to 140 mph were recorded along the eyewall of the storm. Heavy rainfall, flash flooding, and catastrophic damage to some structures was reported as power lines and trees were blown down and roofs were blown off some buildings in the path of the storm. Hundreds of thousands remained without power in the lower Southeast. The storm maintained a category 3 hurricane level as it tracked across the most extreme southeastern counties of Alabama and entered into the plains of southwest Georgia, where it was downgraded to a tropical storm. Precipitation amounts ranged from 3 to inches across the Florida panhandle and throughout Georgia. Strong winds tangled plants and blew lint out of bolls and heavy rainfall strung out fiber. Before the storm arrived, producers attempted to harvest as much lint off of the stalk as possible. Ahead of the storm, ginners worked around the clock to transport modules from fields and complete pressing operations. Local experts were assessing damage from the storm. According to the National Agricultural Statistics Service s Crop Progress report released October 9, cotton harvested reached 19 percent in Alabama and 12 percent in Georgia. Remnants of Tropical Storm Michael drifted into the upper Southeast early Thursday morning bringing strong winds, rain, and tornadic activity to the region throughout the day. Feeder bands from the storm produced heavy rainfall throughout the day producing flash flooding, downed trees, and power outages for thousands. Precipitation totals measured from 3 to inches of rainfall, with heavier amounts recorded locally. In North Carolina, producers attempted to salvage fields ahead of the storm that were recently battered by Hurricane Florence, but harvest was difficult in fields that remained tangled and suffered heavy lint loss. Defoliation and harvesting expanded in the Carolinas and harvesting was getting underway in Virginia. Local experts were assessing damage from the storm. According the National Agricultural Statistics Service s Crop Progress report released October 9, cotton harvested reached 10 percent in South Carolina, 8 in North Carolina, and 3 percent in Virginia. Textile Mill Demand was moderate from domestic mill buyers for a moderate volume of color 52 and better, leaf 5 and better, and staple 35 and longer for January 2019 forward. No sales were reported. Most mills have covered their immediate raw cotton needs through the fourth quarter 2018. Demand for open-end and ring-spun yarn was moderate. Most mills operated five to seven days. Demand through export channels was moderate. Representatives for mills throughout the Far East inquired for any discounted styles of cotton. Trading 2

South Central Markets Regional Summary Jeff Carnahan Memphis, TN Jeff.Carnahan@ams.usda.gov North Delta Spot cotton trading was inactive. Supplies of available cotton were light. Demand was light. Average local spot prices were higher. Trading of CCC-loan equities was inactive. No forward contracting was reported. Producers made excellent progress harvesting before a storm front brought unwelcome rain and much cooler temperatures to the region late in the week. About 1 inch of moisture was reported in some areas. Daytime highs dropped into the mid-0s. Overnight lows were in the upper 40s in northern areas. Outdoor activities were delayed in parts of Arkansas and Tennessee, due to wet conditions. Most gins had sufficient modules on their yards to continue pressing operations without any interruption. The Memphis Classing Office added a third shift to keep up with daily sample receipts. According to the National Agricultural Statistics Service s Crop Progress report released October 9, harvesting jumped to 45 percent in Arkansas, 50 in Missouri, and 33 percent in Tennessee. Local experts report yields ranging from 1,000 pounds up to 1,850 pounds per acre. South Delta Spot cotton trading was inactive. Supplies of available cotton were light. Demand was light. Average local spot prices were higher. Trading of CCC-loan equities was inactive. No forward contracting was reported. Producers made excellent progress harvesting during the period. A cold front brought cooler temperatures to the region late in the week. Less than 1 inch of moisture was reported in localized places. Daytime highs dropped into the mid-0s. Overnight lows were in the 50s in most areas. Outdoor activities were briefly suspended, due to wet lint and soft soils in isolated areas. Most gins had an adequate supply of modules on their yards to maintain operations without any delays. According to the National Agricultural Statistics Service s Crop Progress report released October 9, harvesting had reached 51 percent in Louisiana and 40 percent in Mississippi. Producers reported yields of up to 1,800 pounds in a few fields. Trading North Delta South Delta 3

Southwestern Markets Regional Summary Jane Byers-Angle Lubbock, TX Jane.Byers-Angle@ams.usda.gov East Texas Spot cotton trading was slow. Supplies and producer offerings were light. Demand was light. Average local spot prices were higher. Producer interest in forward contracting was light. Trading of CCC-loan equities was inactive. Foreign inquiries were light. Less than optimal harvesting conditions continued in the Blackland Prairies, the Edwards Plateau, and in the Upper Coast as more rainfall was received. Sprouting and regrowth were a concern and could require a second application of defoliants. Industry members were eager for drier conditions to wrap up harvesting in some locations. Some gins in the Rio Grande Valley had finished pressing services, and a few gins had around 100 modules left to process. In Kansas, bolls opening was at 73 percent, ahead of 58 last year and the 3 percent average, according to the National Agricultural Statistics Service s Crop Progress and Condition report released on October 9. The cotton producing areas in Oklahoma received 10 to 12 inches of rainfall early in the reporting period. Modules were brought to the gin yards ahead of the rain event and ginning continued. Ginning is expected to catch up to the accumulated modules on October 14. West Texas Spot cotton trading was inactive. Supplies and producer offerings were light. Demand was very light. Average local spot prices were higher. Producer interest in forward contracting was light. Trading of CCC-loan equities was inactive. Foreign inquiries were light. Producers were kept out of the fields, due to excessive rain. A widespread thunderstorm entered the region on October 5, and continued to bring precipitation through mid-day on October 9. The thunderstorms deposited one-quarter to six and one-half inches of rainfall. Daytime temperature highs were in the mid-0s to low 80s, and nighttime lows were in the upper 40s to low 0s. The sun reappeared mid-week and fields began to dry, but soggy conditions halted field activity. Local reports indicated that lots of acres were ready to be harvested. Ginning activity increased as more gins began to offer pressing services. Trading East Texas In Texas, a light volume of new-crop cotton containing color 21 and 31, leaf 3 and better, staple 3 and 37, mike 44-48, strength averaging 29.1, and uniformity averaging 80.4 sold for around 72.75 cents per pound, FOB warehouse (compression charges not paid). A light volume of even-running lots mostly color 22 and better, leaf 3 and better, staple 35 and longer, mike 41-47, strength 29-32, and uniformity 77-80 sold for 70.00 to 70.50 cents, same terms as above. In Kansas, a light volume of new-crop cotton mostly color 33 and 34, leaf 4 and better, staple 33 and longer, mike 43-51, strength 2-29, and uniformity 78-81 sold for around 8.00 cents, FOB car/truck (compression charges not paid). West Texas A light volume of new-crop cotton containing color 21 and 31, leaf 3, staple 37 and 38, mike 37-41, strength 32-34, uniformity 79-82, and 25 percent extraneous matter sold for around 75.00 cents per pound, FOB car/truck (compression charges not paid). A light volume of even-running lots of 2017-crop cotton containing mostly color 32 and better, leaf 4 and better, staple 33 and longer, mike 25-30, strength 24-27, uniformity 77-80, and 100 percent extraneous matter sold for around 55.00 cents, same terms as above. 4

Maria Townsend Western Markets Regional Summary Visalia, CA Maria.Townsend@ams.usda.gov Desert Southwest (DSW) Spot cotton trading was inactive. Supplies and demand were light. Average local spot prices were higher. No forward contracting or domestic mill activity was reported. Foreign mill inquiries remained light. Mild temperatures were in the mid-to-high 80s for Arizona. Shower activity produced nearly one-half of an inch of rainfall in central Arizona early in the reporting period. Fieldwork was active as producers defoliated the crop. According to the National Agricultural Statistics Service s (NASS) Crop Progress report released October 9, the condition of the crop was rated mostly good to fair. Temperatures were in the low 70s to mid-80s for New Mexico and El Paso, TX. Scattered shower activity brought one-quarter of an inch of rainfall mid-week. Defoliation activities continued. The condition of the crop was rated mostly good to fair, according to NASS. San Joaquin Valley (SJV) Spot cotton trading was inactive. Supplies and demand were light. Average local spot prices were higher. No forward contracting or domestic mill activity was reported. Merchant offerings and foreign mill inquiries were light. Pleasant conditions ruled, with temperatures in the high 70s to low 80s. Defoliation activities advanced. A couple of gins started processing cotton this week. According to the National Agricultural Statistics Service s Crop Progress report released October 9, the crop condition was rated 100 percent good. American Pima (AP) Spot cotton trading was inactive. Supplies and demand were light. Average local spot prices were steady. No domestic mill activity was reported. Foreign mill inquiries remained light. Cooler temperatures reigned in the Far West. Daytime high temperatures were in the high 80s. No rainfall was reported in California. One-quarter of an inch of moisture was recorded in El Paso, TX and Arizona. Fieldwork was active. Defoliation activities expanded throughout the region. Harvesting gained momentum in the San Joaquin Valley (SJV). A couple of gins started processing cotton this week in the SJV. Ginning continued in Yuma, AZ. The Visalia Classing Office received the first 2018-crop samples in the period. Trading Desert Southwest San Joaquin Valley American Pima 5

Crop Production The following information was excerpted from the National Agricultural Statistics Service Crop Production report, released on October 11, 2018 All cotton production is forecast at 19.8 million 480-pound bales, up less than 1 percent from September but down percent from last year. Yield is expected to average 901 pounds per harvested acre, up pounds from last month but down 4 pounds from last year. Harvested area for all cotton is expected to total 10.5 million acres, down less than 1 percent from September and down 5 percent from 2017. Upland cotton production is forecast at 19.0 million 480-pound bales, down percent from 2017. Upland harvested area is expected to total 10.3 million acres, down 5 percent from last year. If realized, the United States average yield for all cotton and Upland cotton will be the second highest on record. Pima cotton production, forecast at 771,000 bales, was carried forward from last month. For complete report click here.

Supply & Demand The following information was excerpted from the World Agricultural Supply and Demand Estimates, released on October 11, 2018 The 2018/19 U.S. cotton supply and demand estimates show higher ending stocks, based on slightly larger production and lower exports relative to last month. Production is raised 81,000 bales, with higher production in Texas and Georgia largely offset by lower production in the Carolinas. Domestic mill use is unchanged from last month, but the export forecast is reduced 200,000 bales to 15.5 million, due to reduced world trade and consumption. Ending stocks are forecast at 5.0 million bales, and the resulting stocks-to-use ratio of 2 percent is slightly higher than the previous month s forecast, and the highest since 2015/1. The forecast range for the marketing year average farm price is 9.0 to 77.0 cents per pound; the midpoint of 73.0 cents is down 2 cents from the previous month s projection. For complete report click here. 7

Ginnings For complete report click here. 8

World market prices for upland cotton, in cents per pound, in effect from 12:01 a.m., EDT, Friday through midnight, EDT, Thursday 2018-2019 Sep Sep Sep Sep 28 Oct 7-13 14-20 21-27 Oct 4 5-11 Oct 12-18 Adjusted world price 1/ 73.77 73.79 71.59 9.94 7.87 7.73 Course count adjustment 0.00 0.00 0.00 0.00 0.00 0.00 Loan Deficiency Payment (LDP) 0.00 0.00 0.00 0.00 0.00 0.00 Fine count adjustment 2017 0. 0.8 0.80 1.00 0.98 0.80 Fine count adjustment 2018 0.71 0.73 0.85 1.05 1.03 0.85 1/ Color 41, leaf 4, staple 34, mike 35-3 & 43-49, strength readings of 2.0-28.9 grams per tex, length uniformity of 80.0-81.9 percent. Source: Farm Service Agency, USDA. Description Outstanding sales Exports Total export commitments 2017-2018 Marketing Years Week Mkt. Year Week -,043,000-118,000 1,505,800 208,400-7,548,800 - New sales 155,500-183,000 - Buy-backs and cancellations 1,000-85,000 - Net sales Sales next marketing year 154,400-98,000 9,300 73,300 142,900 7,520,900 1,02,400-1,713,100 Net sales of 98,000 RB for 2018/2019 were up noticeably from the previous week and up 44 percent from the prior 4-week average. Increases were reported for Vietnam (70,000 RB, including 3,00 RB switched from South Korea and 1,300 RB switched from Bangladesh), Turkey (21,700 RB, including 21,300 RB late reporting), Japan (15,000 RB, including 12,200 RB late reporting and decreases of 00 RB), Pakistan (13,900 RB, including 13,500 RB late reporting and decreases of 900 RB), and South Korea (11,800 RB). Reductions were reported for China (73,900 RB). For 2019/2020, net sales of 142,900 RB were reported for China (13,400 RB), India (4,400 RB), and El Salvador (2,100 RB). Exports of 208,400 RB were up 1 percent from the previous week and 38 percent from the prior 4-week average. Exports were primarily to Vietnam (8,300 RB, including 8,100 late reporting), Turkey (38,000 RB, including 31,400 late reporting), Mexico (18,200 RB), Pakistan (17,200 RB), and Indonesia (14,900 RB, including 2,200 RB late reporting). Net sales of Pima totaling 12,800 RB for 2018/2019 were up noticeably from the previous week and from the prior 4-week average. Increases reported for China (,00 RB), India (4,100 RB), Vietnam (400 RB), and Switzerland (400 RB). For 2019/2020, net sales of 2,300 RB were reported for India. Exports of 1,000 RB--a marketing-year low--were down 78 percent from the previous week and 80 percent from the prior 4-week average. The primary destinations were India (00 RB) and Bangladesh (200 RB). Optional Origin Sales: For 2018/2019, the current outstanding balance of 1,800 RB is for Vietnam. Exports for Own Account: The current exports for own account outstanding balance is 7,400 RB, all China. 2018-2019 Through October 5, 2017 Through October 4, 2018 Mkt. Year 9,123,300 Source: Export Sales Reporting Division, Foreign Agricultural Service, USDA. NOTE: Data may not add due to rounding. October 11, 2018 USDA ANNOUNCES SPECIAL IMPORT QUOTA #25 FOR UPLAND COTTON October 11, 2018 The Department of Agriculture's Commodity Credit Corporation announced a special import quota for upland cotton that permits importation of a quantity of upland cotton equal to one week s domestic mill use. The quota will be established on October 18, 2018, allowing importation of 12,807,185 kilograms (58,822 bales) of upland cotton. Quota number 25 will be established as of October 18, 2018, and will apply to upland cotton purchased not later than January 15, 2019, and entered into the U.S. not later than April 15, 2019. The quota is equivalent to one week's consumption of cotton by domestic mills at the seasonally-adjusted average rate for the period June 2018 through August 2018, the most recent three months for which data are available. Future quotas, in addition to the quantity announced, will be established if price conditions warrant. 9

Number of Bales in Certificated Stocks Delivery Points Stocks as of 10-11-2018 Awaiting Review Non-Rain Grown Cotton Dallas/FT. Worth, TX 5,899 0 0 Galveston, TX 225 0 0 Greenville, SC 37 0 0 Houston, TX 178 0 0 Memphis, TN 21,321 0 0 Total 27,0 0 0 Spot quotations are in cents per pound for cotton equal to the Official Standards, net weight, in mixed lots, compressed, FOB car/truck. SOUTHEAST NORTH DELTA SOUTH DELTA DESERT SOUTHWEST 31-3 41-4 51-5 42-4 31-3 41-4 51-5 42-4 Staple 31-3 41-4 51-5 42-4 21-2 31-3 41-4 51-5 7.0 74.5 71.0 72.31 74.5 72.81 8.31 71.0 33 74.5 72.81 8.31 71.0 70.0 9.31 4.81 3.0 77.81 7.5 72.0 73.81 7.31 75.5 70.31 71.81 34 7.31 75.5 70.31 71.81 72.31 71.5 71.0 3.5 78.81 78.0 72.5 73.81 77.31 75.5 70.81 72.5 35 77.31 75.5 70.81 72.5 7.5 75.0 71.31 5.31 80.31 78.31 72.81 74.0 79.5 7.81 71.0 72.5 3 79.5 7.81 71.0 72.81 77.51 7.51 71.41 5.5 EAST TEXAS-OKLAHOMA WEST TEXAS SAN JOAQUIN VALLEY 21-2 31-3 41-4 42-4 21-2 31-3 41-4 42-4 Staple 21-2 31-3 41-4 32-3 7.81 7.0 5.5 4.0 8.0.0 4.31 3.0 2-31 8.31 7.81 7.0 5.0 8.91 7..31 4.81 32 70.0 9.81 8.0 5.81 70.91 9. 7.0 5.81 33 73.31 72.5 71.31 9.5 72.41 71. 70.81 8.31 34 75.71 74.21 71.5 71.0 74.81 73.81 72.0 9.81 74.31 73.31 71.5 9.0 35 81.9 80.4 73.5 73.5 7.0 75.0 73.0 70.5 74.81 74.31 72.5 70.81 3 85.4 83.9 74.3 74.31 7.31 75.5 73.31 71.0 75.5 75.0 72.81 71.31 37 8.9 85.21 74.4 74.81 7.5 75.81 75.81 71.0 75.81 75.31 75.31 71.31 38 89.21 8.9 74.4 75.81 MIKE DIFFERENCES - POINTS PER POUND SOUTH- NORTH SOUTH E. TX WEST DESERT SJ EAST DELTA DELTA OK Mike Ranges TEXAS SW VALLEY AVG. -2475 24 & Below -2475-1350 -2100-825 -1000-1100 -2475 25-2 -2475-1150 -1504-425 -50-750 -100 27-29 -100-1050 -100-109 -275-325 -325-1250 30-32 -1250-50 -1000-725 -150-125 -125-1025 33-34 -1025-450 -500-48 0 0 0 0 Base 35-3 0 0 0 0 0 25 25 0 37-42 0 25 25 14 0 0 0 0 Base 43-49 0 0 0 0-200 -225-225 -250 50-52 -250-300 -500-279 -375-375 -375-375 53 & Above -375-550 -404 STRENGTH DIFFERENCES UNIFORMITY DIFFERENCES SOUTH- NORTH SOUTH E. TX Grams WEST DESERT SJ SOUTH- NORTH SOUTH E. TX Unit WEST DESERT SJ EAST DELTA DELTA OK per tex TEXAS SW VALLEY AVG. EAST DELTA DELTA OK TEXAS SW VALLEY AVG. -300 19.0-19.9-300 -300-125 -90-90 -90 77 & below -125-100 -0-97 -300 20.0-20.9-300 -300-110 -80-80 -75 78-95 -90-50 -83-425 -300-275 -275 21.0-21.9-275 Diff. -358-100 -70-70 -0 79-80 -80-40 -71-350 -250-225 -250 22.0-22.9-250 -00-29 -25 0 0 0 80 0 0 0-4 -300-200 -200-225 23.0-23.9-225 -450-242 0 0 0 0 Base 81 0 0 0 0-250 -175-175 -225 24.0-24.9-225 -300-500 -254 0 0 0 0 82 0 0 50 7-200 -150-150 -150 25.0-25.9-150 -225-400 -200 20 30 30 10 83 0 30 80 29-25 -25-25 -100 2.0-2.9-100 -200-300 -100 30 40 40 10 84 10 40 90 37 0 0 0 0 Base 27.0-28.9 0-125 0 0 40 50 50 20 85 20 50 100 47 0 0 0 0 29.0-29.9 0 0 0 0 50 0 0 30 8 & above 30 0 110 57 25 25 25 25 30.0-30.9 25 0 75 32 50 50 50 25 31.0-32.9 25 25 125 54 50 50 50 25 33.0 & above 25 50 250 79 October 11, 2018 10

American Pima quotations are for cotton equal to the Official Standards, net weight, in mixed lots, UD Free, FOB warehouse. 1/ AMERICAN PIMA SPOT QUOTATIONS Color 1 2 3 4 5 Leaf 44 4 48 50 1 131.00 139.75 142.25 142.25 2 130.75 139.50 142.00 142.00 3 123.00 130.75 132.25 132.25 4 5 1 130.75 139.50 142.00 142.00 2 130.50 139.25 141.75 141.75 3 122.75 130.50 132.00 132.00 4 112.75 121.00 122.50 122.50 5 1 120.50 128.25 129.75 129.75 2 118.00 125.75 127.25 127.25 3 11.75 124.50 12.00 12.00 4 107.75 115.50 117.00 117.00 5 91.75 99.00 100.50 100.50 1 101.50 109.25 111.50 111.50 2 101.25 109.00 110.75 110.75 3 101.00 108.75 110.00 110.00 4 9.00 103.75 105.00 105.00 5 84.75 92.50 93.75 93.75 1 2 80.50 90.50 91.75 91.75 3 80.50 90.00 91.75 91.75 4 80.50 84.50 85.75 85.75 5 80.25 84.25 85.50 85.50 1 Staple 2 72.75 75.75 77.00 77.00 3 72.75 75.75 77.00 77.00 4 72.75 75.75 77.00 77.00 5 72.50 75.50 7.75 7.75 72.00 75.00 7.25 7.25 The current Pima spot quotations represent prices from local sales, export sales, and offerings last reported on May 30, 2018. Range 2 & Below 27-29 Diff. 30-32 -900 Range (Grams per Tex) -1900 33-34 -400 34.9 & Below 35.0 35.9 Mike Strength -1400 35 & Above 0 3.0 3.9 37.0 37.9 38.0 38.9 39.0 39.9 40.0 & Above Prep - Level 2 1/ Pima spot quotations for color-leaf-staple combinations not quoted will be included as sales of those qualities which are reported. Diff. Extraneous Matter Type - Level -1350-1100 -850 Prep - Level 1-810 Other - Level 1 Other - Level 2 Plastic - Level 2 0 0 0 0 Diff. -1095-715 -1035 Plastic - Level 1-715 -1035 October 11, 2018 11