Cleveland: Cotton Prices Rally to Point of Likely Resistance

Cotton prices moved higher on the week, reaching a six month high as the March contract gave way to the May contract as the spot month.

Attempting again to climb above 90 cents, the market – while remaining strong – again sent signals that the 87 to 90 cent level brought on more rationing from textile mills. Based on export activity, the current rally has likely stalled at the 89 cent mark and will again test the mid-80s. The 90 to 92 cent target just seems too big of a bite for now.

Recall, the prior rally above 89 cents had only a brief life. This market likes the upside for now and likely will through its First Notice Day on the May contract. But the 90 to 93 cent hurdle will likely be too high to clear.

While export sales continued to sizzle, this week did mark the third consecutive week of lower sales. Nevertheless, net sales of all cotton totaled almost 210,000 bales. These were comprised of 120,300 RB of Upland and 7,600 RB of Pima for current year delivery, and 81,900 RB for 2014/15 delivery. Sales have now reached 9.3 million bales well ahead of the pace needed to reach USDA’s 10.5 million bale estimate. In fact, weekly sales from now until August 1 (25 more weeks) need only average 50,000 bales to reach that number. Most, including myself, believe USDA will need to increase its estimate some 300,000 bales.

The reason for USDA’s caution may lie within this week’s otherwise excellent sales report, which indicated that export cancellations raised their ugly heads to the tune of 65,100 bales from eleven countries. Granted, ten of those countries accounted for only 12,200 bales. But Chinese cancellations accounted for the other 52,900 bales, a bit large for this time of the year.

Additionally, it was reported that China sold some of its imported U.S. cotton for export (cotton bought at a lower price and sold for a good profit). Such action allows one to consider the question of slowing export sales due to rising prices.

As has been discussed since November, old crop prices are in a bullish mode and should continue so. However, new 2014 crop continues to have a difficult fight with the bear. The nearly 10-cent spread between new crop and old crop must come together at some point. The bridge to that meeting is a merger of the old crop July contract and the new crop December contract. Typically, this plays out through lower July prices and increasing December prices. It is difficult to see that play out this year, but the market always finds the path.

With U.S. production set to increase three to four million bales this coming season, the path to least resistance will likely see old crop prices begin to deteriorate in early May, assuming that mills recognize the ballooning impact on prices if they insist on delaying fixations until late May or early June. Yet, the good news is that U.S. cotton acreage will, for a number of years, hold near 11.1 to 11.5 million acres.

Topics: ,

Leave a Reply

Market Analysis Stories
Market Analysis

Time for Growers to Start Pricing Their 2017 Crop

February 17, 2017

Dr. O.A. Cleveland believes growers should price at least 50% of their anticipated 2017 crop now with the December ICE contract above 74 cents.

Market Analysis

NCC: U.S. Cotton Industry Hinges on World Demand, China, Global Supply

February 11, 2017

According to NCC economists, several key questions will shape the 2017 economic outlook for the U.S. cotton industry.

Market Analysis

78 Cent Cotton? The Opportunities are There.

February 6, 2017

Titanic bullishness has captured the cotton market, providing opportunities for nearby cotton futures prices to top 78 cents.

Market Analysis

Strengthening Prices, Strong Demand and Bon Jovi Jeans

January 30, 2017

The narrow three cent trading range – 72.50 to 75.50 cents – remains in play, but pressure is building for cotton prices to move higher. Maybe Jon Bon Jovi’s new line of denim jeans will help.

Market Analysis

Market Remains Strong as The Limited Bows Out

January 20, 2017

The market consolidated gains of the past few weeks, just as The Limited – a primary supplier of cotton to women – closes its doors.

don shurley
Market Analysis

Shurley on Cotton: Opportunities in Improved Market

January 16, 2017

March futures have improved, and January is looking like a good month. The big question and the uncertainty is whether or not this will last.

Market Analysis

Market Holds in Face of USDA Report Adjustments

January 16, 2017

From now likely into the mid-March trading period, the very bullish call sales ratio will continue to carry the ball for the bulls.

Around The Gin
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.

Product News

PhytoGen Rolls Out Seven New Enlist Varieties for 2017

January 5, 2017

PhytoGen is releasing seven new cotton varieties with the Enlist cotton trait and WideStrike 3 Insect Protection for the 2017 growing season.

Latest News
Market Analysis

Time for Growers to Start Pricing Their 2017 Crop

February 17, 2017

Dr. O.A. Cleveland believes growers should price at least 50% of their anticipated 2017 crop now with the December ICE contract above 74 cents.

Market Analysis

Shurley on Cotton: A Lot Going on and a Lot to Digest

February 13, 2017

The 2017 cotton market appears to be on increasingly stable and improved economic footing compared to 2016.

Market Analysis

NCC: U.S. Cotton Industry Hinges on World Demand, China, Global Supply

February 11, 2017

According to NCC economists, several key questions will shape the 2017 economic outlook for the U.S. cotton industry.

Market Analysis

Market Fueled by Demand, Mills and Shrinking Carryover

February 10, 2017

Cotton futures continue to hold tight to the 75-76 cent level, thanks to ever-increasing demand, mill indecision and shrinking world carryover.

Market Analysis

78 Cent Cotton? The Opportunities are There.

February 6, 2017

Titanic bullishness has captured the cotton market, providing opportunities for nearby cotton futures prices to top 78 cents.

Market Analysis

Strengthening Prices, Strong Demand and Bon Jovi Jeans

January 30, 2017

The narrow three cent trading range – 72.50 to 75.50 cents – remains in play, but pressure is building for cotton prices to move higher. Maybe Jon Bon Jovi’s new line of denim jeans will help.

Market Analysis

Market Remains Strong as The Limited Bows Out

January 20, 2017

The market consolidated gains of the past few weeks, just as The Limited – a primary supplier of cotton to women – closes its doors.

Market Analysis

Shurley on Cotton: Opportunities in Improved Market

January 16, 2017

March futures have improved, and January is looking like a good month. The big question and the uncertainty is whether or not this will last.

Market Analysis

Market Holds in Face of USDA Report Adjustments

January 16, 2017

From now likely into the mid-March trading period, the very bullish call sales ratio will continue to carry the ball for the bulls.

Market Analysis

Bull Market Pushes Prices to Five Month High

January 9, 2017

Prices reached a five-month high, as cotton demand flexed its muscles and pushed the market up.

Market Analysis

Could the Market Drift into the Mid-70s? It’s Possible.

December 28, 2016

The 70-73 cent price range remains very firm, with a good chance that the market could drift into the mid-70s.

Market Analysis

Export Sales Drive Market as Potential for Explosive Growth Builds

December 19, 2016

U.S. export sales continue to lead trading. But conditions are growing for a potential “explosive fire” under the market.

Market Analysis

Shurley: December Numbers May Contain Hidden Stocking Stuffers

December 12, 2016

USDA’s December production and supply/demand estimates were as expected in some respects. But it also contained a few unexpected and positive surprises.

Market Analysis

Is Market Opening Window for “Made in U.S.” Revival?

December 12, 2016

USDA’s seemingly bearish December supply demand report failed to break cotton’s upside momentum, presenting a small window to potentially revive the “Made in U.S.” theme.

Market Analysis

Prices Hold as U.S. Quality Cotton Moves to Market

December 2, 2016

U.S. crop quality is essentially the highest on record. While mills may be facing potentially higher prices, they are getting a bargain on their U.S. purchases.