Bullish Market Run Continues As Weather Concerns Mount

Cotton prices settled 100 to 200 points higher on the week as bullish fundamentals continue to build and speculative funds add to their already bullish positions.

As broadcast to you over the past month, the unfixed on-call sales, along with the severe weather affecting the world’s major producing countries, have laid the groundwork for price optimism. The potential 2014 U.S. crop, as well as the Chinese crop, is dwindling in our sight. Incredibly, the end-of-the-marketing-year unfixed July call sales are growing instead of shrinking.

I do not recall any previous year when such has ever occurred, at least in an active market. Almost as incredible is a significant increase in open interest in both the old crop July and the new crop December contracts. The demand for U.S. crop is weak, because A) most of the available supply is high micronaire and/or barky, and B) foreign-grown cotton – while still above 90 cents – is three to five cents less than the price of U.S. growths.

Demand for high quality U.S. cotton continues strong, but it is in extremely limited supply. Additionally, the potential for a weather-reduced 2014 crop is only adding more value to little old crop that has not been sold. Little to no physical demand exists with July futures above 96 cents, but the aforementioned factors could push July to that magic one dollar level before all is said and done.

The demand for physical cotton does not justify one dollar. However, the demand for pricing the unseasonably large number of on-call sales that must be fixed (priced by buying futures) over the next 35 trading days until first notice day on the July contract can easily justify that magic price level.

New crop December has held above 82-83 cents with ease. It has all but breached its 85-86 cent resistance point and could add another nickel in the absence of a Memorial Day/first week of June rain in the Southwest. Small pockets of the Rolling Plains have had some beneficial moisture, but the vast acreage of the High Plains Districts 1-N and 1-S remains totally dry – the third driest in at least 50-70 years. A soaking rain by the first week of June would take up to 300 points out of the market, but it would only represent a one-month band aid before needing major attention again.

The combination of these factors will likely make for extreme price volatility in the July contract. Likewise, some of that volatility should also surface in the December contract.

Of course, the July contract will be more price sensitive to weather in the Southwest. Yet, the water-logged Mid-South and Southeast are also on the radar as well. The old adage for those crops is that they “always get in.” Yes, they do. But it is time to dry out, as planting is already delayed in both regions. The high-yielding California crop has, for the most part, either switched to Pima or lost to Upland this year due to the sharp reduction in water allocation for irrigation.

The northern region of China’s cotton belt continues with its weekly freezing rain and snow. Thus, the 2014 Chinese production can now be some 25 percent below its 2013 crop. Suddenly, the massive level of Chinese stocks is not so massive any more. Too, China’s goal is to continue reducing cotton plantings in favor of food/feed grains and remain a net importer of cotton.

Export sales are shrinking, given the market is at 95 cents and above. Yet, export commitments stand at 89 percent of USDA’s annual projection. This is identical to the five-year average for the same week in time.

July could get wild, trading a ten-cent range from 90 to 100 cents. December will make a run to 86 cents and try for more.

Topics: ,

Leave a Reply

International Stories
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

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.

International

Update on Indian Cotton Textile Sector

June 15, 2016

By Dr. Seshadri Ramkumar The Indian government implemented its largest ever minimum support price (MSP) scheme through Cotton Corporation of

International

Jack McCarty Named ICAC Researcher of the Year

May 31, 2016

Dr. Jack C. McCarty of Mississippi State University was named Researcher of the Year for 2016 by the International Cotton Advisory Committee.

International

New Cotton Traceability System Reaches Final Testing

May 9, 2016

An inexpensive traceability system to prove the authenticity of organic and other niche cottons could be available by the end of the year, says ICA Bremen.

International

No Export Subsidies for Indian Cotton

April 27, 2016

According to the Government of India, the country is not entitled to export subsidies for its cotton.

Around The Gin
Product News

Enlist Technology Provides Tolerance to Three Key Herbicides

July 13, 2016

The Enlist weed control system will give growers the ability to use three modes of action postemergence in both cotton and soybeans.

Product News

Providing Upland Varieties with Acala-like Quality

July 13, 2016

PhytoGen offers growers several upland cotton varieties with Acala-like fiber quality for added premiums and higher profitability.

Product News

PhytoGen Names Winners in Best Yielder Club Sweepstakes

June 29, 2016

A North Carolina cotton grower was named grand prize winner in the 2016 PhytoGen Best Yielder Club sweepstakes.

Product News

Monsanto Donates Research Center to Local Foundation

June 27, 2016

Monsanto Company has donated its 150-acre Leland Agronomy Center to The B.F. Smith Foundation, a nonprofit organization in the Mississippi Delta.

Product News

Record Yields Set by 2015 FiberMax One Ton Club

May 4, 2016

The 127 members who qualified for the FiberMax One Ton Club pushed cotton yields and quality to higher levels in 2015.

Product News

Meister Media Worldwide Website Relaunches With New Resources

April 22, 2016

Meister Media Worldwide — publisher of Cotton Grower magazine – has relaunched its corporate website, highlighting information and services available from one of agriculture’s leading media companies.

Product News

ReinCloud Promises Remote Control

April 18, 2016

New software set to combine irrigation management and data collection – all in the palm of your hand.

Product News

Search Begins for Deltapine Class of 17

April 14, 2016

Deltapine’s NPE program is nine years old, and the search for the company’s Class of 17 cotton varieties is underway.

Latest News
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.

International

Update on Indian Cotton Textile Sector

June 15, 2016

By Dr. Seshadri Ramkumar The Indian government implemented its largest ever minimum support price (MSP) scheme through Cotton Corporation of

International

Jack McCarty Named ICAC Researcher of the Year

May 31, 2016

Dr. Jack C. McCarty of Mississippi State University was named Researcher of the Year for 2016 by the International Cotton Advisory Committee.

International

New Cotton Traceability System Reaches Final Testing

May 9, 2016

An inexpensive traceability system to prove the authenticity of organic and other niche cottons could be available by the end of the year, says ICA Bremen.

International

No Export Subsidies for Indian Cotton

April 27, 2016

According to the Government of India, the country is not entitled to export subsidies for its cotton.

International

Little Activity on New World Cotton Contract

April 4, 2016

The ICE Futures world cotton contract is off to a slow start.

International

India Taking Proactive Measures to Combat Whitefly

March 30, 2016

As planting season approaches, the government of India is taking proactive measures to combat likely white fly infestations in the country's cotton-producing Northern States.

International

Better Cotton Initiative Joins ISEAL Alliance

March 24, 2016

The Better Cotton Initiative has been accepted as a full member of the ISEAL Alliance by achieving full compliance with the organization’s standard-setting code.

International

India to Produce Less Cotton This Season

February 29, 2016

India is expected to produce about 3 million bales less cotton for the season ending in September 2016, compared to a year ago.

International

China Losing Top Cotton Importer Status

February 3, 2016

China has been surpassed by Vietnam as the world’s top cotton importer.

International

China Considering Sale from Cotton Reserves

January 18, 2016

China’s government is reportedly considering plans to sell some of its cotton stockpile, a move that could move Chinese domestic prices lower and reduce import demand.