Cotton Sales Rocket To Highs, Chinese Lead The Way

U.S. cotton sales charged to their highest level this season mainly due to robust purchases by Asian giant China, and any further weakness in the dollar may kick sales higher, industry analysts said Thursday.

USDA, in its weekly export sales report, said U.S. net upland cotton sales soared to a 2002/03 (August/July) marketing year peak of 379,200 running bales (RBs, 500-lbs), above trade expectations of 270,000-325,000 RBs. In the last four weeks, U.S. sales have hit 1,147,900 RBs.

China led the parade by buying 162,800 RBs, which USDA said is the largest such purchase by Beijing since January 1996. Total Chinese cotton purchases in 2002/03 have already hit 1,211,100 RBs, although shipments stand at 618,500 RBs.

"They (the Chinese) need the cotton," Frank Weathersby of brokers Affinity Trading in Fort Walton Beach, Florida, told Reuters in a phone interview.

Sharon Johnson, cotton expert for Frank Schneider and Co. Inc. in Atlanta, said the question mark for the market is how much more the Chinese will buy in the remaining 20 weeks of the 2002/03 marketing year.

USDA, in its monthly production report, said Chinese cotton imports in 2002/03 will reach 2.25 million (480-lb) bales.

"I think this is a hedge on their part," Keith Brown, president of trading firm Keith Brown and Co. in Moultrie, Georgia, said in a separate interview when asked about the pace of Chinese buying.

"They can either roll it or cancel it," he said, referring to the cotton imports, noting that roughly only half of the cotton bought by China has been shipped to the country, and Beijing can always cancel some of its orders in July.

Analysts said uncertainty over a looming war with Iraq, the gyrations of the U.S. dollar, and anemic global economic performance could easily throw a monkey wrench into future U.S. cotton exports.

"It's hard to say whether the pace of sales can be maintained," concluded Weathersby.

Traders said the cotton market has likely priced in the robust sales data from USDA.

The benchmark May cotton contract climbed 0.74 cent to close Wednesday at 58.80 U.S. cents a lb, having surged to a contract high of 59.39 cents.

"We may make new highs early on, but whether we can sustain it remains to be seen," Johnson said.

Brown added, "To some extent, we did price it in."

Dealers said the market would typically not react well to robust cotton sales in the USDA report.

"Somebody knew the sales were going to be very good so they ran it up yesterday. We may get a knee jerk move up, but it won't last," one explained.

Traders said the market would also be turning its focus to spring planting conditions in the U.S. and a USDA report on March 31 outlining planting intentions by American farmers.