Bears Still Impacting Market, But Chinese Mill Updates Driving Demand

The bears continue their month-long rule of the cotton market, reinforced by additional moisture over a portion of the drought-stricken Southwest, coupled with the speculative fund’s market exit strategy of either profit taking or the rolling of long contracts which traditionally occurs with the approach of first notice day.

July is barely atop its 85 cent support level, while the new crop ICE December contract sits on its 77 to 78 cent support level.

The selloff in July has uncovered more and more demand as evidenced by the weekly export sales report. Nevertheless, Mother Nature will likely pepper a major portion of the cotton area in West Texas, the central part of the state, and the Coastal Bend. All of the moisture will be welcomed, leading up to the late May/mid-June period being referred to as the billion dollar rain instead of the million dollar rain.

December will likely remain under pressure, while July should find excellent support at the 85 cent level.

With July eleven cents below its three month high, U.S. export sales of Upland for immediate delivery climbed to a net of 131,500 RB for the week ending May 29. China continues to be the main buyer of U.S., taking a total of 81,400 bales. Upland sales for the 2014/15 marketing year were 176,400 RB. Again, China was the primary buyer, accounting for 83,600 bales.

Pima sales for the current season were 3,100 RB and 900 bales for the 2014/15 season. Shipments of Upland for the period were 168,200 RB, while Pima shipments were 11,400 RB. The primary destinations for this export delivery were Turkey, Vietnam, and again, China.

As if a sore thumb, China continues to “stick out” as the principal taker of U.S. cotton, although the country’s spinners have also been major buyers of both Australian and Indian cotton. The world cotton industry – overwhelmed by the size of the Chinese National Reserve cotton stocks – continues to underestimate the volume of foreign demand coming from Chinese domestic spinners.

Simply put, the demand for foreign cotton is being driven by the renovation of existing mills and the investment in new mills – all with new machinery that operates best with machine-harvested, high grade cotton. And, the most logical suppliers of that type cotton are the U.S., Australia, Brazil, West Africa and some Indian types. Specific reasons make U.S. and Australian types the favorites of Chinese mills.

Thus, once again, reports that China will sharply reduce imports are simply not true. China will continue to be the world’s leading importer of cotton for at least the next five years, and most likely ten years out and longer.

The USDA June supply demand report should include an increase of 100,000 bales in U.S. exports, which translates to a 100,000 bale reduction in U.S. carryover. However, this late in the season, USDA may just punt and wait until the August report when actual season-ending data are available. Additionally, the forecast for the coming 2014 crop could be increased 200,000 bales to reflect the far better than anticipated moisture that has covered the Southwest. This should also be reflected in an increase in exports, but again, the entire industry seems to underestimate the import demand coming from the Chinese mills.

The December contract, while in a bearish mode, could well see as much as a 200-point rally. However, the 75 cent support will likely be tested longer term. Likewise, there is considerable price resistance at 79 cents and again between 81 and 82 cents. Demand should continue brisk with July at 85 to 86 cents, and this will allow consumption to demonstrate a slight improvement.

Topics: ,

Leave a Reply

One comment on “Bears Still Impacting Market, But Chinese Mill Updates Driving Demand

  1. Don’t you think that impact of Chinese policy released in April 2014 will have major effects in upcoming cotton season??? As mentioned that China will be the largest importer but the question still persists that how much will it buy in figures, because under WTO they have to purchase 4 million Bales with this it already makes it largest importer so what matters is how much more than this figure the Chinese will buy?

International Stories
International

Indian Cotton Consumption to Increase Slightly

February 22, 2017

The Cotton Association of India now expects domestic consumption and imports of cotton to be higher than originally estimated.

International

Innovations in Nonwovens Focus of International Conference

February 22, 2017

The Technical Association of Pulp and Paper Industry will hold its Innovative Nonwovens Conference (NETInc) April 23-26 in Minneapolis, MN.

International

Indian Cotton Crop Estimated at 34.1 Million Bales

January 24, 2017

India is estimated to produce 34.1 million cotton bales during the season ending September 2017.

International

Indian Cotton Association Opposes Stockpiling Program

October 27, 2016

The Cotton Association of India is opposing the creation of a cotton stockpiling program for the country.

International

India: Higher Production on Less Acreage as New Season Begins

October 25, 2016

India’s Cotton Advisory Board is estimating 35.1 million bales of cotton production in the country during the new growing season that began October 1.

International

Could Blockchain Transform International Cotton Trade?

October 24, 2016

A recent cotton shipment processed and executed using blockchain – the technology that drives bitcoin – could represent a big breakthrough for international cotton trade.

International

Indian Textile Industry Seeks Cotton Stability Support

October 3, 2016

The Indian textile industry has asked the government to provide a support mechanism to counter high volatility in cotton prices.

Around The Gin
Product News

Six Greenleaf Nozzles Approved for Use with XtendiMax

February 24, 2017

Six TurboDrop D Series nozzles from Greenleaf Technologies have been approved for use with Monsanto’s XtendiMax herbicide with VaporGrip Technology.

Product News

EPA Approves DuPont’s FeXapan Dicamba Herbicide

February 17, 2017

DuPont has received EPA registration for FeXapan herbicide plus VaporGrip Technology, a low-volatility dicamba formulation for use on cotton and soybean varieties carrying traits that provide tolerance to dicamba and glyphosate herbicides.

Product News

Fourteen Southern States Register Enlist Duo for Use on Enlist Crops

February 14, 2017

Thirteen Southern states have granted state registration of Enlist Duo herbicide for use on Enlist cotton and other crops, following federal registration received in January.

Product News

BASF Application Academy Adds Online Training Module

February 2, 2017

BASF has added an online training module to its On Target Application Academy stewardship program to help increase education of new and advanced herbicide technologies.

Product News

Bayer Offers Shared Risk Program for FiberMax, Stoneville Growers

January 26, 2017

Bayer is helping support the economic sustainability of cotton growers through the company’s 2017 Shared Risk Program for those who plant FiberMax and Stoneville cotton seed.

Product News

Enlist Duo Herbicide Registered for Use on Enlist Cotton

January 13, 2017

The U.S. EPA has registered Enlist Duo herbicide for use on Enlist cotton varieties, beginning in 2017.

Product News

Data Show Yield Gains from Indigo Cotton in 2016

January 9, 2017

Data collected from 2016 trials show that Indigo Cotton – a seed treatment based on naturally occurring, in-plant microbes to help increase water use efficiency – led to yield improvements on testing acres, including an 11% average yield increase in West Texas.

Product News

FiberMax and Stoneville Release New Varieties for 2017

January 9, 2017

Cotton growers searching to match the right variety the right field now have two new FiberMax varieties and two new Stoneville varieties to consider for 2017.

Latest News
International

Indian Cotton Consumption to Increase Slightly

February 22, 2017

The Cotton Association of India now expects domestic consumption and imports of cotton to be higher than originally estimated.

International

Innovations in Nonwovens Focus of International Conference

February 22, 2017

The Technical Association of Pulp and Paper Industry will hold its Innovative Nonwovens Conference (NETInc) April 23-26 in Minneapolis, MN.

International

Indian Cotton Crop Estimated at 34.1 Million Bales

January 24, 2017

India is estimated to produce 34.1 million cotton bales during the season ending September 2017.

International

Steady Rise in Indian Cotton Prices

January 23, 2017

While global cotton production is increasing, the cotton situation in India is getting serious attention due to a steady rise in prices.

International

Indian Cotton Association Opposes Stockpiling Program

October 27, 2016

The Cotton Association of India is opposing the creation of a cotton stockpiling program for the country.

International

India: Higher Production on Less Acreage as New Season Begins

October 25, 2016

India’s Cotton Advisory Board is estimating 35.1 million bales of cotton production in the country during the new growing season that began October 1.

International

Reinhart Named New ICA President

October 25, 2016

The International Cotton Association named its 2016-17 leadership team – headed by President Jürg Reinhart – during the organization’s annual general meeting in Liverpool.

International

Could Blockchain Transform International Cotton Trade?

October 24, 2016

A recent cotton shipment processed and executed using blockchain – the technology that drives bitcoin – could represent a big breakthrough for international cotton trade.

International

Indian Textile Industry Seeks Cotton Stability Support

October 3, 2016

The Indian textile industry has asked the government to provide a support mechanism to counter high volatility in cotton prices.

International

Next Year’s Indian Cotton Crop to Remain Flat

August 30, 2016

The Indian cotton crop for the next season beginning in October is expected to remain at the same level as the current year.

International

Indian Government to Sell Cotton Stock

July 18, 2016

The Government of India has directed the Cotton Corporation of India to sell its entire cotton balance stock to offset the abnormal price rise.

International

Indian Spinning Association Works to Calm Current Cotton Situation

July 15, 2016

The Southern India Mills’ Association has called for calmness among spinners in India in the wake of the country’s downward cotton production estimate.

International

Indian Cotton Production to Decline

July 14, 2016

The Cotton Advisory Board of India has revised its estimate for this year’s cotton supply and demand situation in India, placing production at its lowest total in five years.

International

New Leadership, Export Program for Indian Textiles

July 6, 2016

India’s textiles industry is benefitting from newly-established leadership and a program designed to increase garment exports.

International

Indian Association Wants Free Trade for Cotton

June 27, 2016

The Cotton Association of India is urging the Government of Pakistan not to support the call for an export ban on cotton by the All Pakistan Textile Mills Association.