9-Sep-2013
US farm officials gave hope to investors downbeat on cotton prices, hiking forecasts for India's harvest and, for Brazil, flagging a slump in forward sales by growers and a limited boost to demand from soccer's World Cup.
US Department of Agriculture foreign staff raised to a record 29.0m bales their forecast for India's harvest in 2013-14, citing "adequate" sunshine following strong monsoon rains, conditions "which point to food yield prospects".
"Recent field travel to Andhra Pradesh and Gujarat and a phone survey of contacts in other states point to considerable optimism concerning the upcoming harvest," the USDA's New Delhi bureau said.
The production estimate is 1.0m bales higher than the official forecast from the USDA, which will on Thursday update its world supply and demand numbers on a range of crops in its monthly Wasde report, and represents a 9.4% increase year on year.
And it will support exports of 7.0m tonnes, above the official USDA number of 6.25m tonnes, with the strong supplies, an absence of government intervention and currency weakness boosting prospects.
While Indian supplies are currently some 4 US dollar cents a pound above the Cotlook A index of physical prices, "presumably, the onset of harvest will push Indian cotton lower and a weaker rupee will eventually make Indian cotton an attractive option", the bureau said.
Reluctant to hedge ahead
In Brazil, the USDA's Brasilia office offered some succour to cotton bulls, estimating that cotton exports will halve to 2.1m bales in 2013-14, below the official USDA forecast of 2.6m bales.
The estimate reflected ideas of a significant hangover from a weak harvest in 2012-13, when output tumbled by one-third as "farmers exited cotton production, dismayed with the high capital costs, level of risk, and stringent management practices".
However, output is expected to rebound some 24% in 2013-14, reflecting a recovery in sowings and the greater use of seed resistant to the Helicoverpa zea corn earworm moth caterpillar, which has become a major pest in cotton and soybeans as well as corn.
The office also flagged weak forward sales by farmers of the next harvest, with 14% of the crop hedged so far, a little under half the 30% of the crop typically sold by now, reflecting a rise in local prices.
Local prices, while falling late in August, increased 3.4% overall last month, protected by the weak real, according to research centre Cepea.
World Cup impact
Meanwhile, on demand, the USDA's Brasilia staff downplayed hopes that the 2014 football World Cup, being held in Brazil, would spark rising domestic demand for cotton through boosting purchases of replica shirts and soccer-based clothing.
"Across-the-board inflation has weakened consumer's domestic purchasing power and reduced disposable income available for apparel purchases, particularly in the lower and middle classes," the staff said.
"Significant World Cup sales are expected in 2014. But these sales are expected to offset the minor slide in consumption instead of increasing consumption."
Source:- agrimoney.com
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