NEW YORK, Dec 7 (Reuters) - Ideal weather should jack up the U.S. 
cotton crop, but sky-high energy prices and a credit crunch which shook 
financial markets could hit demand, analysts said Friday in forecasting 
next week's USDA report. 
    The U.S. Agriculture Department will release its monthly supply/demand 
data on Tuesday at 8:30 a.m. EST (1330 GMT). 
    Most analysts forecast the U.S. 2007/08 cotton crop to rise to between 
18.95 million and 19 million (480-lb) bales, versus last month's USDA 
estimate of 18.86 million bales. 
    "Texas accounts for most of the increase with its production of 8.127 
million bales and a yield of 830 lbs per acre," Sharon Johnson, cotton 
expert for First Capitol Group in Atlanta, Georgia, wrote in a report. 
    "That crop is absolutely tremendous, high yielding and very high 
quality," added Mike Stevens, an analyst with brokers SFS Futures in 
Mandeville, Louisiana. 
    Texas is the nation's top cotton producing state. Cotton farms in the 
state have often been plagued by drought, but this year they have received 
plenty of rain. 
    Yields in several U.S. cotton producing areas were at or near all-time 
records. The only states which suffered from drought were Florida, Alabama 
and South Carolina. 
    DEMAND MAY WEAKEN 
    Analysts said most of the trade will not be paying too much attention 
to the U.S. numbers in the USDA report. That's because one of their chief 
concerns will be the impact of global economic turbulence on demand. 
    Johnson said a combination of "high energy prices, (the) U.S.-driven 
credit crunch, disparity among currencies...are all having a negative 
impact on world usage in key countries and regions of the world." 
    A tightening in China to contain and curb inflation could eventually 
hit the textile industry there given its excessive investment and 
overcapacity, she added. 
    Stevens said China holds the key to world numbers, and a reduction of 
as much as 2.0 million to 3.0 million bales below USDA's current numbers of 
35.5 million bales is in the offing. 
    "However, cuts in the Chinese crop will quite likely be at least 
partially offset by reductions in their import needs," he said. 
    For India, John Flanagan of brokers Flanagan Trading Corp said that in 
line with a USDA attache's report, Indian production should rise by 400,000 
bales from USDA's November projection of 23.5 million bales. 
    The increase in India may be offset by a cut in Pakistan's crop, with 
Stevens saying a reduction of 750,000 bales to 9.0 million bales might be 
in line. 
    Despite the questions over demand and China, the longer term outlook 
for cotton remains promising because U.S. cotton acreage in 2008 is 
expected to go down given robust prices for wheat, corn and soybeans. 
    Johnson said new-crop cotton prices for the following season should 
stay strong since grain prices are quite high and that "will inevitably 
spill over to cotton." 
 (Reporting by Rene Pastor, Editing by John Picinich) 
 (([email protected]; +1 646 223 6047; Reuters Messaging: 
[email protected])) 
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