facebook_pixel

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

First Estimate of India’s New Season Cotton Crop Revealed

November 15, 2017

The first estimate of India’s current season cotton crop has been released.

International

Some New Thoughts for the Cotton Industry

August 23, 2017

Dr. Seshadri Ramkumar of Texas Tech spent part of his summer in India, observing and discussing the country’s cotton industry and goals. He shares some of his observations in this commentary.

International

International Cotton Leader Showcases Innovations

July 12, 2017

Cotton Incorporated’s Kater Hake urged India producers to find new applications and functionalities for cotton and textile production.

International

Kai Hughes Named ICAC Executive Director

July 5, 2017

Kai Hughes has been named the new Executive Director of the International Cotton Advisory Committee.

International

Indian Textile Industry Aims to Reach $650 Billion by 2025

July 5, 2017

India’s Prime Minister has urged the country’s textiles sector to reach $650 billion by 2025.

International

Indian Company Debuts Cotton for Technical Textiles

June 22, 2017

A company based in South India has developed mechanically-processed cotton varieties suitable for use in absorbent technical textiles products.

International

India Expects 20% More Cotton in 2017/18

May 10, 2017

India’s cotton crop for the season beginning in October 2017 may see up to a 20% percent increase in production.

Around The Gin
Product News

Bayer Looking for FiberMax One Ton Club Growers for 2017

November 16, 2017

Cotton growers who produce an average of 2,000 lb/A on 20 or more acres planted to FiberMax varieties in 2017 are eligible to be part of the 13th annual FiberMax One Ton Club.

Product News

Monsanto Delays NemaStrike for Additional Review

November 2, 2017

After finding cases of skin irritation, Monsanto is pulling its nematode seed treatment NemaStrike for further product review.

Product News

Intrepid Trio: Naturally Balanced Nutrition in Every Granule

November 1, 2017

Intrepid Trio contains three essential nutrients for cotton plants.

Product News

Save Time, Increase Efficiencies with Mixmate

November 1, 2017

Mixmate from Praxidyn is a precision chemical mixing system for small farms to large enterprises.

Product News

Crumpler Ironworks & Fabrication

November 1, 2017

Crumpler Ironworks & Fabrication is committed to providing the highest level of service, honesty and integrity, regardless of project size.

Product News

Delivering Proven Performance Across the Cotton Belt

November 1, 2017

Seed varieties, traits and crop protection products from Bayer deliver proven performance to growers across the Cotton Belt.

Product News

Growers Continue to Count on Americot and NexGen

November 1, 2017

Americot is dedicated to working with cotton growers throughout the Cotton Belt to provide elite performing NexGen varieties within the marketplace.

Product News

Deere Adds New Narrow Track Versions to 9RX Tractor Lineup

November 1, 2017

John Deere has added three new 9RX Narrow Track Tractors, expanding its lineup of high-horsepower machines.

Latest News
International

First Estimate of India’s New Season Cotton Crop Revealed

November 15, 2017

The first estimate of India’s current season cotton crop has been released.

International

Cotton Market Facing Price Pressure

October 3, 2017

Thanks to expected record yields in many countries, the cotton market will likely show some signs of pressure in the short term.

International

Lunchaprasith Wins Cotton Grower Essay Contest at Cotton Institute

August 24, 2017

In his winning essay from the 2017 ACSA International Cotton Institute, Nudhanai Lunchaprasith offered a personal reflection on the evolution of technologies in cotton marketing.

International

Some New Thoughts for the Cotton Industry

August 23, 2017

Dr. Seshadri Ramkumar of Texas Tech spent part of his summer in India, observing and discussing the country’s cotton industry and goals. He shares some of his observations in this commentary.

International

International Cotton Leader Showcases Innovations

July 12, 2017

Cotton Incorporated’s Kater Hake urged India producers to find new applications and functionalities for cotton and textile production.

International

Kai Hughes Named ICAC Executive Director

July 5, 2017

Kai Hughes has been named the new Executive Director of the International Cotton Advisory Committee.

International

Indian Textile Industry Aims to Reach $650 Billion by 2025

July 5, 2017

India’s Prime Minister has urged the country’s textiles sector to reach $650 billion by 2025.

International

Indian Company Debuts Cotton for Technical Textiles

June 22, 2017

A company based in South India has developed mechanically-processed cotton varieties suitable for use in absorbent technical textiles products.

International

India Expects 20% More Cotton in 2017/18

May 10, 2017

India’s cotton crop for the season beginning in October 2017 may see up to a 20% percent increase in production.

International

Collective Effort Needed to Advance Cotton Industry

May 5, 2017

The cotton industry needs a collective effort by all of its stakeholders to advance.

International

Register Now for ACSA International Cotton Institute

April 12, 2017

This summer, some of cotton’s young minds will gather to learn business details at the ACSA International Cotton Institute.

International

Cotton Industry Veterans Launch New Commodities Firm

April 11, 2017

Three veteran analysts and traders have combined their collective 60+ years of cotton industry experience to form the Rose Commodity Group.

International

Global Cotton Contract All Hope, No Action?

April 10, 2017

The ICE Global Cotton Futures Contract is fighting for market traction, with no significant trading volume since June 2016.

International

Indian Cotton Situation Currently Stable

March 17, 2017

The cotton situation in India from both producers’ and users’ points of view seems to be stable.

International

Enrollment Open for Texas International Cotton School

February 28, 2017

Registration is open for the 37th session of the Texas International Cotton School, scheduled for August 7-17 in Lubbock.