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2005 Cotton Situation, Outlook and Management Strategies. Charles Curtis, Jr Applied Economics & Statistics Clemson University. National Cotton Council Survey 2/19/05. National Cotton Council Survey 2/19/05 (cont.). National Cotton Council Survey 2/19/05 (cont.). - PowerPoint PPT Presentation
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2005 Cotton Situation, Outlook and
Management StrategiesCharles Curtis, Jr
Applied Economics & StatisticsClemson University
U.S. Cotton Planted & Harvested Acres
y = 0.0675x + 13.673
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
Year
Mil
lion
Acr
es
Planted Harvested Linear (Planted)
Planted 12.4 14.1 13.2 13.4 13.7 16.9 14.6 13.9 13.4 14.9 15.5 15.8 14.0 13.5 13.7 13.5
Harvested 11.7 12.8 11.1 12.8 13.3 16.0 12.9 13.4 10.7 13.4 13.1 13.8 12.4 12.0 13.1 12.0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Prospective 2005 U.S. Cotton Crop
2004 2005 % Δ
SOUTHEAST 2,956 2,862 -3.20%
Alabama 550 530 -3.60%
Florida 89 84 -6.10%
Georgia 1,290 1,268 -1.70%
North Carolina 730 702 -3.90%
South Carolina 215 201 -6.30%
Virginia 82 78 -5.30%
National Cotton Council Survey 2/19/05
National Cotton Council Survey 2/19/05 (cont.)
Prospective 2005 U.S. Cotton Crop
2004 2005 % Δ
MID-SOUTH 3,430 3,664 6.80%
Arkansas 910 926 1.70%
Louisiana 500 576 15.30%
Mississippi 1,110 1,199 8.10%
Missouri 380 418 10.00%
Tennessee 530 544 2.70%
National Cotton Council Survey 2/19/05 (cont.)
Prospective 2005 U.S. Cotton Crop
2004 2005 % Δ
SOUTHWEST 6,155 6,183 0.50%
Kansas 85 95 11.90%
Oklahoma 220 235 6.90%
Texas 5,850 5,852 0.00%
National Cotton Council Survey 2/19/05 (cont.)
Prospective 2005 U.S. Cotton Crop
2004 2005 % Δ
WEST 868 770 -11.30%
Arizona 240 214 -10.70%
California 560 478 -14.70%
New Mexico 68 78 15.10%
TOTAL UPLAND 13,409 13,479 0.50%
TOTAL ELS 250 255 2.30%
ALL COTTON 13,659 13,734 0.60%
U.S. Cotton Yield
y = 6.0956x + 617.13
400
450
500
550
600
650
700
750
800
850
900
Year
Pou
nds
per
Acr
e
Yield Trend
Yield 634 652 699 606 708 537 707 673 625 607 632 705 665 730 846 710
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
U.S. Cotton Production & Total Supply
0
5
10
15
20
25
30
Year
Mil
lion
Bal
es
Production Total Supply
Production 15.50 17.61 16.22 16.13 19.66 17.90 18.94 18.79 13.92 16.97 17.19 20.30 17.21 18.26 23.01 17.80
Total Supply 18.50 19.95 19.92 20.80 23.21 20.96 21.95 22.78 18.25 21.00 21.13 26.32 24.72 23.69 26.55 25.10
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
U.S. Domestic Use
8.7
9.610.3 10.4
11.210.6
11.1 11.4
10.4 10.2
8.9
7.77.3
6.5 6.36.0
y = -0.28x + 565.02
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Million Bales
Yea
r
Dom. Use Trend
U.S. Cotton Exports
7.79
6.70
5.20
6.86
9.40
7.68
6.877.50
4.34
6.75 6.76
11.00
11.90
13.7613.00
13.50y = 0.46x - 902.38
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Export Trend
Export Wildcard
U.S. Total Cotton Disappearance
0.00
5.00
10.00
15.00
20.00
25.00
Year
Mil
lion
Bal
es
Dom. Use Export
Export 7.79 6.70 5.20 6.86 9.40 7.68 6.87 7.50 4.34 6.75 6.76 11.00 11.90 13.76 13.00 13.50
Dom. Use 8.66 9.60 10.25 10.42 11.20 10.60 11.13 11.35 10.40 10.24 8.88 7.70 7.27 6.49 6.30 6.00
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
End Stocks & Stocks-to-Use
14.2%
22.4%
30.2%
20.4%
12.9%14.3%
22.1%20.6%
26.7%
23.1%
38.4%39.8%
28.1%
17.3%
37.8%
28.7%
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Year
Mil
l B
ales
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
S/U
%
End Stks S-to-U
Cotton Stocks-to-Use & Farm Price
14.2%
22.4%30.2%
20.4%
12.9%14.3%
22.1%
20.6%
26.7%
23.1%
38.4%
39.8%
28.1%
17.3%
37.8%
28.7%
y = -1.1603x + 0.8564
R2 = 0.6847
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0%
Stocks-to-Use (%)
Pri
ce (
$/lb
)
Price Trend
Probability That Futures Price Will Be Less Than:
2.7%8.6%
19.3%
33.9%
50.0%
65.1%
77.4%
86.4%92.4%
96.0%
0.5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
$0.36 $0.40 $0.44 $0.48 $0.52 $0.56 $0.59 $0.63 $0.67 $0.71 $0.75
Futures Price at Option Expiration
Cu
mu
lati
ve
Pro
ba
bili
ty o
f F
utu
res
Pri
ce
Oc
cu
rrin
g a
t E
xp
ira
tio
nDec 05 Probabilities
SEASONAL PRICE TENDENCIES1997-2002
JanFeb
Mar
Apr
MayJun
Jul Aug
Sep
OctNov
Dec
85
90
95
100
105
110
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
% o
f S
easo
n A
vera
ge
Pri
ce
Source: G. Shumaker, UGA
Crop: Cotton PCP Basis: -$0.10 Harvest
Loan Rate: $0.52 Increment: $0.01 Futures: $0.30
Harvest Predicted Harvest Predicted Harvest Predicted
Futures LDP Futures LDP Futures LDP
$0.30 $0.32 $0.44 $0.18 $0.58 $0.04
$0.31 $0.31 $0.45 $0.17 $0.59 $0.03
$0.32 $0.30 $0.46 $0.16 $0.60 $0.02
$0.33 $0.29 $0.47 $0.15 $0.61 $0.01
$0.34 $0.28 $0.48 $0.14 $0.62 $0.00
$0.35 $0.27 $0.49 $0.13 $0.63 $0.00
$0.36 $0.26 $0.50 $0.12 $0.64 $0.00
$0.37 $0.25 $0.51 $0.11 $0.65 $0.00
$0.38 $0.24 $0.52 $0.10 $0.66 $0.00
$0.39 $0.23 $0.53 $0.09 $0.67 $0.00
$0.40 $0.22 $0.54 $0.08 $0.68 $0.00
$0.41 $0.21 $0.55 $0.07 $0.69 $0.00
$0.42 $0.20 $0.56 $0.06 $0.70 $0.00
$0.43 $0.19 $0.57 $0.05 $0.71 $0.00
$0.44 $0.18 $0.58 $0.04 $0.72 $0.00
Predicting Harvest Time Loan Deficiency Payments
Returns for Different Price Levels with LDP:
$0.37
$0.47
$0.57
$0.67
$0.77
$0.87
$0.36 $0.40 $0.44 $0.48 $0.52 $0.56 $0.59 $0.63 $0.67 $0.71 $0.75
Futures Price Levels
Str
ateg
y R
etu
rn
Cash Sale at Harvest Basis Contract Futures Hedge
Forward Contract (CFC) Put Option Call Option
Cotton Marketing with LDP’s
Summary
2004 left 2005 with excess supplies Plantings up slightly – Yield? 2005 Use expected:
Reduced US use Increased Exports (CHINA!!!!)
Current S&D would forecast 52¢ price Smart Marketing could yield much
better!
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